No one has claimed that GS Yuasa was chosen for the 787 on anything but merit. But Boeing has long been dogged by suspicions that in return for its awarding major contracts to Japanese companies, which also receive subsidies from Japan’s government, the country’s airlines buy Boeing aircraft almost exclusively.
Such arrangements are banned by the World Trade Organization Agreement on Trade in Civil Aircraft, signed by the United States and Japan, which requires that aircraft purchases be made solely on the basis of “commercial and technological” factors and that procurement contracts should be entered into only on the basis of “competitive price, quality and delivery.” The agreement is intended to ensure that purchase decisions are based “strictly on technical and commercial factors,” according to the United States trade representative.
“The world has made tremendous progress” at eliminating political influence from the sale of aircraft and components, Richard L. Aboulafia, an aerospace and aviation analyst for the Teal Group, a consulting firm in Washington, told me this week. “And then, there’s Japan. All the normal ways of doing things are upended.” Is there a quid pro quo? “Yes, absolutely. But no one will talk about it, and no one can prove it,” he said.
A former Boeing executive confirmed this when we spoke this week. After asking not to be named because of the diplomatic fragility of the topic, he said: “Let me put it this way: we knew the Japanese market would be Boeing’s in return for our selecting these Japanese partners. It was a silent understanding, and there was nothing in writing.” He added that Boeing’s Japanese suppliers had received low-interest loans from the Japanese government repayable only out of future profits.
Although the Japanese airlines and suppliers are independent companies, “in Japan there’s a unique relationship between the airlines, the suppliers and the government,” according to the former Boeing official. “It’s cultural. The officials all went to the same schools and have close personal relationships. The government supported the airlines and the industries and they developed together. The government has enormous influence. They all work together.”
As a Boeing vice president and former Boeing Japan president, Nicole Piasecki, told the company magazine in 2008: “These aren’t just relationships with people in business. The Japanese government is a powerful and important part of all economic activity and industrial development. So part of relationship building is negotiating these two important spheres of influence in Japan and understanding it’s all tied together.”
Mr. Aboulafia agreed that Japan was unique. “This is the way things used to be in the days before free trade,” he said. “Japan is the last unreconstructed believer in industrial policy writ large.”
The Japanese External Trade Organization referred questions to the Japanese Ministry of Economy, Trade and Industry, which had no immediate comment.
In response to my questions, Boeing declined to address the specific choice of GS Yuasa for the 787 batteries, but said, “In general, internal and external suppliers of the 787 program were selected based on their ability to do the work with the high quality, affordability and reliability that customers expect from Boeing and that Boeing demands of its partners.” Boeing added that “GS Yuasa provides the batteries under subcontract to Thales,” the French company responsible for the 787’s electrical systems, but confirmed that Boeing approved the choice and that all subcontractors had to meet Boeing’s quality standards.
Nonetheless, there’s circumstantial evidence to support suspicions that quality and price may not be the only factors affecting the choice of Boeing’s Japanese partners. Japan’s market for commercial aircraft is dominated by Boeing to a degree unrivaled by any other country. Over the last decade, Boeing supplied over 80 percent of the aircraft ordered by Japanese customers. The nation’s flagship airline, Japan Airlines, has never ordered a plane from Airbus, Boeing’s rival. The Japanese carrier All Nippon Airways flew the 787’s maiden commercial flight and has placed an initial order for 50 aircraft. Boeing said that over the last 50 years, Japanese carriers had ordered 900 Boeing aircraft, making Japan one of its top markets by dollar volume.
Airbus has struggled to gain traction in the Japanese market. Evidently taking a page from the Boeing playbook, it said it invested an estimated $4.6 billion with Japanese suppliers for its jumbo A380. But $4.6 billion is a drop in the bucket compared with Boeing’s spending over the decades. Airbus has since booked four orders for the A380 from the low-cost Japanese carrier Skymark Airlines. Airbus has long accused the Japanese government of engaging in improper subsidies to Boeing; an Airbus executive called the 787 the most heavily subsidized civil aircraft in history.
Article source: http://www.nytimes.com/2013/01/26/business/selection-of-the-boeing-787s-battery-maker-raises-questions.html?partner=rss&emc=rss
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