By Jim Spencer
March 28, 2011
WASHINGTON – The sale of Cirrus Aircraft to an aviation company controlled by the Chinese government is necessary to save the jobs of thousands of Minnesotans, Cirrus CEO Brent Wouters said Monday.
Wouters’ statement, in a letter to Rep. Chip Cravaack, R-Minn., is the latest salvo in a war of words pitting the Eighth District congressman against a company that employs hundreds of his constituents.
On Friday, Cravaack wrote to Treasury Secretary Timothy Geithner, claiming the exact opposite of Wouters’ assurances. Cravaack said the sale of Cirrus to China Aviation Industry General Aircraft (CAIGA) would cause “hundreds of American families” to “lose their livelihood.”
The public feud between the CEO and the congressman comes as Geithner and other members of the Committee on Foreign Investment in the United States ponder whether to bless the Cirrus sale.
“In the short term, the congressman is probably grandstanding about losing jobs,” said Alfred Marcus, a professor at the University of Minnesota’s Carlson School of Management who also teaches in the U’s Technological Leadership Institute. “He’s playing on a genuine fear we have because we have lost thousands of jobs.”
The fact that Cirrus’ current majority owner is a bank in Bahrain does not help Cravaack’s case against foreign ownership, Marcus said. Marcus also believes the technical knowledge of Cirrus’ workforce “will make it extremely difficult to take the jobs out of the Duluth area.”
“This is not like the apparel business,” Marcus said.
Cravaack’s concern about long-term job prospects depends on whether Cirrus’ aircraft technology “takes off,” Marcus explained. “In that case,” the professor said, “the intellectual capital will not be so isolated.”
Wouters says Cirrus needs an infusion of capital to continue operating, as the company has been hit with slumping sales since 2006. The biggest dip came in 2009 when orders plummeted more than 50 percent. The company had $200 million in sales last year and is close to breaking even, Wouters has said. But Cirrus also cut its workforce in Duluth and Grand Forks, N.D., from 1,350 to 500 since 2008.
Still, work continues on a new jet that is supposed to allow the company to revive itself. Cirrus officials say the jet, to be unveiled in 2014, will cost an estimated $140 million to develop. It is the cash to pay those capital costs that Cirrus seeks in its sale to the Chinese. Still, Wouters insists that the new aircraft will be manufactured in Duluth or Grand Forks.
Cravaack fears that it might be built in China instead. The congressman told Geithner that an American suitor for Cirrus might make a counter-offer to the Chinese. But in his letter to Cravaack, Wouters insisted that was “inaccurate.”
In a statement Monday, Cravaack continued to express concern.
“I have said all along that my highest priority with the proposed purchase of Cirrus [by the Chinese] is to ensure all of the jobs associated with production of Cirrus’ planes remain in the United States. Mr. Wouters has promised as much, but I hope he understands my skepticism. The Midwest is littered with abandoned factories and plants, in part because of China’s artificially low labor costs.”
Former Eighth District Rep. Jim Oberstar, the man Cravaack defeated in November, helped bring Cirrus to Minnesota from Wisconsin in the 1990s.
The Chinese made an agreement with Cirrus to keep jobs in Duluth, Oberstar said. Cravaack is “undermining that relationship making these representations to the Treasury Secretary.”
Wouters’ letter also addressed in detail Cravaack’s “grave concerns” that the Chinese would adapt Cirrus’ commercial aviation technology for military use. Wouters said China already has most of the military technology that Cravaack fears it would try to adapt from Cirrus.
Source: Cirrus CEO: China deal saves jobs