The irresistible attraction of lower wages, a big state incentive and a non-union environment lured The Boeing Co. to announce this afternoon that it will build a second 787 Dreamliner production line in South Carolina.
Attempts by Sen. Patty Murray to orchestrate an eleventh-hour meeting between the company and its Machinists Union to salvage a new labor agreement deal weren’t successful, and the company cast its lot with the site in North Charleston, S.C.
Boeing had sought no-strike concessions from the Machinists as part of the consideration for putting the second line in Everett where the first production line for the Dreamliner is located.
But despite negotiations between the union and the company last week, the two sides were unable to reach an agreement.
South Carolina is a right-to-work state where establishing a union is more difficult. The company has been the subject of multiple strikes in the last two decades at its production facilities in the Puget Sound area.
“Establishing a second 787 assembly line in Charleston will expand our production capability to meet the market demand for the airplane,” said Boeing CEO Jim Albaugh, the new president of Boeing’s commercial airplane operation.
“This decision allows us to continue building the synergies we have established in South Carolina with Boeing Charleston and Global Aeronautica,” he said.
The union representing Boeing’s machinists was blunt in its criticism of the company.
“Boeing has betrayed our loyalty once again, walking away from our discussions just like they walked away from Seattle eight years ago to move to Chicago,” said Tom Wrolblewski, head of the International Association of Machinists Union District Local 751.
“We tried very hard to reach an extended agreement with Boeing. We listened closely to what executives said, and suggested ideas to meet their needs. We offered concrete, real-world solutions,” he said.
“But I can tell you now, no matter what Boeing says or implies, the truth is this: We did offer Boeing a 10-year contract, and even offered to go longer than that. And when we did, they seemed stunned, and stopped talking.
It was obvious to me that Boeing wasn’t really interested in working with us. They didn’t take our proposals seriously and they never offered any proposals of their own. Most of the time, they didn’t even take notes,” Wroblewski said.
“It’s now clear that Boeing was only using our talks as a smoke screen, and as a bargaining chip to extort a bigger tax handout from South Carolina,” he said.
Boeing spokesman Tim Healy said the company made it clear to union negotiators what it required in any extended agreement. The company, he said, wanted an agreement through at least 2022, and it wanted wage increases in line with historic wage improvements over the last two decades.
The company said it told the union it would consider an arrangement in which bargaining would happen as it does now with the union membership voting on the company’s best and final offer. If members rejected that offer, the matter would go to binding arbitration.
Healy said the union rejected that path to labor peace presumably because it feared an arbitrator might see that Boeing workers are now being paid 20 to 30 percent above the industry norm and grant them minimal increases.
The union also proposed that as a condition of a long-term no-strike arrangement that the company nationwide be restricted from campaigning against the union’s organizing efforts in other plants.
The union that represents Boeing’s engineers and technical workers in the Puget Sound area said the decision to open the new facility could multiple Boeing’s already plentiful problems with 787 production.
The Boeing Company’s decision to place the second 787 production line in South Carolina will hurt a program that is already stretched to its limit, said Ray Goforth, executive director of the Society of Professional Engineering Employees in Aerospace.
“We are astounded that Boeing has chosen to compound the problems of the 787 program by further fragmenting the supply chain,” said Goforth. “There is no credible business case for this decision.”
Members of Washington’s congressional delegation expressed regret that the decision was for South Carolina.
Over the past several days Washington state lawmakers led by Sen. Patty Murray, D-Wash., and Rep. Norm Dicks, D-Wash., had been in frequent contact with top Boeing officials, including the company’s CEO James McNerny and Albaugh.
As late as Wednesday morning Murray tried to bring the machinists union and Boeing back to the table. The union agreed. Boeing rejected the offer in a terse statement.
Boeing’s decision on the South Carolina plant comes as Dicks, Murray and Washington state’s other senator, Democrat Maria Cantwell, are backing the company’s bid for a contract to build new Air Force refueling tankers. The contract could be worth $100 billion. The Air Force is expected to release its formal request for bids by the end of November.
