Advertisement

Tiger tanks, and that should be a public-private lesson

January 28, 2007|by TIM ROWLAND

Since bankruptcies and the airline industry go together like, to quote Principal Skinner, half-sandwich and soup of the day, I doubt that anyone did much more strenuous than raise an eyebrow at the news out of Martinsburg, W.Va., this week that Tiger Aircraft had barrel-rolled its way into insolvency.

Grand things were planned for the light-plane manufacturer, which was largely muscled into existence by U.S. Sen. Jay Rockefeller - a $30 million manufacturing plant, 400 jobs, a cornerstone for a budding Eastern Panhandle aviation industry.

"Tiger's venture in the Eastern Panhandle has seen more than its share of highs and lows..." Rockefeller said.

Point of order: What would be the highs? Tiger had hoped to build 70 planes a year, but produced only of total of 51 between 2001 and 2006.

It may be too severe to say that Tiger wasn't worth the gamble. The four-seat AG-5B Tiger, popular with pilots, was based on a proven design that had a pedigree dating back nearly 40 years. At times, its ancestors had been produced by companies that included Grumman and Gulfstream.

Advertisement

But it should be a warning to those who believe the state and free enterprise make satisfactory bedfellows, or that investments of public money in private business are a routinely good idea.

The Tiger assembly plant was built with the help of a $4 million state economic development loan. At the end of November, the buildings were put up for sale and the Associated Press reported that the company hadn't paid personal or property taxes since 2004 and was $115,000 in arrears.

Here's the thing to remember before signing off on any public-private venture:

If a company believes it can make a decent profit building light aircraft in Martinsburg, W.Va., it will build light aircraft in Martinsburg, W.Va.

Without state help.

If a private project cannot make do without dependency on state assistance, then there is a very good chance that it is not a viable private project.

When politicians, well-meaning as they may be, become so obsessed with job creation that they attempt to force projects into existence against the rules of economics, these projects are bound to either fail or become wards of the state feeding off public assistance or perpetual tax breaks.

"How many jobs will you create?" is the wrong question. The right questions include less sexy stuff, including "What are your costs of operation? What's the market? What's the competition? How much debt are you taking on?"

You want to assume these questions are being asked at the state level, but when a company dangles the sugar plum of 400 jobs, how much attention is the state paying to the answers?

Certainly economic-assistance apologists will respond by pointing to legitimate successes, such as foreign automakers that were lured to the (mostly southern) states through tax incentives and other taxpayer-subsidized goodies.

But what if no state offered tax incentives?

I dare say those foreign auto plants would have come here anyway, for the one reason that really matters: It made good business sense.

When sending its phones to some Third World countries, it costs Motorola more to ship the handsets than it does to make them.

A car is somewhat bigger than a phone. Plus, foreign companies benefit from playing the "made in America" card.

Which is fine, except they should be doing it at the going, unsubsidized rate; which is exactly what they would be doing if states weren't in this silly economic-development competition with each other.

So we mourn the downfall of Big 3 at the same time we're helping foreign automakers to build cheaper cars. I'm all for globalization, but that's just weird.

In fact, this whole notion of states competing with each other for jobs is fundamentally flawed. Why should someone in Tennessee be more worthy of a job simply because his state offered more giveaways than did Kentucky?

Markets, not the state, should be the deciding factor in where a company chooses to set up shop. And companies should be expected to pay the costs of relocation.

Economic development commissions have their place in providing demographic information, making sales pitches and helping to ensure a vibrant and attractive quality of life in the community.

But when the state steps in with purse strings open, established companies that can afford to go it alone end up with an unneeded subsidy. And nascent companies, such as Tiger, can end up in bankruptcy, leaving taxpayers in the lurch and sorely disappointing employees hoping for a long-term career.

Rockefeller hopes that some company will step in, buy Tiger's machines, and resume the manufacture of aircraft in the Eastern Panhandle.

And if there is a company out there with a good product, a proven market, a solid business model and adequate private financing, I certainly hope so too.

The Herald-Mail Articles
|
|
|