McNerney on unions and other stuff; where will 777X be built?

Note to Readers wishing to comment: See this article and our Comment #35 and be forewarned.

Boeing CEO Jim McNerney is cited in the Puget Sound Business Journal on labor unions, China and other stuff from his appearance at an aerospace summit.

In the article, McNerney tries to take a moderate stance on unions. But just this week Boeing announced it is moving SPEEA and other union jobs out of Puget Sound, here and here. The moves resulted in a blast from Seattle Times columnist Jon Talton here, and our response here.

Production is booming in Seattle’s Puget Sound, but it’s clear to us that Boeing is engaged in a long-term strategy to build up Charleston as a major, second production plant–not just a 787 production line. We see Charleston-as-to-Seattle as Hamburg-is-to-Toulouse some day. We don’t see Everett shutting down (at least not in our lifetime) because there is too much there. We think Renton is more at risk, once there is a New Small Airplane finally designed to replace the 737–but this is well into the next decade.

The question over where the 777X will be be built is, to us, a little more vexing. Logic says build it here, given the similarities between the baseline 777 and the derivative 777X. This is no different in principal than the 737NG and the 737 MAX–it would have been silly to build it elsewhere.

But McNerney’s comments about labor in the Business Journal notwithstanding, the anti-union sentiment at Boeing Corporate is obvious for all to see.

The future of the 747-8 is in jeopardy. Boeing said as much in its 2012 10K:

The accounting quantity for the 747 program increased by 25 units in 2012, reflecting the normal process of estimating planned production under existing and anticipated contracts. We continue to incorporate changes identified during flight testing into previously completed airplanes.

The production rate increased from 1.5 to 2 airplanes per month in May 2012. Ongoing weakness in the air cargo market and lower-than-expected demand for large commercial passenger aircraft have resulted in pricing pressures and fewer orders than anticipated in 2012. We have a number of unsold Freighter and Intercontinental production positions beyond 2013. If we are unable to obtain orders for multiple Freighter aircraft in 2013 consistent with our near-term production plans, we may be required to take actions including reducing the number of airplanes produced and/or building airplanes for which we have not received firm orders. We also remain focused on reducing out-of-sequence work, improving supply chain efficiency and implementing cost-reduction efforts. If market and production risks cannot be mitigated, the program could face an additional reach-forward loss that may be material.

If Boeing cancels the 747-8 program early (i.e, within the next few years) due to lack of sales, the bay where the airplane is built will be vacated for the 777X line to be built right along side the 777. We believe the 777-9X, a 406 passenger concept, will kill the already-dismal prospects for the 747-8I. Cargo traffic is not recovering well, as the 10K comments suggest.

We don’t count on building the 777X in Seattle. Boeing being Boeing, it will analyze site location because that’s what it does. But buying hundreds of acres in Charleston and the clear, obvious anti-union sentiment from Chicago are ominous signs. Washington Gov. Jay Inslee is already on record vowing to see the 777X built here. But there is little he can do while Jim McNerney remains CEO.

  • Aviation Week has this story in which Boeing dismisses Reuters’ story about possible ETOPS restrictions on the 787 when it returns to service as “speculation.”


34 Comments on “McNerney on unions and other stuff; where will 777X be built?

  1. Interesting quotes from the Chairman . . . maybe we need a little red book

    Unions are OK, but some are better than others

    Tom Donohue, the chamber’s president and CEO, is no fan of labor unions, and he tried to get McNerney to bash them.
    The Boeing CEO wouldn’t take the bait.
    “I have probably a more balanced view than you would expect,” McNerney told Donohue.
    If McNerney were starting with a blank sheet of paper, he’d prefer not to have a union standing between him and his employees, but he respects workers’ choice to have a union.
    The big question for Boeing concerning labor relations is that it wants to create the most competitive aerospace country in the world.

    “Some unions work with us toward that end,” he said.

    “As long as that’s the dialogue, I almost don’t care who I’m sitting across the table from.”

    Here are five messages McNerney delivered at the summit:

    The Dreamliner will be a success despite its battery problems
    “This has been a difficult time for us,” McNerney acknowledged.
    But, he added, “we’ve got this fabulous airplane — none of the promise of this airplane has really been diminished by this.”
    For example, airlines that use Dreamliners can expect a 20 percent to 30 percent reduction in operating costs, he said.
    Boeing, however, has learned some things from the battery fiasco. It got “too horizontal” with its supply chain, McNerney said, which meant it lost control over some of the airplane’s design.
    “We’ve taken some of this time to tighten up on things,” he said.

