Superior's Chinese Connection

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Superior Airparts announced last week that it's being purchased and re-capitalized by a Chinese company. Key the kneejerk reaction: Good grief, are we shipping the entire country to China? In five years, will there be anything left?

I'll concede that this is my standard reaction whenever I'm told or read that a company has sold its assets to or has otherwise gotten in bed with the Chinese. On first blush, it always seems like such a sellout, a naked attempt to cash out and head for an early retirement. The reality is always more complicated than that and thus the initial emotional reaction soon gives way to the harsh reality of the modern business world.

And the harsh reality is that arguing against globalization at this scale—or any other scale, for that matter—is like arguing against gravity. You're far better served by adapting the business tide rather than attempting to shovel sand against it. Cessna realized that when it moved the Skycatcher to China and now Superior has had a similar revelation.

So inevitable or not, is this a good thing or a bad thing? It's a good thing, but with reservations. When Superior turned turtle last year, it occurred for reasons we may never know exactly but it's a safe bet that two them were the same financial mismanagement that upended Thielert (it has bought Superior) and the demand cliff represented by the onset of a deep recession in 2008.

The fact that Superior didn't immediately find a suitor suggests that in the current market, business isn't that great and that there's just not that much Western capital looking for a home of any kind, much less one in the risky world of aviation. China has a trillion-plus dollar trade surplus with the rest of the world and is looking for a place to put some of that money. Through a chance set of circumstances, a Chinese company found Superior and the deal was done.

On the plus side, it could mean that Superior's Texas operation gets an infusion of capital to gin up its parts inventory and product expansion, which new CEO Tim Archer says he sees happening soon. That's likely to include some new cylinder projects which were put on hold by the recession and bankruptcy. That's a good thing, because engine shops need all the competitively priced parts they can get to stay in the game against increasingly aggressive marketing from Lycoming and Continental, not to mention other shops. The deal Archer made with the Chinese company evidently stratifies the market, so that Chinese made parts won't find their way into the U.S. but will be limited to the developing Asian market. More likely, at least initially, the reverse will be true. U.S.-made parts will trickle into the Asian market until Superior's Bejing factory ramps up.

The Chinese are just as desperate for creating manufacturing jobs as are U.S. companies so it's anyone's guess how long or even if this relationship will stand. By Western standards, the Chinese play a zero-sum business game and any company who has traded there has had to learn that the Chinese do things differently.

But short term, setting aside the understandable emotional reaction, the deal is good one and is almost certain to grow some jobs in Texas. In any case, it's better than the alternative, which was to have Superior continue to struggle and, perhaps, eventually wither.