Outsourcing a sore point for Boeing unions

Published 6:58 pm Friday, June 19, 2009

The Boeing Co. considers its 787 as a great leap forward. For the company’s unions, the jet has meant a step back in their relationships with Boeing.

“The company tried a poor model: outsourcing,” said Bill Dugovich, spokesman for the Society of Professional Engineering Employees in Aerospace.

Boeing handed over not just some manufacturing work but also design responsibilities on its 787 Dreamliner to its global partners. Supplier troubles and production problems have plagued the 787, giving Boeing’s unions a sense of vindication for protesting the company’s new business model.

“The plane is two years late,” Dugovich said. “Luckily, our members and the Machinists were there to work out the problems.”

Both SPEEA’s Dugovich and Machinists president Tom Wroblewski say their members have put in long hours to get the 787 on track, despite the initial slight by Boeing.

“Our members are eager about getting the 787 into full production,” Wroblewski said.

Boeing officials admit the global design and production model didn’t go as smoothly as planned. On the design side, Boeing’s Mike Denton acknowledged last fall that the company would have its own engineers do more work on the next Dreamliner model, the 787-9, than on the 787-8. Keeping future new aircraft programs in mind, Denton thought Boeing might do things differently.

“We really think we need to own some part of major production,” Denton said.

Scott Fancher, the latest vice president of the 787 program, told investors in May that certain suppliers might be excluded from future jet work in the long run.

“Clearly we’ll look at some rebalancing of work scope,” he said.

But how much work might be brought back to the Puget Sound region is uncertain.

The only major 787 structure built here in the region is the Dreamliner’s vertical fin, manufactured by Boeing workers in Frederickson, Pierce County. Boeing workers in Everett piece together 787 sections rather than producing the assemblies themselves.

Boeing’s troubles on the 787 has meant the company needed more Machinists for final assembly than it originally planned, Wroblewski said. Boeing had told the union it would need 350 Machinists, but Wroblewski estimates that nearly 1,000 Machinists work on the 787 line today.

“Will it stay at that level? I don’t know,” Wroblewski said.

Should Boeing decide it needs a second 787 final assembly line, Wroblewski points out that the company already has trained 787 Machinists here in Everett. Boeing’s unions and Washington politicians worry that if the company were to pick a location outside the state for a second 787 line, it would be unlikely to keep future jet programs here.

“We’re doing everything we can to make this first line successful to show this is where they should put the second line,” Wroblewski said.

Wroblewski has little expectation that Boeing will pull large amounts of work back from its foreign suppliers. Boeing Commercial Airplanes president Scott Carson has said repeatedly that the company’s partnerships with global suppliers give it access to different markets and reduce risks.

The strategy has meant greater stability in Boeing’s backlog, which consists of about 10 percent of domestic carrier orders. Carson pointed to the company’s relationship with Japanese suppliers as reason that Boeing holds about 85 percent of the commercial jet market share in that country.

For Boeing workers, that means acceptance of the company’s global business model.

Ultimately, “operating globally means jobs at home,” Carson told business and government leaders last year.

But those jobs at home are going to become fewer and fewer, said local analyst Scott Hamilton, of Leeham Co., at an Economic Development Council of Snohomish County meeting in April.

Hamilton says that outsourcing simply is part of Boeing chief executive Jim McNerney’s mentality — something McNerney picked up while at 3M and General Electric.

“McNerney seems committed to outsourcing despite 787 problems,” Hamilton said.

Hamilton points to cost as the reason why he believes Boeing will keep its new business model. Developing a new aircraft requires significant investment. In order to stay competitive with rival Airbus, Boeing very likely could be forced to develop two new aircraft — 737 and 777 replacement planes — at roughly the same time, Hamilton said. More than ever, therefore, Boeing will need partners to share the financial risk.

“That’s too much to Boeing to bear itself,” Hamilton said.

He said he believes that no matter how much the unions might fight it, outsourcing is here to stay at Boeing.

For the meantime, though, SPEEA and Machinists members are focused on the 787’s first flight, first delivery and production ramp-up.

“We stand ready to build this 787 into the future,” Wroblewski said.