EVERETT — The Boeing Co. hasn’t flown its 787 jet, but already concerns have surfaced about whether the company will place a second Dreamliner production line in the state.
“We know Boeing (officials have) options,” said Bill McSherry, the governor’s newly appointed aerospace adviser. “We know that they’re discussing their options for a second 787 line this year. I know we need to act to be as attractive as we can be.”
The state rolled out a tax incentive package in 2003 to land the 787 line. Some lawmakers said the state has since let down its guard. Others believe Boeing’s unions could make or break a second line. And some suggest Boeing is simply milking the state to save itself more money.
But Gov. Chris Gregoire and the Legislature are taking the talk seriously for now. The Legislature recently called for a competitiveness study to see how Washington stacks up against other states. For its part, Boeing remains mum on if, when and where a second 787 line would come into play.
“There has been no decision,” said Bernard Choi, a Boeing spokesman. But “anything the state can do … that can make the state more competitive, not just for Boeing but for business, is a good thing.”
Boeing “isn’t telling us what it wants,” said Deborah Knutson, with the Snohomish County Economic Development Council, which is in charge of the governor’s study. But the tax incentives and other efforts of southern states have been pretty well publicized, she said.
Snohomish County Executive Aaron Reardon put some urgency on the state’s action during his state of the county speech early this year. Reardon, who was in Olympia for the 2003 agreement, says his concerns over securing the second 787 line come not from threats from Boeing officials but rather his own observations.
The delays in the 787 will make it difficult for airlines placing new orders for the Dreamliner to take deliveries until the second half of the next decade. With many U.S. carriers yet to place orders for the 787, Reardon thinks Boeing inevitably will need a second line and likely will start looking at sites in the near future. Reardon doesn’t see Everett, or the state, necessarily as a shoo-in for another production line. But he believes if Boeing puts its second line elsewhere, Washington will have a tough time convincing the company to put its next all-new aircraft program here.
2003 agreement
Boeing hasn’t evaluated how its agreement with the state in 2003 panned out as far as spokesman Choi is aware. But Scott Carson, president of Boeing Commercial Airplanes, wasn’t overly complimentary of the state last November when he addressed the Prosperity Partnership conference in Seattle. State leaders have made progress in making Washington a more attractive place to do business, but there’s still “significant room to improve,” he said.
“We want and need Washington state … to be increasingly competitive over the long haul,” Carson said.
While Boeing might not be spelling out publicly what the state needs to do to remain competitive, the company’s 2009 legislative agenda notes some key issues: reducing unemployment insurance costs and workers compensation costs; finding a viaduct solution; striking down a labor neutrality bill and supporting education.
Several of those items — training, unemployment and transportation — are holdovers from the 2003 deal, Reardon said.
“It was clearly underscored in 2003 that the movement we made would allow us to squeak by as a competitive state,” he said. “Those efforts were never continued.”
Unemployment costs
The state ranks in the top 10 in the nation in highest workers compensation costs and unemployment insurance rates, said Linda Lanham with the Aerospace Futures Alliance. Lanham’s group is pushing Boeing’s legislative agenda in Olympia. Although Washington shouldn’t “race to the bottom” it needs to take steps prudent to lowering its rates, she said.
Washington had lowered its unemployment rates for the 2003 agreement but rolled back some of those breaks in 2005. “We’re starting to go backward,” Lanham said.
The unemployment insurance bill in the state Senate would reduce unemployment taxes up to $583 million for 2010 to 2015. If the state cuts its workers compensation and unemployment insurances costs this session, “it will send the message that we do care about keeping the Boeing Company in the state,” Reardon said.
Training
Washington has long touted its trained aerospace work force as a big reason that Boeing should stay. But Reardon and Lanham say other states interested in luring Boeing away have made strides to close the training gap. And training will become even more important as Boeing’s aging work force in the state begins to retire. About 25 percent of Boeing workers will be eligible to retire in the next few years.
Jerrilee Mosier, who leads Edmonds Community College’s work force development and training efforts, has kept tabs on what states are doing in terms of aerospace training.
