Free Enterprise in the 21st Century

I guess I just don't understand free enterprise or capitalism here in the 21st century. I always thought it meant that the market, buyers with money, would decide whether products and ultimately companies would sink or swim, based on the quality of their ideas and their ability to turn those ideas into something people will pay for.

So this week in Duluth, Minnesota, mayor Don Ness is hopeful that the Minnesota state government will put up US$4M, to go with the US$6M the city has committed, to build a new US$10M plant at the Duluth Airport. The plant will be leased to Cirrus Aircraft who will use it to build their new SF50 Vision personal jet aircraft in. The jets will sell for about US$2M each. Cirrus CEO Dale Klapmeier indicated that time is running out for the state to commit. Mayor Ness is very concerned that without the city and state building the plant for Cirrus that the company will move its manufacturing of the SF50 elsewhere, lured by incentives from other cities in the US.

You see in free enterprise there is lots of competition, at least between US communities willing to give tax breaks or even build facilities for companies, in an attempt to lure jobs to their communities.

The odd thing is that Cirrus was bought out for US$210M in February 2011, by China Aviation Industry General Aircraft (CAIGA), a subsidiary of Aviation Industry Corporation, which is wholly owned by the Government of the People's Republic of China. The Government of the People's Republic of China is currently arguably the richest entity of any kind on earth. So why do they need handouts from small US cities? It is also a communist government and a bit totalitarian, but let's not get into that.

Okay so let's summarize: The City of Duluth and the State of Minnesota want to provide a total of a US$10M taxpayer subsidy to the Government of the People's Republic of China as an incentive for them to establish their Cirrus SF50 production in Duluth instead of having it lured away by greater government subsidies from other cities. The new plant will build jets for rich Americans, since I doubt that poor or middle class Americans, like most of the taxpayers in Duluth, will be buying too many personal jets.

That all seems to add up to the taxpayers of Duluth and Minnesota subsidizing lower aircraft purchase prices for wealthy Americans via the intermediate step of providing facilities to a Chinese government state-owned enterprise.

Is it worth mentioning that government subsidies like this are not permitted under most trade agreements, like GATT? Of course that would be applicable if the City of Duluth was subsidizing a private company, but in this case they are really subsidizing a foreign government, so I guess that doesn't count.

I guess I just don't understand free enterprise, at least 21st century free enterprise.

External links

• Cirrus Eyes Jet Factory At Duluth, by Russ Niles, AVweb

Cirrus SR22 Demo At Carp On 23-24 March 2012

By Gary Black, Great Plains Regional Sales Director, Cirrus Aircraft Corporation

I will be flying into Carp Airport (CYRP) on Friday afternoon, March 23rd and displaying my 2012 Cirrus SR22 at the West Capital Development. We will plug in the aircraft for display and serve barbequed hamburgers and hot dogs for dinner starting at 4 pm. Please stop by to see it and join us for a meal! For directions, please come to 1500 Thomas Argue Road, the March road airport entrance. The FBO building is at the end of Thomas Argue and it is the first building on the left on taxiway Alpha.

If you are planning on attending the BBQ please call John Phillips at West Capital Developments to RSVP at 613-839-7900.

I will be able to do a limited number of demos on Saturday. My current Cirrus demo plane will be on the cover of next month’s FLYING magazine. There is an excellent piece about Cirrus and I thought you would like to have a sneak peak.

Happy flying and see you soon!

More information:

* www.cirrusaircraft.com
* www.whycirrus.com

Cirrus Sold to Chinese Government

The announcement was made today, 28 February 2011, that Cirrus Aircraft had been sold to China Aviation Industry General Aircraft Co. (CAIGA) of Zhuhai, China. CAIGA is owned by Aviation Industry Corporation (AVIC), which is in turn owned by the Government of the People's Republic of China. Anyone who didn't see this coming just wasn't paying attention, as I noted in this blog when Continental was bought by the Chinese.

Of course the company people put the best spin possible on the sale. Cirrus CEO Brent Wouters said: "CAIGA understands the strength and the talent of Cirrus's workforce and the prominence of the Cirrus brand in general aviation. Through this transaction, CAIGA will invest in our employees in both Minnesota and North Dakota by committing to the continued use of our world-class production facilities."

Cirrus co-founder and present Chairman Dale Klapmeier said: "With this transaction, Cirrus will continue to develop and build the best, most exciting aircraft in the world. The original dream remains alive and well at Cirrus. We are just embarking on our next chapter on a global stage."

Of course the question everyone is asking is "will the jobs stay in Duluth and Grand Forks or move to Zhuhai?" Right now everyone is making reassuring noises. Meng Xiangkai, CAIGA’s President, stated: "CAIGA is dedicated to being an international leader in the provision of general aviation products and services, and light piston aircraft is one of CAIGA’s business focuses. We are very optimistic to begin our partnership with Cirrus and add Cirrus’s strong brand as the cornerstone in our aviation product portfolio. We are deeply impressed with Cirrus's performance in the global general aviation industry, especially with its consistent product performance, comprehensive safety features, outstanding management team, highly skilled employee base and advanced production facilities as well as its expanding global footprint. We look forward to working with Cirrus’s management team to build upon Cirrus’s proven success and to further expand production volume in order to cement Cirrus’s existing leadership position in the global general aviation industry, as well as to produce greater job opportunities in Duluth and Grand Forks."