(Reuters) – Barely three months ago, Serge Dumas had one problem: how to keep up with record demand for the metal fasteners and bolts his small aerospace supply firm manufactures just north of Toulouse.
Now, the head of Gillis Aerospace is wondering how to keep his 45 employees busy as Europe’s aerospace capital reels from plummeting jetliner demand caused by the coronavirus crisis.
“In February, we were in the midst of euphoria and operating a just-in-time schedule,” Dumas said, referring to the drum beat of a fully-stretched aerospace supply chain.
“In a few days, we went from accelerating flat-out to slamming on the brakes. We were flabbergasted.”
Now his company, which recently partnered with Germany’s Boellhoff Group, has suspended an 800,000-euro ($906,700) investment in a new building and machinery.
Gillis Aerospace, with annual revenues of 5 million euros, is one of thousands of small to medium-sized firms hurt by the crisis as the French government and private lenders finalise a 1-billion-euro fund to help the sector.
Across the surrounding Occitanie region, a total of 40,000 aerospace jobs are seen at risk, up to half of which could involve Airbus, based in regional capital Toulouse.
Once basking in wealth from air transport, France’s fourth largest city is alarmed by whispers that it could suffer a fate similar to Detroit, ravaged by recession in the auto industry.
Although Europe’s social safety net is stronger, Detroit’s experience highlights a pressing issue: how a city built around a single industry can spiral into decline when that sector is hit by economic disruption.
Four think-tanks and associations sounded the alarm in May, warning the area could succumb to “Detroit Syndrome”. They noted, though, that Airbus – flush with orders with rival Boeing (BA.N) weakened by the grounding of its 737 MAX – had avoided the kinds of strategic mistakes that worsened the plight of U.S. automakers.
Just as Toulouse is now in France, Detroit was once one of the wealthiest American cities. But after decades of job cuts and auto factory closures, the Midwest city’s population of below 700,000 is less than half its 1950 peak, and many residents live in poverty.
“Right now, aerospace sub-contracting represents 86,000 jobs in Occitanie and Airbus buys 5-billion-euros of parts locally,” said Alain Di Crescenzo, president of Occitanie’s Industrial Chamber of Commerce (CCI). Planemakers employ another 30,000.
“When Airbus coughs, everyone gets sick,” he said.
CCI estimates Airbus will halve parts procurement this year. For suppliers paying off loans, such cuts could be devastating.
“Halving activity equates to 40,000 direct jobs locally and the same again for indirect jobs,” Di Crescenzo said.
Airbus declined comment.
SOURCE: Reuters, read more..
