787 Line 2 incentives: WA vs SC

Some media and a few politicians misinterpreted the study released yesterday by Washington State, as well as not having correct what South Carolina is or isn’t doing, to land production Line 2 for the 787.

The misinterpretation comes from headlines and conclusions that Washington “won’t” offer new incentives to Boeing to win Line 2. First, this ignores that new Boeing Commercial Aircraft CEO Jim Albaugh told Gov. Christine Gregoire that Boeing isn’t asking anything of the State–that the decision comes down to what accord might be reached with the IAM to remove the threat of future strikes.

(Boeing’s response to the study also overlooked the fact that Albaugh said the company wasn’t asking for anything.)

Second, the Washington State Legislature is not in session until January. This means the governor can’t offer incentives unless she were to call a special session–but what is the point if Boeing’s Albaugh says the issue is not between the State and Boeing but between Boeing and the union?

With this being the case, what was the governor to do? Since Albaugh is new to BCA and new to Washington (he was CEO of Boeing’s defense unit is St. Louis, MO) it makes sense to give him a report about Washington’s business climate vs. South Carolina, which is competing for Line 2. For Albaugh, this will all be new information. Who knows if when the time comes for a decision and some kind of agreement is reached with the IAM whether the decision might be so close that a better understanding of the business climate for Albaugh’s recommendation might or might not make the difference?

As for what South Carolina is or is not offering, media here picked up on a story written by media there quoting a legislator as saying the state is offering Boeing a deal it can’t refuse. Naturally we were curious, so we called the reporter who wrote the story and asked for details–there weren’t any in the story.

It turns out the legislator may have been talking to hear himself talk. The South Carolina Legislature, like Washington, is adjourned until January and the State can’t offer anything new until then–just like Washington. Boeing can only benefit from previously granted concessions, just like Washington, and doesn’t have anything new to consider, according to our discussion with the reporter.

Finally, we have this thought on the whole union issue. Yes, the IAM local in Charleston voted to decertify. But if Boeing puts Line 2 there, the IAM (or any other union) will be back in a year (the minimum time until a new effort is permitted)  to try and reorganize the workers. No union is going to let any facility like this of any company like Boeing go forward without attempting to organize. The odds may be against it–look at all the failed attempts at organizing Delta Air Lines employees in Georgia, for example–but to assume there will never be a union at Charleston is a reach. “Never” is a long time.

5 Comments on “787 Line 2 incentives: WA vs SC

  1. A point is missed here Scott.

    Sure Boeing isn’t asking. It never asks. It lays out the oblique threat. It then engages is a systematic campaign of psychological warfare to achieve its ends. It leaves the possible negative outcomes to be formulated and fretted over in the minds of the easily frightend.

    It then fully expects riches to be tossed at it’s feet. Without anything being given in return.

    And that ethod has worked famously well every time except with the IAM, who seem unmoveable by such tactics. But on politicians, business leaders, and the general public well, it’s a very effective gameplan, and a spectacle to observe every time it occurs.

    I’m sure there are a few Boeing execs a little stunned that it didn’t work this time insofar as the Governor is concerend. ( I am as well). She doesn’t appear willing to allow the unemployment or workers comp systems go insolvent like so many other states, no pony up additional revenues she doesn’t have to give.Whodathunkit from a left leaning Democrat governor.

    As far as the unions go, I have called in all my favors and contacted every source i have, and they all say the same thing:

    Boing isn’t making any offers. There are no behind the scenes negotiations ongoing. Boeing expects they can break the union’s nerve and have them come calling, with no quid pro quo of any sort.

    I suspect they are wrong again. While I think an agreement is achievable, Boeing doesn’t want one, and least not one that is has to make any compromises to attain.

    Anyway, If I read the labor laws correctly, there is nothing the Union leadership can do without consent of the rank and file anyway, and the timelines seem far to short to put new terms together and have any sort of vote on the matter.

  2. Scott – Good piece. Thx.

    It is obvious that Boeing’s overwhelming imperative is to assure their very skeptical customers that they can max 787 production ASAP. If they don’t, they are likely to lose lots of orders, or worst case, the entire 787 program could collapse.

    These potential disasters are very real because a growing number of 787 customers are buying the A330 as interim lift, and more will do so the longer Boeing delays giving a credible schedule for achieving max production and volume deliveries. At some point, it will make economic sense for Airbus to offer 787 customers linked contracts between the A330 and the A350-800, if they have not done so already; ie buy 330s now and keep them as long as you want, and then replace them with 358s in the middle of the next decade. These contracts may be appealing to 787 customers even if Boeing announces early max production dates because the airlines may not believe anything Boeing tells them about the 787, while at least so far Airbus has not lied about the 350.

    If their were any doubt that the 787 program is on the brink of disaster, they disappeared when Boeing brought Albaugh to ComAirplanes. Why else bring him from IDS, Boeing’s cash cow where he has been quite successful?

    Thus, Boeing needs a second 787 production line ASAP (and to ramp up its suppliers to do this), and avoid crippling strikes once that production level is achieved. A Charleston facility makes sense because they can move very fast to build, there is space to build (while there is a lot less in Seattle), and at least for the moment there is no strike risk.

    The problem is in Seattle, where there will be at least one 787 production line for years, no matter what happens in South Carolina. The IAM does not seem to grasp that the dominant issue here is to keep the 787’s customers on board so as to preserve the millions of jobs created by the plane’s huge backlog of about 830 planes and major potential for future production which will keep both lines humming for years to come. It is NOT about the normal cycle of labor contract negociations dealing with wages, benefits, etc.

    The union has legitimately blamed this mess entirely on Boeing’s unbelievable incompetence in running whole 787 program. It makes me sick at heart to think about it. But blaming Boeing will not solve the problem Boeing have created and assure jobs. The problem is to credibly assure airlines of a max production schedule that will get them their planes at some time they can live with. To do that the union must make some agreement not to strike, both in Seattle and in Charleston if the union gets certified there, and do it very quickly. Certainly there are fair ways to do this, but even if the onlly ways are unfair, it needs to be done to assure long terms jobs in the 787 program.

  3. Chris makes a good point: it’s long past time to stop pointing fingers of blame (on both sides). Boeing officials have acknowledged they went too far on outsourcing and plan to bring some of this back in (though one can argue how much is enough, and Boeing hasn’t said). This is a pretty good admission.

    IAM made its point with its strike last year, but now what? We certainly haven’t heard any mea culpas on anything. A little humility wouldn’t hurt.

  4. Quick follow up. See Brandan Sobie’s piece in http://www.Flightglobal.com today entitled, “Qantas’ Jetstar Opts for Higher Gross Weight A330s.” The idea is that this new model can do much of what the 787 was designed for.

  5. Pingback: SC’s unemployment problem: $2bn « Leeham News and Comment

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