The delay in appointing members of the board of US Export-Import Bank is causing cost rise for Boeing Co sales. It is losing orders as it can't get export finance deals approved by US Exim Bank owing to lack of board functioning on a full scale. The delay is also causing concerns for General Electric (GE) and other US companies as it's preventing them from accessing export finance.
Deals of export finance over $10 million need the approval of US Exim Bank. However, only two of five seats on US Exim Bank are filled, so the board can't take a decision on export finance crossing $10 million. Boeing's Chief Executive Officer (CEO) Dennis Muilenburg said the aircraft manufacturer was losing orders due to lack of export finance in time.
Reuters reports if a third member is appointed on board, then US Exim Bank will be in a position to extend export finance to the tune of billions of dollars in sales of US aircraft, rail, power and communications equipment globally. Boeing will also get export finance access meeting its sales orders. EXIM Chairman Fred Hochberg said a third member on the board would ease further export financing for US majors.
Hochberg said, "We've got about $10 billion (worth of loans and guarantees) in our pipeline right now that are being held up because of the short-handed board. If exports slow in the areas that require our financing, it will also hit the supply chain of 14,000 US companies that supply Boeing and jobs."
The Wall Street Journal (WSJ) further states many aircraft manufacturers are in a position to accept new orders owing to lack of export finance. The absence of US Exim Bank's support is causing loss of aircraft and engine sales. For instance, Ethiopian Airlines informed Boeing its inability to take delivery of new jets as it can't have Ex-Im guarantees. Boeing has also cancelled a satellite deal with Singapore in the absence of export credit finance. Commercial space business relies heavily on export finance.
Also citing reasons for lack of export finance, General Electric has decided to shift its production base overseas that can access export credit. Boeing is also planning to cut production level on its 777 jetlines in 2017. Global jetlines sales are slowing down more so in 2016. Boeing delivered 176 airlines during the first quarter of 2016.
Despite Boeing lagging behind, Iran Air is willing to buy aircraft from it. Iran Air has ordered 118 jetliners worth $27 billion from Airbus Group SE. Boeing might have acted faster given that US Treasury plays a crucial role in policing trade barriers, as reported by Bloomberg.
Senate Banking Committee Chairman Richard Shelby has not confirmed a third member appointment so far, delaying further. Shelby's moratorium on some of 16 financial nominees appointed by Obama administration is awaiting panel confirmation. This delay is causing sales loss for Boeing, GE, Caterpillar Inc and other US companies.
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