Is the Boeing Co. merely diversifying geographically, as company leaders say, or is this the beginning of the end for Boeing in Washington?
A week after the company said it would establish engineering centers in two other states where engineers would compete with counterparts in Washington for design work, analysts and state leaders are still trying to figure out the company’s true long-term intent.
“There does seem to be a concerted effort to move jobs to other parts of the United States — places where costs are lower, unions are less cantankerous and politicians make the world’s biggest aerospace company feel more welcome,” wrote Loren Thompson, an aerospace analyst with Lexington Institute, in a guest column for Forbes on Thursday.
Boeing’s latest move, announced May 31, is to create engineering centers in South Carolina and Southern California. Washington will lose 300 jobs in the short term. Down the road, though, the company’s engineers here will face increased competition from those at Boeing’s other sites for work on such projects as the 777X.
Alex Pietsch, director of Gov. Jay Inslee’s Office of Aerospace, was nonplussed by Boeing’s announcement. The company’s effort to establish an East Coast aerospace base in North Charleston, S.C., has been clear since the company picked the airport there in 2009 as the location for a second 787 final assembly line, he said.
“That doesn’t mean there aren’t going to be thousands of jobs here” in Washington, he said.
Pietsch noted that it would take 45 years for Boeing’s presence in South Carolina to eclipse that of Washington at Boeing’s current pace of expansion there.
Boeing’s Washington employment is 85,488, while the South Carolina location employs 6,549.
Rather than worry about South Carolina, Pietsch said, he is more focused on executing on the governor’s strategic aerospace plan, which boosts education and workforce training as well as transportation.
State Senate leaders, though, pointed to Boeing’s recent announcement as a call to action as the Legislature continues a special session to resolve Washington’s budget.
Unless Inslee wants to “wave goodbye to Boeing,” then “we need to make some fundamental changes,” Sen. Rodney Tom said during a Senate Majority Coalition Caucus media briefing last week. A significant shift or departure by Boeing likely would prompt owners of small and medium-sized companies to reconsider doing business in Washington state, he said.
“We need to make sure we have a competitive business environment in Washington state,” the Bellevue Democrat said.
Republican Sen. Mark Schoesler of Ritzville agreed.
“If it’s that way for Boeing, how many other companies are going to make the same conclusion that this is not a good place to do business?” Schoesler said.
Boeing invested in the North Charleston 787 final assembly line to “have a choice,” the company’s CEO, Jim McNerney, said in late May at an investors conference in South Carolina.
“Now that we have internal competition … we’re going to get much better deals,” he said.
After the conference, Ken Herbert of Imperial Capital estimated that the overall hourly cost of doing business in North Charleston was 30 percent to 40 percent less than that for 787 assembly in Everett. Herbert told the Post and Courier newspaper in Charleston that his estimate was based on wages, benefits and cost of living.
Like their counterparts in Washington, South Carolina lawmakers haven’t shied away from offering incentives to Boeing, adding $120 million in incentives this year in exchange for Boeing’s pledge to create 2,000 more jobs and invest $1 billion there in eight years. The state approved $450 million in incentives in 2009 for the 787 final assembly line.
Despite everything South Carolina has to offer, Boeing “has invested tens of billions of dollars in research, design, production and training facilities” in the Puget Sound region, analyst Thompson wrote. That means Boeing “has no intention of abandoning the place.”
Everett Mayor Ray Stephanson didn’t find Boeing’s announcement about engineering centers particularly surprising. The company has expressed concern for several years about being able to recruit enough engineering talent, he said.
Inslee put Stephanson in charge of a coalition that will streamline any needed permitting should Boeing decide to build an updated version of the 777, called the 777X, in Everett. The mayor doesn’t think Boeing’s decision to open other engineering centers is an indicator of where the company will base the 777X. Like Pietsch, though, Stephanson emphasized the importance of following through with education initiatives, such as adding 850 engineering slots at state universities.
Linda Lanham, executive director of the Aerospace Futures Alliance, an industry lobbying group, is pushing for many of the education and workforce training efforts mentioned by Pietsch.
“We’ve got to stay competitive,” she said.
Lanham remembers the effort in 2003 by Washington to win the initial 787 final assembly line. Then the state offered $3.2 billion in incentives.
“We just did everything we could possibly do to make sure Washington was the most competitive,” she said.
That’s the sort of effort the state will need to muster year after year to keep companies like Boeing content.
“I think Washington will always be one of the top aerospace clusters in the world,” Lanham said.
Michelle Dunlop: 425-339-3454; email@example.com.