  2. My take, is that Boeing has to balance maintaining its intellectual resources (engineers, technical skill people) with the fact that it is going to face an increasingly cost pressure market which will include China, Brasil, Russia etc (not to mention Airbus). I would suggest that diversifying some of its production out of Seattle to Charleston is a consideration that has some attractiveness since they have shown (at least in theory) that they can produce 787s there. It also provides some protection against labor unrest and allows cost benefit.

    On the other hand, designing and building cutting edge aircraft is not simple and requires enourmous resources that must be maintained and cultivated or they will be unable to compete. Heck, the Seattle center saved the 787 after the outsourcing debacle nearly sank the program.

    If I were Boeing, I would consider moving a 777 or 737 line to Charleston, while using the Seattle center to bring the new stuff out (77x, 787-9, 787-10, NSA). This would keep the “brains” (Seattle) concentrated and focused on the new stuff, allowing the “assembly line” (Charleston) to produce at a competitive cost.

    My 2 cents.

  3. I think Boeing will pay big price for waging this pointless war on employees instead of concentrating on building great planes. And it’s hard to see how they will compete in aerospace industry if the end idea is to govern with iron fist over wallmart type automatons who fiercely fight among themselves over few scraps and have no pensions and no medical insurance.

  4. Aviation Week:

    – Calling the Reuters report “pure speculation,” Boeing says that VP/Chief Project Engineer Mike Sinnett’s statements last month in Tokyo that “there will be no restrictions on the aircraft and no limit to ETOPS,” reflect the company’s position. The FAA, which will only begin to review the data for compliance with the AD following the certification flight of Line No. 86, says it is premature to say if there will be any change to the current certification base of the 787.

    My understanding has always been, since the beginning of the current crisis, that the 787 had AUTOMATICALLY lost its ETOP qualifications. And I still don’t understand why it has not. And when the Dreamliner fleet was grounded, my initial impression was that the 787 had lost its Type Certificate, like the DC-10 had in 1979. But the 787 has been grounded for a longer period than the DC-10 was, and it is still grounded. But its certificate is still valid! And apparently so are its ETOP qualifications!

    For me this is beyond belief. I am dumfounded. And confused. Frankly and honestly, I don’t understand what is going on right now. But I don’t like what I see nor what I hear. I have lost confidence in Boeing’s upper management and I am about to do the same with the FAA. But I feel the need to reiterate that I have full confidence in Boeing’s workforce and especially its formidable engineering department. But I must admit that my confidence in the Dreamliner has been shaken and I has not been fully recovered yet.

    Aviation Week:

    – Separately, the National Transportation Safety Board announced its upcoming forum, “Lithium-Ion Batteries in Transportation,” will be held on April 11-12. The NTSB event, which was announced on March 7 when it released its interim factual report on the Jan. 7 Japan Airlines’ 787 battery fire investigation, will focus on design, development and performance of the batteries as well as related regulatory and safety aspects of the technology.

    I eagerly await the results of those hearings. But even more so the NTSB final report, or whatever interim report that might come before that.

  5. I say this every four years: Management get the unions they deserve.
    Moving production to Charleston will only buy a few years of peace, until Boeing’s management so upset their workers that the unions become necessary again.

  6. The Seattle Times:

    – Boeing’s white-collar union said Thursday the company is eliminating the positions of 38 flight-standards pilots and flight-simulator instructors.

    – In negotiations Thursday with the Society for Professional Engineering Employees in Aerospace (SPEEA) to discuss the effects of that move, Boeing told the union it will not offer to relocate this subgroup of employees to Miami.

    Outsourcing? 🙁

  7. I wonder if the 777x will get longer main gear? Where’s the wing fold into place, near the gate or at the runway? How much wind can the wing take when it’s folded up?

    • We think Boeing is restraining gear length. PW was told to restrict the GTF fan diameter for available space, and this tells us this is about the gear length. But for the 777-9X’s longer fuselage, this seems to imply some adjustment unless there is a smaller rotation angle of attack, in which case that affects runway length requirements (we think).

      • I’m wondering why they don’t go ahead and stretch the aircraft ten or fifteen feet. This would be more revenue for most trips not at max range. More space for seats to beat the per seat cost of the A350-1000.