Other states already have a leg up on Washington in terms of centralized aerospace training centers. For instance, West Virginia is building two advanced technology training centers with $30 million in state funds. North Carolina, which funneled $11 million into aerospace education and training, put $7 million into its Advanced Machining Center — a key component in landing a new Spirit AeroSystems’ plant there. And Alabama, Washington’s rival for a lucrative tanker contract, built an Aerospace Training Center in 1999. That state also plans to sink up to $15 million into a robotics training facility.
Although Washington built its Employment Resource Center in Everett in the 2003 agreement, the facility is dedicated to 787 training only for its first five years. The company’s suppliers in the state don’t have access to the facility, Mosier said.
“It’s difficult for employers to know where to go for training,” Mosier said.
Mossier and Lanham want to see a central aerospace training facility funded using state and federal dollars. That training center would coordinate aerospace training efforts throughout the state — to community colleges and via Internet. One spot under consideration is a 26-acre site adjacent to EdCC. The estimated price tag for buying the land and building a facility: $18.7 million.
The idea of an aerospace training center isn’t a new one, Mosier said. But it’s one that hasn’t been acted on by the state.
Unions
Boeing’s decision about its second 787 line may have less to do with what Washington offers and more to do with its labor unions. The Boeing Co. complained loudly over last fall’s 57-day Machinists strike. In a competitive industry, Boeing said, the company can’t allow labor disputes to give Boeing a reputation as an unreliable jet maker.
“I’ve never seen the relationship between the two this bad,” Reardon said. “It needs to be fixed.”
Analyst Richard Aboulafia believes Boeing and the Machinists each bear some blame for the last strike. He doubts Boeing will build the replacements for the 737 or 777 jets in Washington state.
“It does seem like wrong moves were made by management to not extend a partnership,” Aboulafia said at a conference in Lynnwood. But the union “didn’t recognize what was going on in the world,” he said.
Tom Wroblewski, Machinists president, said the union has reached out to Boeing, telling the company that getting the 787 delivered is the group’s top priority. Wroblewski equally is passionate about keeping a second line in Washington.
“It doesn’t make sense to me that we would build it anywhere else,” he said.
Boeing’s engineers union believes Boeing made a bad decision — for the company, its shareholders, its employees and the community — to outsource the Dreamliner so aggressively, leading to lengthy delays. Paul Shearon, secretary-treasurer for the International Federation of Professional and Technical Engineers, said putting a second line elsewhere would be an “extremely wrong-headed move.”
“It would be a horrible mistake for them to go into a different area with unqualified workers,” he said.
Ploy or real threat?
Bill Dugovich, spokesman for the Society of Professional Engineering Employees in Aersopace, isn’t convinced that Boeing actually wants to look elsewhere.
“The way that the company talks, they’re using it as a threat,” he said.
And Boeing’s threats of leaving Washington are wearing on some lawmakers.
“Their mantra is ‘Do it our way or we’re leaving.’ My question is, when are they going to make a commitment to stay here? Where is their commitment to the community and the state instead of trying to bully people?” said Rep. Mike Sells, D-Everett, who is also secretary-treasurer of the Snohomish County Labor Council.
Sells introduced a controversial worker privacy act this session that was opposed by Boeing. The legislation was shelved last week.
Local aerospace analyst Scott Hamilton wouldn’t be surprised if Boeing just wants more breaks from the state and unions.
“I certainly think Boeing is going to do whatever they can do to hold up Olympia and Snohomish County,” Hamilton said.
But Hamilton, who interviewed former Gov. Gary Locke recently, dismisses talk that the 2003 agreement permanently locked Boeing into building its 787 line in the state. Gregoire’s adviser McSherry wouldn’t say one way or the other.
“We hope it never comes to whether we have to make a legal argument,” McSherry said. “Our goal is that it never comes to that.”
While the tax incentives were a key factor in Boeing locating the first 787 here, “it does not present a barrier for decisions on an additional 787 assembly capacity in Washington or elsewhere,” Choi said.
But with a trained work force, equipment, suppliers and tax breaks in place here, “to me, it doesn’t make sense to put a second 787 line elsewhere,” Hamilton said.
Herald reporter Jerry Cornfield contributed to this story.
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