Leather firm fears hit from jet write-off loss
JOHNSTOWN One of the few bright spots in what remains of the local leather industry is aviation upholstery, and officials of a Johnstown company that employs more than 100 people finishing leather for business jets are worried that federal tax changes could affect sales of the planes.
Shipments of corporate jets from U.S. manufacturers more than doubled in the fourth quarter after President Barack Obama, as part of his stimulus plan, replaced the long-standing five-year tax write-off for corporations with a one-year write-off.
So it was a surprise to the National Business Aviation Association, a trade group, when Obama spoke at last week’s news conference to single out corporate jet write-offs as one of his targets for elimination, said NBAA spokesman Dan Hubbard, who said it sounded as though the president was vilifying the business jet industry.
Corporate jets are not manufactured in Johnstown, but the upholstery leather for a majority of those planes is.
“Anything that hurts the industry hurts Townsend Leather,” said company Chairman Terry Kucel, who employs about 130 people at the Townsend Avenue plant. In 2008, before the recession took its toll, the plant employed 225.
Kucel said he watched Obama’s news conference and came away with the impression that the president was engaging in some class warfare rhetoric that may not reflect his actual intentions regarding the jet write-offs.
Hubbard said the president’s message conveyed the idea that eliminating or modifying the write-off would affect corporate titans but not middle-class employees at hundreds of companies that supply the industry.
Actually, Hubbard said, the business jet industry is primarily an American enterprise and one that contributes about $150 billion annually to the U.S. economy while providing employment to about 1.2 million, including the Townsend staff.
For many years, Hubbard said, tax laws provided a five-year depreciation write-off on business jets. There is a seven-year depreciation for commercial jets, he said.
Last fall, the Obama administration was able to establish a new one-year write-off, which immediately stimulated sales, he said.
Despite the president’s remarks last week, Hubbard said there is still no direction from the White House regarding the president’s intentions. Information circulating since the news conference, Hubbard said, suggests the possibility that Obama now favors imposing the same seven-year depreciation schedule afforded the commercial airline industry.
“This is not good for an industry primarily based in the U.S.,” Kucel said.
Kucel said Townsend is the major upholstery leather supplier to at least seven aircraft manufacturers, including Bombardier/Learjet, Cessna, Gulfstream, Dassault and Boeing’s business jet division.
If jet purchase incentives are removed or weakened, Kucel said, Townsend will feel some of the pain. “We’ve been hit pretty hard already,” he said, citing the impact of the 2008 recession.
Since then, Kucel said, Townsend has made an effort to diversify into new products. As a result, the company may lessen the damage from changes in the jet tax write-off, he said.
Still, Kucel said, “it would have a terrible effect on our industry.”
The NBAA and its members — which include Townsend — began a letter writing campaign this week targeting legislators.
Townsend Vice President for Sales Geoffrey Peck composed a form letter asking elected officials “to stand with me, and other companies in the state of New York that rely on business aviation, to keep our company competitive and keep jobs in New York state.”
Peck cited Obama’s news conference and the threat to tax depreciation schedules for business aircraft, and said it is “devastating that the president would attack our jobs and vilify an industry that is fundamentally American.”
Wally Hart, president of the Fulton County Chamber of Commerce, said changes to the national tax policy on jet depreciation “will trickle down to Fulton County.”
Though the Fulton County Chamber supports Townsend’s efforts on this issue, Hart said national policy is decidedly “too far up the food chain” for the local chamber to have much influence. He said Townsend’s concerns will be communicated to the national chamber.
Statistics provided by the NBAA show that more than 1,300 general aviation aircraft (not including commercial airline and military planes) were shipped last year by U.S. manufacturers, including 364 business jets. In the third quarter of last year, 60 business jets were shipped, compared with 145 in the fourth quarter.
More than half the general aviation planes manufactured worldwide in 2010 were made in America.