Why Everett lost out on Boeing’s second 787 line

By Michelle Dunlop, Herald Writer

EVERETT — In the end, it just wasn’t enough.

A long-term, no-strike offer from the union. A local training center. More than $3 billion in state tax incentives passed three years ago.

Despite efforts by Washington lawmakers and the Machinists union, the Boeing Co. announced Wednesday that it will put a second 787 assembly line in Charleston, S.C., nearly 3,000 miles away from the company’s original 787 site in Everett.

The second line will join with the first in Everett to fill the 840 orders for the Dreamliner, Boeing’s first all-new jet in a decade. The decision sparked concern about the company’s future in Washington state.

“I know this decision may be of concern to some in the Puget Sound, and I ask everyone to focus on the larger picture,” said Jim Albaugh, president of Boeing Commercial Airplanes, in a message to workers. “We are adding jobs in South Carolina, not taking them away from the Puget Sound.”

Albaugh’s words did little to soothe the sore feelings of Washington politicians and Boeing workers, who had held out hope that an agreement between Boeing and Machinists union leaders could be reached to convince the jet maker to consolidate its 787 assembly work here.

“We had an opportunity today to take a step toward work-force stability and a win for Boeing, our workers, and the state of Washington,” said Sen. Patty Murray, who asked Boeing and the Machinists on Wednesday morning to continue talks. “I am disappointed that Boeing cut off negotiations and passed on a final chance to make this happen.”

The labor factor

Boeing’s Chief Executive Jim McNerney made it clear last week that the company’s decision between Charleston and Everett depended largely on talks with its Machinists union. McNerney called labor strikes, notably the Machinists’ 57-day work stoppage last fall, very damaging for the company. On Wednesday, local Machinists president Tom Wroblewski said the union offered the company the very thing McNerney said was needed: long-term labor security.

“We did offer Boeing a 10-year contract, and even offered to go longer than that. And when we did, they seemed stunned and stopped talking,” Wroblewski said.

He called the talks with Boeing a “sham,” saying the company used the union to get more tax incentives from South Carolina. That state’s Legislature, in a special session Wednesday, passed $170 million in tax incentives aimed at Boeing.

But a long-term, no-strike agreement wasn’t the only key factor in Boeing’s decision, said Tim Healy, spokesman for the company. Boeing also needs to improve its competitiveness. And cutting costs doesn’t come simply from state tax incentives.

Boeing wasn’t asking for adjustments in its current contract with the Machinists, which runs through 2012, Healy said.

But, if the two had agreed to extend the contract, Boeing was looking for changes in health care, pension, wages and similar areas. For instance, Boeing wanted to see the guaranteed annual wage increase reduced to roughly 2.5 percent; the Machinists asked for 3.5 percent. Although the Machinists agreed to cost-sharing for health care, the union wasn’t willing to do so until 2018, not soon enough for Boeing’s liking.

The Machinists wanted guarantees from Boeing that it would locate production for its next all-new jet in the Puget Sound region, Healy said. Boeing balked.

From the Machinists’ perspective, Boeing wasn’t even willing to guarantee the second 787 line in exchange for a long-term contract. Instead, he said the company kept the union guessing about what it really wanted.

“We found ourselves bargaining with ourselves,” Wroblewski said.

Local reaction

Despite Boeing’s guarantee that its decision doesn’t mean job cuts here, local lawmakers and residents believe differently. Everett Mayor Ray Stephanson called Boeing’s Charleston pick disappointing.

“This decision will have an adverse impact on many loyal and dedicated workers, suppliers and subcontractors here in Puget Sound,” Stephanson said.

In downtown Everett on Wednesday afternoon, most people said they are unhappy about Boeing’s choice of Charleston for its second 787 assembly line.

“It’s a shame. They’re all set up here,” said Dustin Rose of Everett. “Having that line would have meant more local jobs. A lot of people here need jobs.”

His sister, Kristina Rose, also of Everett, said she has been expecting Boeing to begin its departure from Snohomish County for awhile.

“They’ve threatened the county and the state before,” she said. “We fixed the freeway for them. Our community has tried to help Boeing.”

Boeing’s troubles with the unions are to blame, said Susan Patton of Snohomish.

“I’m a union member,” Patton said. “But the union screwed this up.”

Patty Blair, 61, of Everett, was drinking a vodka and cranberry juice at the 747 Inn after her shift at the Everett Boeing plant on Wednesday afternoon. She was mad that Boeing management placed the blame on the union for its decision to relocate, saying she believed the decision was made long ago.

“I was hoping it would go our way and stay here,” said Blair, who works in parts at the plant. “I think it’s a mistake on Boeing’s part – one of the other mistakes with the 787.”

The right decision?

Because of problems with Boeing’s global supply chain and hiccups in the 787 production process, the company is running more than two years behind schedule on the 787, the first jet made with a majority of parts from composite materials. The company has yet to take the 787 on its first flight, but officials say that will happen by year’s end.

Boeing said it needs a second production line in order to meet its goal of turning out 10 787s monthly. Its Charleston factory is expected to produce three Dreamliners each month while Everett workers will churn out seven monthly.

But both analysts and Boeing’s unions have said putting the second line in Charleston is a risky move. Local analyst Scott Hamilton, with Leeham Co., believes it could take years for the second line in Charleston to work, given Boeing’s troubles with the jet so far. Hamilton also worries that the decision would cause further animosity with its workers here.

Ray Goforth, executive director with the Society of Professional Engineering Employees in Aerospace, said Boeing had no credible business case for its decision.

“We are astounded that Boeing has chosen to compound the problems of the 787 program by further fragmenting the supply chain,” he said.

Herald reporters Gale Fiege and Andy Rathbun contributed to this report.