Boeing’s Charleston land buy is bad news for Washington State

Update, Dec. 21: A story on this topic:

Charleston Post-Courier: a much longer, in-depth piece than its original report linked below.

Original Post:

Boeing has agreed to buy a lot more land in Charleston (SC) to expand its plant there over time.

Charleston 1

Charleston 2

Illustrations via Charleston Post-Courier.

We believe Boeing is preparing to eventually locate new airplane programs in Charleston rather than Washington State. This would be the successor to the 737 MAX, potentially the 777X and we would not be at all surprised to see the 787-10 assembled in Charleston.

The contentious SPEEA negotiations aren’t going to help matters. We also believe Washington’s strict environmental laws are a factor, which seem on a track to get stricter with the move to clean up Puget Sound to save the fish.

Our estimated timeline is over the next 10-20 years (sooner if the 787-10 is placed in Charleston).

This is entirely our assessment–we can’t say we know anything about this. But the old adage is that if it looks like a duck and walks like a duck, then it’s a duck. And this sure quacks to us.

11 Comments on “Boeing’s Charleston land buy is bad news for Washington State

  1. IMHO – In the long run ( >> 15 years) the current SPEEA issue will be of little import as to where BA expansion takes place. The tax situation will have FAR more impact- along with ObUma care issues, etc

  2. In less then 8 years Boeing (Vought, Alenia) created a full blown Aerospace Munafucturing and Assembly site on the other side of the country. Despite many folks here understandably hating it, it seems quiet successful from Boeings perspective..

    • Yep, quite an achievement. If only they had done it on their own right away. Tinkering with Vought and Alenia has cost Boeing roughly $3bn in buy-out settlements. Likewise, hiring trained professionals from the outset instead of trying to cheapskate on semi-skilled burger-flippers would have really made a difference. Will Airbus do better in Alabama?

      • But Boeing was aiming for an Apple type business model:

        Design by PowerPoint, squeeze service and parts providers
        sell at perfect prices … and become rich 😉

      • Can you justify your comments about the South Carolina workforce, or are you just a semi-skilled know it all?

    • well actually Vought did the factory in S Carolina- not quite within spitting distance of the foreign country of Texas- Dallas -Arlington area where they still produce 747 and other assemblies. Then Vought bought out Alenia- and then Boeing bought out the mess and virtually had to start over from scratch. it was the faster- better cheaper mantra, and Boeing went for the cheaper ( forget the other two )

  3. Uwe :But Boeing was aiming for an Apple type business model:

    Design by PowerPoint, squeeze service and parts providerssell at perfect prices … and become rich

    As the one who links to Javier’s model for the 787, which is a good model for any commerical airplane, one would expect an understanding of the true implications of the model, but then again it is based on capitalism economics.

    Bottom line is you can’t re-coup your investment on developing a new plane unless you have some way to access low-cost capital. Airbus has launch subsidies – which specifically address the cost of capital problem. Although Javier recuses himself from running the same model for Airbus, it would be interesting to see how the model would work if he plugged in a “hypothetical” 30% capital infusion with no interest payments until airplanes start delievering. I think one would magically find the model predicting a much better outcome. Of course if it’s not your money, why should you care?

    Boeing’s attempt was to use risk sharing partners and history has shown how well that worked. As the artical points SC specifically provided some of the up-front capital to Vought (a private equity company) and Global-Aeronautica (the joint venture between Vought and Alenia) to build mid- and aft bodies. These companies didn’t have the deep pockets required to sustain the losses early in the program and Boeing was forced to buy them out.

    As to the ObUma care comment: Boeing employees get about the best insurance one can get anywhere, and they are willing to strike to not have to pay for it. Why should they pay for someone else to get minimal insurance who don’t have companies that can afford it?

  4. Bsee67 :
    Can you justify your comments about the South Carolina workforce, or are you just a semi-skilled know it all?

