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How the 787 was won

Everett weathered fierce competition from around the nation for the plane

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By Bryan Corliss
Special to The Herald
Published:
  • After signing the legal papers to officially announce Boeing's partnership with Washington state to build the 7E7 on Dec. 19, 2003, at the Boeing Asse...

    Photo by Chris Goodenow

    After signing the legal papers to officially announce Boeing's partnership with Washington state to build the 7E7 on Dec. 19, 2003, at the Boeing Assembly Plant in Everett, Gov. Gary Locke smiles as he is given a model of the fuel efficient aircraft by Mike Bair, sitting at far right, Boeing senior vice president in charge of the 7E7 program. Behind the governor and Bair are, from left, John Quinlivan, general manager and vice president of Boeing's Everett plant, Herman Williams, chairman of the Tulalip Tribes, Paull Shin (obscured, looking over Williams' shoulder), state senator for the 21st Legislative District, and John McCoy, state representative for the 38th Legislative District.

  • Alan Mulally, then chief executive of Boeing Commercial Airplanes, addresses about 3,000 Boeing employees, suppliers and dignitaries on Dec. 16, 2003,...

    Justin Best / The Herald

    Alan Mulally, then chief executive of Boeing Commercial Airplanes, addresses about 3,000 Boeing employees, suppliers and dignitaries on Dec. 16, 2003, at the event announcing that the company had chosen Everett as the place where its new jet would be built.

  • Boeing employees rally in 2003 to urge Boeing to build its jet, then called the 7E7, in Everett.

    Dan Bates / The Herald

    Boeing employees rally in 2003 to urge Boeing to build its jet, then called the 7E7, in Everett.

