Aerospace race is real, state leaders warn

EVERETT — Matt Yerbic is bullish on aerospace in Washington, but that has not deterred people in other states from courting one of the owners of Everett-based Aviation Technical Services.

And the offers are pretty darn good.

“They say we will build you a building for nothing, we will train your workers for nothing,” said Yerbic, the firm’s chief executive officer, at the Governor’s Aerospace Summit Wednesday at Comcast Arena.

The 1,200 workers of ATS repair, maintain and overhaul jetliners at Paine Field and in Moses Lake.

“Every single region of the country is knocking on doors like ours to say, ‘Think about us,’” he said. “What we have seen, we were a little bit taken aback by.”

Other states and regions are aggressive, Yerbic surmised, because they want what Washington has: an industry of 1,350 companies in 36 of the state’s 39 counties employing 132,500 people. Collectively, the industry accounted for 11 percent of gross business income in Washington in 2012, according to a statewide analysis released Tuesday.

Yerbic’s comments didn’t surprise anyone. Rather, he was one of many during the two-day conference who called for Washington’s elected leaders to realize that the state must compete or risk seeing companies depart. Not the least of those firms is the Boeing Co., which could, many fear, choose another state in which to design and build the next generation of the popular 777.

Linda Lanham, executive director of Aerospace Futures Alliance, which hosted the summit, began the day with a warning of sorts.

She said lawmakers need to push for transportation improvements, reform of worker compensation and unemployment insurance, and a resolution on water quality regulations tied to the amount of fish citizens consume.

If they don’t, she said, Washington will find itself in an “arms race” with other states for aerospace businesses. “If we are to be successful, we must face reality.”

Bob Drewel, outgoing executive director of the Puget Sound Regional Council and president of the Washington Aerospace Partnership, delivered the same message in a softer tone.

Industry, government and labor worked together to win the 787 program, the KC-35A aerial-refueling tanker contract for the Air Force and, most recently, the 737 MAX, which is to be built in Renton.

The “together quotient” needs to be as high as it’s ever been to sway Boeing to design and build the new plane, dubbed the 777X, in Washington, Drewel said.

He insisted it’s not about making a political case to the company.

“We are working hard, very, very hard, to make the business case that Washington is the best place to build the 777X,” Drewel said.

Boeing is expected to announce the launch the 777X program at the Dubai Air Show next month, and likely sometime after that it will announce where it will design and assemble the jetliner.

The firm now builds the 777 at Paine Field, seemingly giving Washington an edge against other states competing for the work.

But Boeing officials are concerned about the effect of pending regulatory changes here and are always looking to cut costs. They could choose to do some or all of the work in South Carolina, where Boeing builds some 787s and has been buying up land in North Charleston.

In the keynote address Wednesday, Gov. Jay Inslee said he’s committed to making a strong case for Washington.

“We need to do everything humanly possible to protect and grow our position in this competitive environment,” he said. “We’ll have a chance to test our mettle in the next few months.”

The first-term Democratic governor laid out steps he’s taken so far, such as ensuring permitting is fast-tracked should Boeing need to build more factory space, and announced other action he’s willing to take, including extending tax incentives that benefit the aerospace industry through 2034. Those breaks, which helped secure the 787, are set to expire in 2024.

“If Boeing makes that commitment to the people of Washington, then I believe the people of Washington would be willing to commit to another 10 years of the tax incentive,” he said.

Inslee tackled two topics on which he and Boeing officials have been at odds: worker-compensation reform and water quality standards based on fish consumption.

He asserted that businesses pay lower rates in Washington’s worker compensation program than in South Carolina or California. And the state is getting injured workers back on the job more quickly, he said. He gave no indication he thinks reform is needed.

Fish consumption has been a touchy subject, since before he took office.

Federal law requires that water discharged into rivers and Puget Sound be clean enough to support fish that are safe to eat. Standards for each waterway are tied to how much residents consume.

Washington is under pressure from environmental groups to increase the consumption rate that is the basis of that determination, a rate which hasn’t changed since 1992. That would mean tougher standards, which could require Boeing to make millions of dollars of water-discharge improvements.

“What I want to do is what’s right for our state,” Inslee said. “This is a big decision. I want to assure you we will not finalize any rules until will we get answers to all questions we have. I really get how important this is to our state.”

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.

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