This is the second time in recent years the Washington state congressional delegation has been disappointed by a major Boeing announcement. The lawmakers received no advanced notice when Boeing said several years ago it would move its corporate headquarters to Chicago.
Asked why she thought the state’s congressional delegation should continue to fight for Boeing in light of Wednesday’s announcement, Murray said “that’s a good question.”
But she quickly added, “I work for the 80,000 people who get up every morning in Washington state to build airplanes. I have people on the line every day that I am fighting for.”
Murray said McNerny had made clear in their conversations that what Boeing most wanted was “certainty” from its workforce. The senator said she thought the union’s latest offer was “impressive” and called Boeing decision “shortsighted.”
“We are where we are,” Murray said in an interview.
Rep. Rick Larsen, D-Wash., whose congressional district includes the company’s massive Boeing plant in Everett, said “it is crystal clear that no level of tax breaks or training or anything else was going to stop this from going to South Carolina. It seems the management-labor divide was too wide to bridge. We did everything we could.”
In an interview, Larsen noted Boeing blamed an eight week strike for delays in 787 production, but the plane is 104 weeks behind schedule.
“What about the other 96 weeks?” Larsen said.
Cantwell said Albaugh told her the decision to put the second line in South Carolina won’t result in the loss of any Washington state jobs. She said Boeing’s relationship with the machinists union had to be a major factor.
“Obviously the labor-company relationship has been strained,” Cantwell said. “We live in a new, competitive aerospace world. We need a new model.”
Rep. Adam Smith, D-Wash., said he hoped Wednesday announcement didn’t “represent a larger shift in the company’s approach to doing business.
“Throughout the years, Washington state and its workers have provided Boeing with the incentives, support and high quality workers that have allowed it to become one of the world’s leading aerospace companies. Given this history and all that Washington state has to offer, it is extremely disappointing to see them push aside our workers and develop the second plant outside the state.”
Boeing is opening its second production line for the 787 because of unprecedented demand for the jetliner. The company had hoped to assemble each jetliner in just three days in Everett, but glitches in supplier production of the component parts have thus far made the assembly move much more slowly.
Boeing bought Vought Aerospace’s Charleston factory that built 787 fuselage sections after that company botched its efforts to build the sections on time and in fully-completed form.
The company also bought a half interest in a Charleston plant jointly build by Vought and Alenia of Italy to join the fuselage parts built by Vought in Charleston and sections built in Italy by Alenia.
The company has already secured building permits to clear a forest near the existing plant to construct the assembly plant.
The South Carolina Legislature this week passed an incentive package to lure Boeing to build more in the state. That package hinges on Boeing creating 3,800 jobs there.
In addition to the non-union environment, Boeing will find wages substantially lower in South Carolina where assembly line workers make $14 an hour versus $26 in the Puget Sound area.
For Washington, the biggest potential impact may be long term. Boeing in the next decade is expected to create new planes to replace the 777 and the single-aisle 737. The 737 is built in Renton. The 777 is assembled in Everett.
The decision to opt for a site in the South could set a pattern for where those new planes would be built.
Albaugh told Boeing employees in a message that the decision will make the company more competitive. Boeing is still dedicated to its Puget Sound workers, he said.
“I know this decision may be of concern to some in Puget Sound, and I ask everyone to focus on the larger picture,” wrote Albaugh.
“Establishing a second 787 assembly line in Charleston will expand our production capability, diversify our manufacturing base and ultimately drive down the cost of the 787 — sustaining our competitiveness,” he said.
” We are adding jobs in South Carolina, not taking them away from Puget Sound — which is and will continue to be—our center for design, flight test and manufacturing. We have exciting programs to work on here, including the majority of the production for the 787, and we see increased production rates in the future across all programs in Puget Sound.
Until the South Carolina plant is up and running, Boeing will establish what it calls “surge capability” to build the next version of the 787, the 787-9, in Everett. The 787-9 is a somewhat larger version of the basic Dreamliner, the 787-8.
When the South Carolina plant is ready, 787-9 assembly and testing will happen there, and the 787-9 facility will be closed in Everett. The assembly line for the 787-8 will remain open in Everett.