Boeing: No Choice But to Leave Washington State?

Boeing 777 Interior

If members of the International Association of Machinists and Aerospace Workers and local politicians do not ratify an agreement announced by Boeing (NYSE:BA) earlier this week, the jet manufacturer’s latest aircraft — the 777X — will likely not be built in the Seattle area, the company’s traditional manufacturing base. On Friday, in a statement emailed to the Seattle Times, Boeing said the company was ready to “pursue other options” outside Washington for manufacturing the jet. The warning was issued hours after senior members of the union voiced opposition to the proposed labor contract, which will go to a membership vote next Wednesday, the publication reported.

At the end of a Thursday night meeting attended by a hundreds of union workers, District 751 President Tom Wroblewski tore up a copy of Boeing’s proposed contract, saying he would try to have it withdrawn even before the vote took place. “I know this is a piece of crap,” Wroblewski said. “Vote No,” proclaimed many signs held by meeting attendees, and as the publication reported, that was the tenor of the meeting in general. Similarly, earlier that day, union workers at Boeing’s Everett jet-assembly plant marched through the facility chanting the same sentiment: vote no.

“All of our options are still on the table, including those within Boeing and interest we have received from outside. We chose to engage in Puget Sound first, but without full acceptance by the union and Legislature, we will be left with no choice but to open up the process competitively and pursue other options for locating the 777X work,” read Boeing’s statement.

The 777X — which boasts the largest engines ever put on a plane and key costs-saving technologies that could change trends in modern aircraft design — is considered pivotal to Boeing’s future profitability. The new version of the popular long-haul get, due for delivery in 2020, will likely be the last major new jet constructed by Boeing for many years, making it a very important aircraft. It is a crucial component in the company’s fight against Airbus for dominance in the long-range, twin engine market, and given the size of the program, the plane’s construction has a huge ripple effect for the state where the production line is located and the labors who build the plane.

Early last week, the Wall Street Journal reported that Boeing — the Chicago-based aircraft manufacturer once headquartered in Washington state — was evaluating whether to build the carbon-fiber composite wings of the redesigned 777 long-range jet and complete the plane’s final assembly in the South Carolina facility that currently builds sections and assembles some 787 Dreamliners. Had the key 777 manufacturing steps been moved to South Carolina, most of the construction of Boeing’s key two-aisle planes would have taken place in that state, considering the company also plans to move significantly more 787 production to the facility as well.

That facility is the first final assembly plant for jets manned by nonunion workers. Since South Carolina is a right-to-work state, legislation prohibits agreements that govern the extent to which a union can require employees’ membership. Therefore, Boeing’s proposed expansion to that state was taken by unions as a sign that the company wanted to cut back on its labor expenses and cut union jobs.

But after a tense few weeks of ongoing talks between the International Association of Machinists and Aerospace Workers, which represents more than 32,000 employees, Boeing Commercial Airplanes President and Chief Executive Officer Ray Conner announced November 5 a contract extension that would allow the “final assembly of the new 777X and fabrication and assembly of the airplane’s wing” to take place in Puget Sound.

“I want to congratulate IAM District 751 Directing Business Representative Tom Wroblewski for his leadership, vision, and determination to forge an agreement of historic proportion that, when ratified, will secure and extend thousands of high-wage, high-skilled aerospace jobs and expanded economic opportunity for residents of Puget Sound and Portland for many years to come,” said Conner in his statement. Wroblewski noted that, “His team pressed hard for an agreement that maintains market-leading pay and benefits for the members he represents, while also recognizing the critical importance of our efforts to achieve increasing competitiveness in order to win against a growing list of global competitors.”

That same day, Washington state Governor Jay Inslee called legislators to a special session to approve a $18.7 billion package of tax and policy incentives for Boeing. “I am asking lawmakers to pass a package of legislation that will guarantee that the Boeing 777X and its carbon fiber wing are built in Washington state,” Inslee said at a Tuesday press conference. “If we can do this in the next seven days, we can be certain that Washington’s aerospace future will be as bright as its past,” he added. Last year, Washington’s aerospace industry generated $76 billion in economic activity, with the 777 contributing $20 billion in economic activity and 56,000 jobs.

In a November 7 announcement posted on its website, the Machinist union said the eight-year contract agreement would provide an “unprecedented degree of labor stability in the volatile and competitive industry.” But the problem with the labor contract is that it lowers health care benefits and replaces the traditional pension with a defined contribution savings plan. The contract also includes wage increases of just one percent every other year, with a wage structure meant to keep workers from reaching the top of the pay scale as quickly as the current contract — 16 years — compared to six years. Yet, the true source of union anger is the fact that Boeing has given the union a “take-it-or-leave-it” ultimatum for the 777X contract, as the Seattle Times reported.

“[I]f not ratified per the scheduled vote on November 13, we will begin taking the next steps,” said a Boeing spokesman in the statement. Competing for the construction of the 777, which has already received record orders before its launch at the Dubai Airshow later this month, are the South Carolina factory as well as facilities in Texas and Utah.

Follow Meghan on Twitter @MFoley_WSCS

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