Officials of McDonnell Douglas want to borrow $10 million from the state to consolidate the company's aircraft assembly operations in Salt Lake City, money that could be repaid by creating new jobs under a plan endorsed by Gov. Norm Bangerter.
If they don't get the loan, officials of the St. Louis-based aerospace company told lawmakers Tuesday they may shut down Douglas Aircraft Co. operations here and expand existing operations in Long Beach, Calif."I have no choice," William Skibbe, a McDonnell Douglas vice president and general manager based in Long Beach, told a Utah House caucus. "I only need one (assembly plant)."
That apparent threat raised concern among some lawmakers. House Minority Leader Frank Pignanelli, D-Salt Lake, questioned whether the loan was a good precedent for the state to set. Lawmakers haven't taken any action on the loan.
The 10-year proposal to expand McDonnell Douglas' operations in Utah was outlined to both House and Senate caucuses Tuesday by the governor and officials of the state Department of Community and Economic Development.
Bangerter acknowledged that the proposal is not without risk but asked legislators to support it. "The bottom line is we think this is a good project," the governor said.
State economic development officials predict the $10 million loan would result in as many as 1,800 new jobs and as much as $150 million in new state and local tax revenues.
The proposed terms of the loan, which the state attorney general's office helped negotiate, would allow repayment to be waived if the company brings in nearly $600 million in new business over the next 10 years.
McDonnell Douglas would earn credits of 3 percent to 5 percent for contracting with Utah companies to offset the $10 million principal and the $8.7 million in interest that would accumulate at a 10 percent interest rate.
State economic development officials hope the provision will boost the amount of business the company does with Utah firms. Only about $8 million in parts used at the Salt Lake operation are made in Utah, a figure that state officials hope will reach as much as $80 million annually.
The $10 million loan would come from "internal service funds," money normally used to provide computer, telecommunications and transportation services to state agencies.
There are about 620 employees at the company's Salt Lake operation, which makes the lower fuselage and floors for the MD-80 aircraft. Last September, the company broke ground for a $1.6 million expansion.
During the summer of 1990, McDonnell Douglas announced that as many as 17,000 employees nationwide - but only about 10 in Utah - would be laid off.