Fine Print - July 2008

Rolling in the “D’oh!”
By G.D. Gearino

One of the many unhealthy similarities between journalists and politicians is that both run the risk of becoming wedded to a particular policy or point of view. Intellectual flexibility is a desirable quality in both professions, yet intoo many cases when the circumstances change … Oh, hell. Enough of the throat clearing and pussyfooting. I need to just man up here and say it: The state’s Global TransPark might prove to be a success after all.

You may recall that it was a mere two months ago when, in this very space, I declared that political leaders who had created the cargo airport/industrial park near Kinston in the early 1990s had “made a mistake so obvious that any Junior Achievement dropout could have avoided it. They provided the supply where there wasn’t (and clearly still isn’t) a demand for industrial air parks in remote, rural areas.”

Almost before the ink was dry on the page, Gov. Mike Easley announced that Spirit AeroSystems Holdings Inc., the world’s largest independent provider of commercial-airline components, would open a huge factory at GTP that eventually would employ as many as 1,000 people. Upon hearing that news, my immediate reaction was to make the same sound Homer Simpson makes when his incompetence and endless miscalculations have once again been put on display: “D’oh!”

My second reaction was one of happiness for a part of the state where good jobs have chronically been in short supply. Only a cretin would wish for continued economic misfortune in Eastern North Carolina if the alternative — namely, a prosperous GTP — would prove him wrong. That’s the kind of bizarre entrenchment in a point of view that can lead an anti-Bush activist into believing that success in Iraq is a bad thing.

Before I reveal my third reaction, though, I’ll encourage you to stop reading now if you pumped your fist with glee as you heard these words from Easley as he explained the deal with Spirit: “Today we start to silence all of those naysayers over the years who have been heckling from the sidelines.” If you prefer the silencing of naysayers, you’re not going to like what follows from here.

My third reaction was that Easley had unconsciously set himself up for a possible “Mission Accomplished” moment — which is to say, the premature declaration that the insurgents have been routed and the battle has been won. One impressive deal doesn’t make a success out of GTP. State and federal funds totaling $100 million have been poured into the project over the last 15 years, and only now is there even a hope of some payoff. Also, don’t skate too quickly past the fact that Spirit was lured to GTP because Golden LEAF — the state-controlled foundation that is custodian of North Carolina’s share of tobacco-settlement money — agreed to spend $100 million to build Spirit a new factory at the park. Basically, that doubles in a single stroke the amount of public money invested in GTP.

There are a couple of other inconvenient aspects to this deal. The first is that Golden LEAF officials told the Triangle Business Journal in late May that they might have to dip into the foundation’s assets to make payments for the Spirit plant. Golden LEAF’s endowment stands at about $700 million, and every year it gets more from the tobacco industry. But its investment returns, like everyone else’s these days, have gone south. Some of the $100 million it puts on the table for Spirit might come in the form of seed corn — an unsettling prospect for any foundation.

Then there’s the cyclical nature of the aerospace industry. Spirit’s largest single customer is The Boeing Co. (from which it was spun off in 2005), and perhaps you’re familiar with the old saw, “When Boeing catches a cold, its suppliers get pneumonia.” Doing business with, or investing in, the aerospace industry is like dating someone with bipolar disorder: You’re either having the time of your life, or you’re wondering how to get out of the situation before finding yourself broke and crazy.

Stock analysts generally like Spirit Aerosystems, but earlier this year the company got a reminder of what life with Boeing is like. Spirit is building the nose section for the new Boeing 787 Dreamliner, and its original deal called for it to receive payment upon delivery of completed planes to buyers. But the 787 has been plagued by delays — which has left Spirit footing the cost of producing the part while seeing its payday pushed further away. As a result, Spirit needed cash advances from Boeing, as well as an expansion of its bank credit line, to keep its books healthy this year.

Let me add one final complication to all this: On the same day Easley announced Spirit’s presence at GTP, the company revealed that it has a deal to manufacture fuselage structures for Airbus, the French aircraft builder that is Boeing’s biggest competitor. Though this lessens its dependence on Boeing, Spirit has to erect a Chinese wall within its operations to ensure that proprietary information doesn’t leak in either direction. Surely I don’t have to explain the implications if that wall is breached.

In short, GTP might end up with a long-term, stable relationship, but for the moment we taxpayers are sugar daddy to a wild girlfriend.

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