Tuesday, September 29, 2015

Eximbank: The fall out has begun

Well that was unexpected (NOT), GE today announced that its new $300 million engine plant, where all the new engines will be built (next generation) will be located in Canada!  People still cannot believe that US Export Import Bank has closed its doors, but GE has decided that it can no longer wait for the US government to figure out reality.

For Canada this is massive, because engines production line have a very very long life cycle; first the engines are developed for a new type, these are built for a number of years (eg the 777 was built for 15 years) but then new engines are required for the fleet going forward for another 25 years.  Moreover, once "one plant" has been moved, others will follow -- mainly because the specialised skills are there.  On the long run this is all good for Canada.  Granted we are only talking 350 jobs, but in reality there are a lot more jobs involved; GE does the final assembly, but a great deal of sub assembly is done by risk participants, these will want their core operations to be near the final assembly partner (very often but not always), bottom line we could be looking a several thousand jobs here; some will be Americans moving to Canada, but many will be Canadians.

I guess that in a market of 350 million americans, 300 jobs is nothing, but GE is the sharp end of the stick others will follow; Canada's labor is relatively cheap (especially with a cheaper Canadian dollar) health care costs are not a company's problem and the political landscape is subdued.

Now that GE has started how many more high tech companies will follow (either Canada or Mexico) in their footsteps?  These are very high paying jobs, because the degree of skills required here is substantial.

Anyway, I didn't think I would be proven so fast, turns out capitalism can turn on a dime


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