For a while there, it looked like the first flight of Boeing's new 21st-century jet would take place close to Kitty Hawk, N.C., the birthplace of aviation.
Or maybe Savannah, Ga. Or somewhere in Texas. Or New Jersey, New Mexico, Kansas or even Minnesota -- anywhere, in fact, but Everett.
"Every community in America would love to build this plane," U.S. Sen. Patty Murray, D-Wash., said before the Boeing Co. picked Everett to build the new plane in late December 2003."
Boeing's final assembly plant for what it then called the 7E7 was the biggest industrial plum in the American economic development pie that year. At stake: About 1,000 high-skill manufacturing jobs, a $500 million new factory and cutting-edge aerospace technology that would make whatever community Boeing landed in the center of the next generation of jet manufacturing.
Governors and mayors nationwide jumped at the thought of bringing home the Boeing bacon. "I've personally contacted the company to share my commitment and to make our case," Michigan Gov. Jennifer Granholm said in 2003. "We have the skilled work force and manufacturing prowess to ensure that Boeing is successful in Michigan."
Here in Boeing's homeland, it was a politically contentious time. Republicans in Olympia were blasting Gov. Gary Locke and his fellow Democrats for making the state unfriendly to business. Regulations were too tight, they said. Traffic congestion was worsening, and the state's investment in higher education -- relative to other states -- was falling.
Boeing itself had just pulled up stakes and moved its headquarters to Chicago in 2000, cashing in on $63 million in cash and tax incentives in the process. Then-CEO Phil Condit fired a parting shot at the state, saying it was "absolutely critical that the business climate in Washington be improved if we are to be competitive here," and warning that future Boeing growth in the state would be tied to improvements in things such as transportation, education and regulation.
Plus, there was a vocal faction within Boeing's management team that was flat fed up with Everett and the Puget Sound region. Many still remembered how when Boeing wanted to expand the Everett factory in the 1990s, the state levied some $47 million in impact fees on the company. The money went toward improving highway access between I-5 and the site, and when the work came in under budget, the city of Everett ended up refunding about $4 million.
During public hearings, activists tried to claim slices of the Boeing fee for all kinds of worthy projects, and an urban legend grew up within the company that Boeing had ended up paying for Everett's low-income housing projects. (Housing advocates had asked for the money, but it was denied.)
As the search went on in 2003, Boeing continued to be openly critical of Washington's business climate, with then-Commercial Airplanes chief executive Alan Mulally (now CEO of Ford Motor Co.) going as far to proclaim "we suck," when it comes to issues like traffic and overall support for business. But he didn't slam the door on staying in Washington, saying he was pleased with progress the Legislature had made on issues such as the cost of unemployment insurance.
Despite the harsh words, local officials thought they had a pretty good chance of convincing Boeing to stay put.
"I only gave it a 25 percent chance of them moving," said John Monroe, a retired Boeing executive who now is the aerospace program director for the Snohomish Economic Development Council. "I really believed that you needed the Puget Sound skilled work force to do the final assembly. I didn't think you could do it somewhere else. I realized the value of having your manufacturing people sitting down with your design people."
But the competition for the 7E7 assembly site was fierce. North Carolina, for example, offered Boeing a package of cash, tax breaks and state spending worth a total of $534 million if the company agreed to build the new jet at a near-empty industrial park in Kinston, N.C.
Kinston was just one of nearly 100 cities in 22 states to pursue the assembly site to some degree.
Some contenders were brazenly open about it, like Texas, which offered tens of millions of dollars in cash to Boeing, and potential sites from Fort Worth to the Rio Grande Valley, where manufacturing workers earn a fraction of what they do in Everett. Likewise, Kansas was prepared to provide up to $500 million in funding should Boeing relocate.
Others were quieter, like Gulfport, Miss., where leaders didn't say publicly they were wooing Boeing until long after it had already selected Everett. And some -- like locations in Arizona and Colorado -- seemed to be extreme long shots, given that Boeing was looking at sites with year-round, deep-water ports.
Some states pursued bids even though they were convinced Boeing was just using them as bait to leverage Olympia lawmakers into making a sweeter offer to keep Boeing.
"If Washington wasn't in the race, I'd say our chances were pretty good,'' Danny Roberts, a California economic development official, told his local newspaper.
Likewise, within this state, there was a strong sense that it was no use trying to keep the company here, because it had already made up its mind to leave. And to complicate the issue, Washington's state constitution bans the kinds of outright cash grants many states were offering to Boeing.
"It's at a point where we have to pay blackmail to keep jobs in our state," Seattle resident Greg Jacobs told the Associated Press.
Boeing ended up getting about 80 proposals, including two from Washington -- Everett and Moses Lake. The company and its consultants whittled the list down to 10 and began visiting sites.
The "show stopper" for many that looked good on paper was a lack of transportation infrastructure, according to former Boeing 787 chief financial officer Craig Saddler.
In an interview with CFO magazine, published in 2005, he said the problem was that Boeing needed a site with easy access to both a harbor and an airport big enough to handle cargo jets. "There were three sites I thought were going to be really fantastic, and when we got there it became obvious that, based on the infrastructure, they just wouldn't work."
Meanwhile, back home, the planning for the state's response "really was very secretive," Monroe said. "There were very, very, very few people involved in the real detailed planning."
A lot of people supported the effort, but most of what became known as the "Project Olympus" proposal was developed by just two people, he said: Martha Choe, who was a top aide to Gov. Locke, and Tom Captain, a respected aerospace analyst with Deloitte. Captain knew what Boeing wanted; Choe was able to massage it into a package that could get passed by the Legislature.
The secret was not just meeting Boeing's minimum requirements for the new site, Monroe said.
He described it this way: "You do what you can to satisfy the (request for proposal), and then look around and see what else you can do to make them happy. How about throwing in a barge facility? How about throwing in a training facility? Is there anything else that anybody can do?"
"It helped having some good insight to the Boeing Co. and their operations, and what some of the other hot-button points of interest might be above and beyond the simple incentive package that was provided," Monroe concluded.
In the end, Locke (who's now the U.S. commerce secretary) convinced the Legislature to approve a tax-break package worth up to $3.2 billion for Boeing and its suppliers over the next 20 years. The biggest piece of that was a 40 percent cut in the state's business and occupation taxes levied on aerospace manufacturers, but it also included a new Everett barge pier linked to Boeing's rail spur, a state job-training center and a variety of tax rebates and other sweeteners.
That leveled the playing field, in terms of costs, and allowed Boeing to "make a decision that allows us to stay where our heart is," in the words of Walt Gillette, a now-retired Boeing executive who headed 7E7 development during the early days of the program.
The state incentive package was a "huge factor" but far from the only one, Saddler said. "You first have to figure out the logistics issues, the transportation costs, the business climate within a state or location, and the human-resource factors." Saddler's team ran more than 100 spreadsheets, analyzing costs, risks -- even the weather, he said. It all added up to Everett in the end.
Six years later, there's talk once again of Boeing moving out of state, either to establish a second 787 production line, or for an all-new plant to build the projected replacement for the 737.
It's going to take a whole new effort to convince them to stay, Monroe said. Many of the key managers at Boeing have retired or moved on; new elected officials have replaced those who worked so closely with them.
"When Gary (Locke) left office and Martha Choe left office, it just kind of fell apart," Monroe said. "We, state and local government, and the Boeing Co., could have done a much better job of follow-through on the relationship."
And next time, Puget Sound will face even sharper competition and will need to show more than just familiarity with Boeing and its needs, he warned. "You can't rely on that being one of the key assets or key strengths you may have versus, say, South Carolina. South Carolina has had the experience in dealing with them."


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