A year of ups and downs

Published 9:00 pm Saturday, December 27, 2003

Snohomish County’s largest employer, the Boeing Co., made more than its share of big news in 2003.

The company’s December decision to push ahead with the 7E7 and base final assembly in Everett brought a little pre-Christmas cheer to a region that hasn’t had much Boeing news to celebrate during the past three years.

But problems continued to plague Boeing’s long-delayed tanker deal with the U.S. Air Force, leading to the departure of the company’s two top executives and casting some doubt about the future of the 767 assembly line in Everett.

And Boeing’s continuing layoffs dragged on the Puget Sound economy, as the company announced plans to cut 5,000 more workers on top of the 35,000 who already had received pink-slips.

Elsewhere in 2003, Snohomish County’s biotech industry stood poised for its first major drug release, as male impotence drug Cialis was approved by U.S. regulators.

Low interest rates continued to prop up home sales and new construction, which continued at a near-record pace.

And retailers in Everett, Lynnwood and Marysville hoped to benefit from major developments completed or launched in 2003 — the new downtown Everett Events Center, the expansion at Alderwood Mall and the glitzy new Tulalip Casino.

Last December Boeing Commercial Airplanes chief Alan Mulally announced that Boeing was scrapping its delta-winged Sonic Cruiser in favor of "the reference model" — a traditionally styled jet incorporating Cruiser technology to improve fuel efficiency.

Analysts applauded the move, saying that cash-strapped airlines would prefer an efficient new 200-seat jet. But in the next breath, they warned that Boeing had better bring this design to market, or risk falling behind Airbus for good.

In January, the company announced a working designation for the plane — 7E7. The "E" stands for "efficient," "economical" or "environmentally friendly."

Boeing conducted an international online poll to come up with a permanent name. The winning choice — "Dreamliner."

In May, the company started a much higher-stakes contest: the site-selection process for the final assembly plant.

Boeing said the winning site would get 800 to 1,200 final assembly jobs. Satellite plants set up by key suppliers could add to that.

More than 80 communities in two dozen states developed bids. Many considered Everett to be the front-runner, but higher wages, taxes and construction costs here overshadowed the advantages of a trained workforce and already-functioning infrastructure.

The fear in some quarters was if the company took the 7E7 elsewhere, all Boeing jet programs to come would follow it out of Puget Sound.

To battle that, Gov. Gary Locke got the Legislature to swallow a "Big Gulp" package of $3.2 billion in tax breaks, plus other incentives for Boeing.

That made the difference. Boeing executives said the package canceled out the advantages of competing sites, and allowed them to make "a decision from the heart" to stay in Everett.

Meanwhile, the 767 tanker saga was making headlines.

The Air Force’s proposal to lease 100 Everett-built KC-767 tankers was debated in the Pentagon and Capitol Hill all through 2003.

Disturbing patterns emerged, suggesting that Boeing had benefited from an unhealthy cozy relationship between Pentagon weapons buyers and Boeing’s sales staff.

Still, the deal appeared done in May, when the Pentagon announced it had reached agreement on terms on a six-year, $17 billion lease deal.

After months of wrangling, the Senate Armed Services Committee agreed to a compromise. The Air Force would lease 20 tankers and buy the remaining 80 over nine years, saving more than $2 billion in lease costs. President Bush signed it into law in November.

But then, Boeing said its No. 2 executive, Chief Financial Officer Mike Sears, had acted inappropriately by offering a job to Pentagon weapons buyer Darleen Druyan while she still was negotiating the tanker deal. Both were fired.

That led to the Pentagon delaying the tanker deal for an internal investigation. Federal investigators also opened a criminal probe. Faced with this, Boeing Chairman and Chief Executive Officer Phil Condit resigned.

The deal is key to the future of the 767 program in Everett. Future tanker work could keep the production line going for a decade or more.

But without the military sales, the line could close as early as 2005. Sales of 767s have dwindled as Boeing developed its replacement — the 7E7.

Amid all the intrigue, life at Boeing went on.

The company celebrated the first flight of its new 777-300ER in February. The 365-passenger, extended-range jet comes with the most-powerful engines ever put on an airliner.

But more bad news came in July from Boeing, when it announced that as many as 5,000 more workers would be eliminated by year’s end.

Since Sept. 11, 2001, Boeing’s Washington state workforce has fallen from 80,000 workers to 55,000.

The start of Cialis shipments in December marked a milestone for the biotechnology industry in Snohomish County.

Bothell-based ICOS, which developed the erectile dysfunction treatment, foresees a billion-dollar market for it worldwide.

Observers say Cialis will have an advantage over competitors Viagra and Levitra in that Cialis works for 36 hours — prompting it to be dubbed "Le Weekend" pill in France, where it has been available for a year and now has 30 percent market share.

ICOS now has become Snohomish County’s largest locally headquartered company, with a staff of about 700 and market value of about $2.7 billion.

Residential real estate continued to boom during 2003. Fueled by record-low interest rates, sales of existing homes soared 30 percent over 2002 levels during the third quarter, according to the Washington Center for Real Estate Research. Building permit applications were up 5.6 percent compared to the same period last year.

Sales continued strong into the fall, before finally slowing near the holidays.

The climb in home values showed no sign of slowing, however. The combined median price for houses and condos in the county last month was $225,000, an increase of about 3.1 percent from November 2002, according to the Northwest Multiple Listing Service.

Three major Snohomish County projects brought multimillion dollar investments and hundreds of construction jobs in 2003.

In June, the Tulalips opened their new $78 million casino, the state’s largest gambling establishment.

The 227,000-square-foot casino combines Las Vegas glitz with Northwest Native American themes, with 2,000 video slot machines, roulette, keno, craps, poker and blackjack tables. Close to 1,000 area residents work there.

In Everett, the $71.5 million Everett Events Center opened in September, and the Everett Silvertips hockey club started play in October, bringing people to a downtown that previously had shut down shortly after 5 p.m.

Officials say they hope the combination of the casino and events at the downtown arena could draw in more visitors to bolster the county’s $580 million tourism industry.

Meanwhile, Alderwood Mall, the county’s largest retailer, completed the first phase of a planned $50 million to $100 million renovation in 2003.

Key anchor tenant Nordstrom moved into a new 144,000-square-foot store in September. Two new parking garages, with space for 1,500 cars, also opened during the year.

Lynnwood officials say the mall already brings in $1 million a year in sales taxes. That should double by 2005.