Signs were clear Boeing isn’t tied to location

EVERETT — The age of loyalty is dead.

People in the Puget Sound region may have learned that the hard way last week when the Boeing Co. announced its preference for South Carolina over the company’s historic base for commercial airplanes.

“Boeing has betrayed our loyalty once again,” said Machinists president Tom Wroblewski, in a statement shortly after Boeing’s announcement.

Betrayed, disappointed, angry: It wasn’t just Boeing workers here that described their reactions to the company’s decision in those terms. Local, state and congressional leaders did, too.

“Even when they moved their headquarters to Chicago, Boeing’s Washington work force remained dedicated to the quality product they make,” said Sen. Patty Murray, D-Wash., on Wednesday. “Now, Boeing has decided to take their second 787 line to South Carolina. It’s a shortsighted decision.”

Beyond the initial feelings of betrayal, there were those who say the writing was on the wall.

Last year, as Boeing Machinists headed back to work following a 57-day strike, Richard Aboulafia, an analyst with the Teal Group, predicted Boeing’s eventual departure from the Puget Sound region. Although Boeing had not yet bought out its 787 parts supplier, Vought Aircraft Industries, in South Carolina, analyst Aboulafia suggested in 2008 that the jet maker would flee to the South.

The South has “weaker unions and right-to-work laws that diminish union power. As the car companies realized, it’s easier to train flexible workers than it is to work with experienced but inflexible workers,” Aboulafia said then.

On Thursday, the day after Boeing announced it would set up a second assembly line for its delayed 787 Dreamliner in South Carolina, Aboulafia said he wasn’t the least bit surprised by Boeing’s choice.

“That strike had a strong impact on management,” Aboulafia said.

Aboulafia isn’t the only analyst who viewed the strike as a thorn in the side of Boeing management.

“Boeing CEO Jim McNerney is so pissed with the IAM (Machinists) that he wanted to do it,” Scott Hamilton, with Leeham Co., wrote on his Web site just before the announcement was made.

McNerney himself may have telegraphed the decision when speaking a couple weeks ago after announcing the company’s third-quarter financial results.

After mentioning that the 787 second line choice was between Charleston and Everett, McNerney noted there would be “some execution challenges” in getting the work done in South Carolina. “Diversifying our labor pool and labor relationships has some benefits,” he said.

Noting that the company and the Machinists union have had trouble working together during recent contract negotiations, he added that the challenges in Charleston are “certainly more than overcome by strikes happening every three or four years in Puget Sound. Our balance sheet would be a lot stronger today if we had not had a strike last year.”

In April, like Aboulafia, Hamilton warned of a Boeing departure. At an Economic Development Council of Snohomish County meeting then, Hamilton detailed several reasons for Boeing’s exit, including its troublesome relationship with the Machinists and complaints over Washington’s business climate.

Hamilton noted another reason: Boeing Chief Executive McNerney’s commitment to outsourcing.

McNerney came to Boeing in 2005 after previous posts most notably with 3M and General Electric. At GE, McNerney spent years being groomed by Chief Executive Jack Welch. There, he picked up the GE mindset of “no loyalty to place,” Aboulafia said.

It’s an attitude that’s reflected in Boeing’s board of directors. So, while Bill Boeing might have started his commercial airplane company here in the Puget Sound region, the board of the Boeing Co. doesn’t feel an obligation to continue to make jets here.

The board and McNerney’s focus is not on place but on the bottom line. That reality began sinking in for lawmakers this week.

Rep. Jeff Morris, D-Mount Vernon, a member of the Legislature’s aerospace task force, said that one of the messages received by lawmakers by this week’s decision is that “Boeing is bringing a low-bidder attitude for airplane manufacturing into the process. It’s something we have to realize.”

McNerney is no stranger to the low-bidder attitude. In his first three years at 3M, he began moving jobs out of the United States and into Asia. That company’s U.S. staffing fell 10 percent at a time that 3M’s work force in Asia grew by 5 percent.

As with Boeing, McNerney said 3M’s growing presence outside the U.S. wasn’t about cost alone.

“I’m responsible for keeping 3M a globally competitive company,” McNerney said in a 2004 BusinessWeek article. “Now, it’s very hard to serve Chinese customers in a lot of our businesses unless we’re manufacturing there. We don’t do this to eviscerate U.S. jobs. We do it to be competitive.”

Despite troubles with its global 787 supply chain, McNerney stands behind the business model of expanding the company’s presence worldwide and not putting too many eggs in one labor basket.

Boeing’s move South gives the company labor stability for its troubled jet and cuts costs, Aboulafia said. Besides removing a high potential for strikes in a state with a low union presence, Boeing also got the bonus of last minute tax incentives.

Washington lawmakers point to the $3.2 billion in incentives the state passed in 2003 for Boeing and aerospace companies in order to land the first 787 production line. Many felt that deal and previous sacrifices should have weighed more heavily in Boeing’s decision.

The state, counties and cities “have all contributed to the Boeing endeavor by means of massive tax breaks, infrastructure development, job training and political support for decades,” wrote Rep. Jay Inslee, D-Wash., in a letter Wednesday urging Boeing and the Machinists back to the table.

When Boeing shunned further labor talks and snubbed Everett, Inslee sounded scorned.

“The citizens have put out big- time for Boeing management, and I’m disappointed that they are pulling the rug out from under them with this decision,” Inslee said.

However, the reality of McNerney and Boeing’s new business demands is sinking in for some, including Rep. Morris and Deborah Knutson, executive director of the EDC of Snohomish County. Knutson said she hopes Boeing’s South Carolina choice serves as a wake-up to how important the company is to the region.

“We were just complacent,” she said.