Aerospace Shift
1:00 am
Wed September 18, 2013

Next Few Years Critical For Boeing Jobs In Washington

The economic future of this region is still tied to the future of  Boeing, the region's bellwether employer.  The aerospace industry pays 7.5 percent of the wages in Washington state, and Boeing remains the region’s largest private employer, with 85,000 local jobs.

Every time Boeing cuts jobs, it stirs memories of the Boeing Bust, which plunged the region into 25 percent unemployment in the 1970s. And after a summer of layoffs and job transfers, there is concern that Boeing jobs are starting to fly away.

The next few years do contain decisions that will be critical to the future of Boeing jobs in Washington.

It's a different company now. It's driven by revenue and doing what makes the most money for their shareholders.

Boeing moved its corporate head office to Chicago more than a decade ago. Since then observers, from retirees to unions, have noted  a change in the company’s attitude toward Washington.“I think it’s a different company now," said Jim Gillan, a recent retiree. "And it’s driven by revenue and doing what makes the most money for their shareholders.”

The trend has been noticed at the bargaining table. Ray Goforth leads the engineers union. “The Boeing company wants to be able to do what it wants to do without question or explanation," he said. "Being a part of the Puget Sound, being part of Washington state is not important to the corporation.”

Boeing does not talk about hiring plans. It declined KUOW’s requests for an interview.  

The Rise Of The South

However the company is taking action. In summer 2009, Boeing acquired a supplier in South Carolina. This happened while people in Washington were still anticipating completion of the 787 Dreamliner and troubleshooting its many issues. The Dreamliner is Boeing's bid to win the market through fuel efficiency and a radically new design.

That autumn, Boeing bypassed Washington and chose South Carolina for its second 787 production line. Now 6,500 Boeing jobs are there, and not here.

They're buying hundreds of acres of land down there and it's not to preserve the trees or wetlands.

Boeing also has an option to purchase up to 1,100 acres to add to their South Carolina plant. If the land purchases go ahead, the company will own slightly more land there than Boeing owns in Everett.

Aerospace consultant Scott Hamilton of Leeham Co. said the company is clearly expanding. “They’re buying hundreds of acres of land down there and it’s not to preserve the trees or the wetlands," he said. “Those are going to be converted to factory.”

South Carolina, like most of the southern states, has two major advantages over Washington. It has fewer union constraints, thus fewer potential strikes, and more tax breaks for businesses. South Carolina uses many kinds of tax breaks to entice companies to set up in the state. Washington state’s constitution puts limits on the kinds of incentives it can offer.

Boeing is not the only aerospace company setting up in the South. Airbus SAS of France has set up in Alabama. Embraer SA, the Brazilian plane maker, set up in Florida after deciding against Washington state.

These places in the South don’t have a workforce with our experience building planes. But they are forming a new aerospace cluster, with opportunities for workers and for aerospace suppliers.

Michel Merluzeau is an analyst at an aerospace research firm called G2 Solutions. He said we have to contend with a new reality. “The center of gravity of the aerospace industry in the US has shifted. It has shifted to the Southeast. We can question the way it was done but it is a fact and you’re not going to be able to change it.”

On average, from December 2000 to June 2013, Washington has accounted for 43 percent of Boeing's total workforce.
Credit KUOW/Kara McDermott

Successors In Everett And Renton

Right now, Washington is in a competition to keep business it already has. The company's Everett plant, for example, builds the 777. Boeing’s building a successor: the 777X. The company is said to be considering many scenarios for the build, including Washington, Japan, South Carolina and investing in robotics for that next version. A decision in favor of robotics would reduce the number of jobs on that line.

Then there’s the domestic workhorse, the 737. The Renton plant will build the successor: the 737 Max. But Airbus has several strong planes in this popular category. Industry watchers say Boeing is planning a total redesign to improve its competitive edge. In about seven years, Boeing will decide whether Renton builds that new plane. Boeing has 9,000 people working in Renton now.

Consultant Scott Hamilton said the seven-year timeline means Washington has a window of opportunity. “Beginning about 2018 Washington needs to have a strategy in place that will enable the state to offer Boeing better incentives than it is constitutionally able to do so now, as well as to have a business climate that is more competitive with the southern states.”

Hamilton said creating a more competitive business climate means Washington needs to become a right-to-work state. Right to work means people are not required to join their workplace’s union.

He said he’s not against unions; he’s concerned about Washington’s prospects. 

We have to change. If we don't change, then the erosion will be progressive.

Hamilton and analyst Merluzeau do not always agree. However this time Merluzeau said he shares the concern. “We have to change,” he said. “If we don’t change, then the erosion will be progressive.”

People in government do not agree. Alex Pietsch, director of the governor’s office of aerospace, said the facts do not show Washington has a crisis that warrants major change.

“I believe that the company is committed to Washington state,” he said. “We’re in a position of strength. While that doesn’t mean that there’s not work to do, we should celebrate that strength.”

Boeing jobs here are up  by more than 11,000 since 2010. That’s a 15 percent growth. And Boeing committed an estimated $150 million of its own funds to building the Everett Delivery Center.  The day it opened last April, Washington Governor Jay Inslee said Boeing still sees Everett as its factory door to the world.

“We’re going to do everything humanly possible in the state’s capital this year to make sure those jobs continue to be created right here at Boeing to pump out those planes through these doors,” he said as workers applauded.

This story is part of The Big Reset, KUOW’s series that explores how the Puget Sound Region has emerged from the Great Recession.