    I’d love toprovide proper quotes, did that in the past. Unfortunately, Google is now heavily biased towards the most recent sources, so digging up public quotesfrom a few years ago has become annoying. I won’t go there on a Saturday morning over a coffee.

    If you do a little reserach you may note that it is a well known fact that SC started out with very low-paid ‘Assembler A’ job positions that required no prior aerospace experience. Training was outsourced and conducted in crash-course fashion. It was found that the instructors needed some on-the-job training themselves. This was put on the same people in Everett that Boeing planned to substitute with the SC workforce. QA was was lacking both in qualification and quantitiy, couldn’t keep pace with production, so QA work work started to travel dowstream to final assembly. “Burger-flippers” and “WallMart-greeters” were common contextual quotes at the time. The persistent level of FOD issues also is a good indicator.

    I know that in the meantime this has massivley changed, as Boeing learned (the hard way) that skills, experience and company culture are indispensable.

    Still, there are issues with parts not being installed correctly, wrong parts installed or even additional parts installed that are not specified by the drawings. The most recent fuel leak issue is proof to that.

    I certainly do not want to offend the workforce. The blame is on the management who judged that “what little knowledge is required can be learnt in a few weeks” and “doesn’t warrant much higher salaries” than what burger flippers earn. I’d postulate that if only Boeing would have distributed 10% of the incurred cost overruns to their workforce and suppliers (as an investment into quality) it would have cut the delays and the overrun by half.

  5. Bsee67 :
    Can you justify your comments about the South Carolina workforce, or are you just a semi-skilled know it all?

    I can speak of personnel experience about the South Carolina workforce having lived there for many years. The favored expression was, “thank God for Mississippi”. At the time,South Carolina was number 49 in education and Mississippi was number 50. I had worked with some really bright and inventive people so one cannot brand the whole work force as “burger flippers”.
    But as percentages go, the greater number of the work force is poorly educated and they lacked problem solving skills. Our children began their education in the northeast and when we transferred to South Carolina, they were surprised how far behind the schools were in their teaching programs and the teachers themselves lacked basic english skills.
    For many years very little emphasis was placed on progressive education due to being mostly an agricultural state.
    If Boeing invests in good quality training which will take time, and screens applicants well, the results will be a work force that can turn out a fine aircraft. The expression goes, “the past dies hard” but with some proper motivation, qualified workers will do the job proud.

  6. I think for the next narrow body for Boeing, there will be 2 sites. I think with this land purchase one line will be in Charleston, and a 2nd line at a new site (my bet Texas)

  7. Personally I have a different take on this. Boeing will stay in Everett and Renton / Puget Sound, but they will diversify to other locations. Think about it – one well-placed bomb or terrorist attack could cripple either manufacturing site in Puget Sound. Everett can be taken out by damaging or crippling the bridge that goes over WA-526. Heck it wouldn’t even need to be a terrorist attack. Earthquakes happen in the Pacific Northwest. Volcanoes also erupt. Potentially could wipe out the widebody assembly plant. Would be more difficult with the Renton plant, but still do-able.

    Combine with the fact that both Boeing and Airbus project continued robust widebody and narrowbody demand over the next 20 years, and customers clamoring for airplanes faster, what do you do? You build more plants. And Boeing being political as with any defense manufacturer, they are loathe to incur the ire of our politicians by leaving totally. So, I have to respectfully disagree with Leeham on this one. Could I be wrong? Sure. I hope not.

    And nothing would be worse than Airbus swooping in and buying the Everett site. Now how rich would THAT be? I doubt they would since they don’t want another union to worry about, but they might just do it.

    RE: the workers: I know Boeing would have a hard time replacing workers, especially engineers, if they moved. About 500 of their engineers quit or retired when they recently relocated their C-130 support to Oklahoma. Can’t blame them – I’m not a fan of grits, banjo music, Christian evangelism or ultra-right conservative politics, so if I were a Boeing employee I wouldn’t want to move to S.C. either.

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