If a little-understood federal financing agency is shuttered, export-fueled job growth in Ohio could be derailed, advocates of that agency say.
The Export-Import Bank offers loans to help overseas customers buy products from American manufacturers. Often called the “Ex-Im Bank,” the obscure agency quietly guarantees the loans, securing business relationships for U.S. companies.
But a growing chorus of Republican lawmakers and presidential candidates have blasted the 81-year-old bank as corporate welfare, and the Ex-Im bank’s charter was allowed to expire June 30.
In a May speech in South Carolina, Ohio Gov. John Kasich — who supported the bank charter as a congressman — has come out against it, saying, “I don’t like the idea that if the private banks cannot make loans, that therefore the government ought to make them.”
The decision could impact manufacturers, large and small, including Honda — one of Miami Valley’s top five exporters. Honda employs about 13,000 Ohioans, including more than 1,400 residents from Clark and Champaign counties.
Foreign firms rely on bank loans
In response to critics, General Electric Vice Chairman John Rice and other GE leaders have said they will take a hard look at where they place future employees and growth.
GE and companies like it may have to place growth with nations like France and Canada, which still have strong export credit agencies, said Rick Kennedy, a spokesman for GE Aviation in Cincinnati.
The stakes are high for Ohio employers. GE, Boeing, Caterpillar Inc. and parts of General Dynamics Corp. and United Technologies Corp. had foreign customers that received about $10 billion in loans or guarantees from the bank in 2014, Bloomberg News reported. All of those companies have a presence in Southwest Ohio.
GE Aviation has 9,000 employees in Southwest Ohio, including about 1,200 in the Dayton area. It has another 7,400 workers in Greater Cincinnati, and several hundred in Peebles, in Adams County. In 2013, GE Aviation opened the $53 million Electrical Power Integrated Systems Center in a new building on the University of Dayton campus off River Park Drive.
More 60 percent of GE’s revenue come from international customers, many of whom need financing to buy American products, Kennedy said. In five years, probably 70 percent of the company’s revenues will be international, he said.
If GE is forced to turn to another country for export credit services — like Canada, for example — that country’s expectation will be that GE employ more of its citizens, Kennedy said.
“They require a certain number of people who work in that country,” he said. “They will begin to align and put future investments in other countries, to meet those thresholds, to be able to have access to their credit institutions.”
Smaller companies are also concerned.
Graham Hill is owner and president of Mason’s Anglo American Hardwoods, a lumber exporter. An American citizen and a native of the United Kingdom, Hill started his company to trade temperate North American hardwoods. He buys wood from U.S. sawmills and exports it overseas, much of it to the U.K., the Middle East and to Asia.
His sawmill suppliers typically want to be paid in 10 days, but Hill is sometimes forced to extend 60- to 90-day credit terms to customers overseas. He sometimes needs the Ex-Im bank to support those transactions.
“I pay for that,” Hill said. “It’s not a freebie. It really hacks me off when I hear ‘corporate welfare.’”
In June, GE CEO Jeff Immelt said his company would have to “move jobs from U.S. to countries that have export banks” if Ex-Im is not renewed.
In the tri-state area, the Ex-Im Bank “promotes tens of thousands of local jobs,” David Joyce, GE Aviation president and chief executive, wrote in a recent op-ed.
Earlier this month, Boeing Co. was trying to find alternate financing for a satellite contract worth “several hundred million dollars” because of uncertainty about the future of the bank, the St. Louis Post Dispatch reported.
Rick Little, president of Starwin Industries, and chairman of the Dayton Regional Manufacturers Association Board, says his relatively small Kettering company does not directly export. He has about 35 employees, and his customers include automotive producers, government and research facilities and others.
But he is concerned about the companies his business serves who are direct exporters.
GE Aviation, for example, spends $1.2 billion a year with suppliers in Ohio.
“It got my attention when Boeing and GE both, in the course of like two weeks, said this was going to affect jobs directly,” Little said. “That got my attention.”
The Ex-Im Bank costs taxpayers next to nothing, GE’s Kennedy said. The default rate on Ex-Im Bank loans is close to zero, he said.
“We have to be able to say (to the customer) there’s a financial vehicle for you available before you have a discussion,” Kennedy said. “For us over the years, that’s been really, really important.”
The Senate attached an amendment reauthorizing the Ex-Im Bank to a federal highway bill. But the House did not consider the full, 1,000-page bill before it went to an August recess.
According to numbers provided by the National Association of Manufacturers (NAM), the bank support 249 companies in Ohio employing 15,300 people.
Assembly and Test Worldwide Inc. in Dayton is among the Ohio employers who rely on the bank, according to NAM. A call to that company’s treasurer was not returned.
Linda Dempsey, NAM vice president for international economic affairs, rejected the idea that the bank amounts to “corporate welfare.”
Dempsey said most bank transactions help small businesses. Every year, a “few hundred” new small-business exporters come online because of Ex-Im’s help, she said.
If the U.S. does away with Ex-Im, the nation will face a market where more than 60 of its competitors are still armed with export credit services, she said.
“None of these governments are thinking about packing up their marbles and going home,” she said.
Ex-Im takes in fees and interests on the loans it provides, Dempsey said. It pays for all of its expenses, but in many years, it has sent money back to the U.S. Treasury, she said, adding that it has also built up a “very sizable” loan-loss reserve.