Boeing Analyst: Advantages To Keeping 777X In Puget Sound Area

Nov 14, 2013

Boeing said Thursday it has no further plans to negotiate with its Machinists after the union voted against a  contract extension Boeing said was key to its decision to build the 777X in the Puget Sound region. Now the company said it is looking at other locations. It said it would continue to consider the Puget Sound region, but as part of a competition with other places.

With the competition open and the union already saying it won’t agree to concessions Boeing calls necessary, it’s not clear if there is still a way to win the 777X. Union members have begun to weigh that question on the local Machinists' union Facebook page.

The Puget Sound case for the 777X business is strong.  The company's Everett manufacturing facility, which already builds the company's current line of 777 jets,  can build the wing and the fuselage. To Richard Aboulafia, vice president of Teal Group, those reasons alone are compelling.

“If you look at this from a rational perspective, there are enough advantages to staying in Puget Sound with 777X that they should be able to make something work, “ he said in a recent interview. “The business case isn’t so vulnerable as to depend upon the specific terms of this labor agreement.”

One question, though, is whether the strength of that business case will be enough. Suresh Kota, a professor of management at the University of Washington's Foster School of Business, said the reality that workers elsewhere are willing to accept lower wages and won’t strike has changed the game. Customers want certainty, he said, and that means a placid labor situation.

“If Airbus can deliver a plane without uncertainty, customers will look at their plane very carefully,” he said. “And Boeing will be at a disadvantage if it is not able to control its own operations and reduce the uncertainty, as far as the ability to deliver planes is concerned.”

But as Boeing learned from the 787 Dreamliner, uncertainty can also come from manufacturing delays caused by quality problems, not just the threat of strikes.  The company and the union have much to consider as the region awaits the next move.