NYTimes.com Article: Have Municipality, Will Travel to Paris Air Show

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Have Municipality, Will Travel to Paris Air Show

June 21, 2003
By EDWARD WONG






LE BOURGET, France, June 18 - At the Paris Air Show this
week, there are the usual missile makers and bomb builders,
the helmet hawkers and flight suit fashionistas.

Then there is the Arizona Department of Commerce.

It has
a booth in Exhibition Hall 3 right across from Amsafe
Aviation, a company based in Phoenix that makes airplane
seat belts. "The perfect climate for aerospace" reads the
slogan on a bright orange backdrop, printed near the photos
of Monument Valley and an Apache Longbow attack helicopter.


"We're obviously trying to position Arizona as an
attractive location for foreign aerospace companies so they
can choose this state as their U.S. base," said Sally
Spray, director of the international trade and investment
division at the department. "We want to say, `Bring it to
Arizona, it's a good strategic location.' "

The state is not alone. Nearby sit the booths of both the
Oklahoma Department of Commerce and the State of Maryland,
whose lieutenant governor recently stopped by. Cincinnati
is in the neighborhood, too, as well as New York, southwest
Florida, Virginia and Washington State, according to the
list of exhibitors.

The severe budget crises afflicting American municipalities
have sent them scrambling to find new sources of
investment. They are going out of their way to offer
incentives like tax breaks and factory sites to companies
willing to set up local operations. In recent years, many
states have opened economic development offices abroad to
draw in investors from the global marketplace. Arizona, for
instance, has representatives in Mexico, Europe, Japan and
Taiwan.

The Paris Air Show, the largest gathering of military
contractors and aerospace companies in the world, has
become the states' latest hunting ground. It is an
especially auspicious time to promote the benefits of
setting up shop in United States because the weakening
dollar makes the country a more attractive manufacturing
base.

But it is competitive here at the show. Maryland rented a
sprawling booth. Oklahoma's is just slightly bigger than a
Parisian bathroom. But that state is not shy about
advertising its offerings in big words on one of its
backdrops: "Cash for jobs created" and "tax exemptions."

Ms. Spray, meanwhile, said Arizona could boast of, among
other things, "365 golf courses, one for every day of the
year."

She groused about New York and California. They have name
recognition, she said, and foreign companies often
gravitate to them even though Arizona has lower operating
costs and right-to-work laws that result in a low level of
unionization at workplaces. "We're not a huge incentive
state," she added. "We don't say, `Here's a check for
29,000 euros' or whatever. But we do have enterprise zones.
We can tailor those financially to people."

Like many manufacturing businesses, aerospace companies
worldwide have increasingly played municipalities against
one another to squeeze out the best incentives. In May, the
Boeing Company announced it was taking proposals from any
state that wanted to be the site for final assembly of
Boeing's next jetliner, the 7E7. Lawmakers in Washington
State, where Boeing does final assembly of all but one of
its commercial jets, scrambled to offer tax breaks and
other incentives to keep Boeing there, a push that led to a
tax incentive package valued at $3 billion over 20 years if
Boeing stays.

In fact, Snohomish County, where Boeing does final assembly
of its wide-body jets, has a small exhibit here with
brochures sitting beneath a "Home of Boeing" sign.

In recent decades, Bombardier, the Canadian regional jet
maker, received lavish incentives and free factories from
countries in which it set up plants, said Robert Lamb, a
professor of management at the Stern School of Business at
New York University, who has studied aerospace companies
and the economies of municipalities. Bombardier also
arranged with governments to buy its planes in exchange for
its presence, he added.

Professor Lamb said it was not surprising that states had
shown up at the Paris Air Show because they were desperate
to drum up revenue any way they can. "There's a need for so
much new business," he said. "You have to pay money to make
money. You have to pay out for infrastructure buildup. You
need to do roads, water. The things they are doing are much
bigger than light industrial planning."

The danger, he said, is in putting too much hope into
cyclical businesses - like many aerospace companies - that
lay off large numbers of people during downturns.

Yet states continue to court such companies. Kara H. Smith,
director of European operations at the Oklahoma Department
of Commerce, looked up from a laptop at her booth to talk
about her state's recent history of attracting foreign
aerospace investment. First, she said, there is Lufthansa
Technik, which services business jets in the Tulsa area.
Then there is Labinal, a French electronics manufacturer
that set up a plant in 1997 in Pryor Creek.

Asked about the companies she was focusing on at this air
show, Ms. Smith declined to identify them or discuss
specific incentives, citing competitive reasons. For two
months before the show, she said, she had four workers
calling companies and sending out letters to talk up the
state and set up appointments. Representatives of Oklahoma
attend four or five aerospace trade shows each year, she
added.

"Our strategy is to focus on what we're world-class at,"
said Ms. Smith, who works out of the Netherlands. "And
aerospace is what we're highly competitive at."

Mary Smith, executive director of the Aerospace Alliance of
Tulsa, said there were 143,000 aerospace jobs in the state,
with almost a fifth of that in the Tulsa area. She
estimated that the industry brought in $3.2 billion to the
city each year. American Airlines has its largest
maintenance base in Tulsa, she said, where it employs 9,200
people and has attracted 200 suppliers to the area. Part of
Ms. Smith's job is to find overseas companies to add to
that number.

Many foreign companies set up shop in the United States in
hopes that they will be regarded more favorably by American
politicians and government officials, something that is
especially important for military contractors.

Rainer Hertrich, the co-chief executive of the European
Aeronautic Defense and Space Company, or EADS, said he
wanted officials to stop mentally associating his company
with just Europe. He pointed out that the company had
plants and research offices in Mississippi and Alaska. A
company's nationality should be defined by where it gives
the most "added value," he said, meaning in part where it
creates jobs.

The states here have also set up their booths to push the
products of companies based in their regions. Small
aerospace companies that might not have been able to afford
to come on their own can piggyback onto the exhibition
spaces of the states. Ms. Spray, the Arizona
representative, said the state spent about $60,000 to have
a presence at the show but was charging small companies
from Arizona to share its display.

A couple of executives from one of those companies,
Advanced Training Systems International, were milling
around next to Ms. Spray. The company, based in Mesa,
Ariz., has a fleet of a dozen fighter jets that it uses to
train military pilots from foreign governments like the
United Arab Emirates. Its instructors, including pilots who
have attended the Navy's "top gun" school and flown with
the Blue Angels, are also paid to engage in mock dogfights
with customers. Its slogan: Train to Fight, Fight to Win.

"This is a real cost-effective way for a company like us to
be at the show," said Charles Stanford Jr., the chief
financial officer. "This show is a central meeting point
for all of our worldwide customers."

And there are more potential clients to win over.

"We
want to go meet the Canada people in a minute," Ms. Spray
said to Mr. Stanford.

"Sorry, but we can't join you," he said. "We've got a
meeting at 6:30. I've got to get back to the hotel first."

"Canada's having a reception," Ms. Spray said. "But I'll
mention you. Maybe we can set something up."

http://www.nytimes.com/2003/06/21/business/21AIR.html?ex=1057216275&ei=1&en=3f60995832bf0126


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