      • The key question is whether the 777X will or will not get away with a Supplemental Type Certificate as the 747-8 did. The latter ended up as “85% new” (Boeing quote). Add this to the ongonig discussion about self-certification.

      • Lower rotation angle affects the minimum take-off speed. It increases as the aircraft cannot achieve a higher angle-of-attack. Possible remedies are a different wing-to-fuselage angle or more thrust. Or more take-off length.

    • The hinge line of the wing fold will be after outboard of the outer aileron and the outer slats and will affect only the raked wingtip. This is a huge difference to the version envisaged for the classic 777, where the outboard aileron and slat would have been affected by the wing folding system. The wing folding will take place on the runway and runway exit before entering a gate. So it will be a Code F aircraft in the runway and a code E aircraft on the ramp! BCA is conducting investigations on when folding the tips and how long it takes and so on. From a pure engineering point of view, this is all a piece of cake.

  8. To me it is only logical that once the B-787 is cleared to fly passengers again, its ETOPS will be reduced from the current 330 minutes down to the 180/207 minute restriction. That still covers some 90%+ of the Earth. It may be a year, or more of additional commerical service before the 330 minute ETOPS rules can be applied again. Maybe another year before the B-787 can be granted ETOPS rules beyond 330 minutes.

      • ETOPS should be earned through demonstrated reliability, not granted on the basis of self-serving simulation, creative statistics and extrapolation.
        It is no secret that 787 disptach reliability was coaxed into the 98% realm by keeping hot spares on standby.

  9. Pingback: McNerney on unions and other stuff; where will 777X be built?

  10. Pingback: March 29, 2013 War on Workers News

  11. Scott,

    Regarding correspondent cleansing guidlines & your forewarning, unless I am mistaken I think perhaps you intended to refer your comment No:35

  12. Ahhhh,so nice when the comments contain actual useful discussions.
    Wish it was more like this more often.

    Thanks Scott!!!

  13. Cutting or moving union jobs out of Puget Sound? Not before cutting some white-collar jobs in Chicago.

    • I agree..while I’m basically “pro-management” (not that I’m “anti-union” per se), I think Boeing’s management needs their “feet-held-the-fire”..they have done a very, very poor job with the B787 program. Regardless of who’s fault it is, management gets paid the “top dollar” to “run the ship”. They have failed miserably on this level.

      This unfortunately is a symptom of a larger problem: i.e. – no “transparency” between board members and management. This is something which only our (pathetic) Congress of the USofA can fix. Lets put it this way, I’m not too sanguine on this being dealt with anytime soon.

    • There seems to be a persistent issue with power panels ever since the 2010 arcing event?

      • The 2010 event was presented as a one-off problem. It was attributed to small debris (FOD). But then there was a series of at least four incidents with the same panels. Those were now attributed to a “bad batch”.

        Now we hear that “Boeing will fly the 787 Dreamliner Saturday to test engineering refinements of its electrical power panels”. And that “Boeing has been working on a solution to nagging power panel faults”.

  14. Boeing postpone flight to test new engineenered power panals does this mean more delays?

  15. My understanding was that the grounding had been lifted in order to test the battery issues and that the Boeing submitted certification plan approved by the FAA included only two tests.

    How is it that in the middle of this battery flight test program, Boeing is allowed to independently insert another flight to test the power panels?

    Am I the only one who finds this odd?

    • I **THINK** that the first fllght was a ” regular” or so called ” normal ” check flight of an airplane ready for delivery, but in this case with the new battery boom box. And also to check out any up to date mods being installed on all future deliverable airplanes.

      I do agree that it appears to be a stretch of the grounding game- keeping in mind that it is with a limited crew and so called first flight.

      As to the delay of the ‘ cert flight” – it could be no more than the Easter weekend workload mixed in with a delay of some so called ground tests and results.

      But it does match the NO flame- NO overcharge- NO thermal runaway mantra.

      and the
      ” What ME worry . . . ” vision of the MDC er McdMouse company.

  16. Re 777X

    Boeing must hurry.

    After CX probably JAL and BA switched to the A350 and the 777-9X is only three meters/ rows longer then the A350-1000.

    If 10 abreast is not acceptable for long 777 flights at CX, SQ, UA, BA and JAL, look at CASM again.

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