The St. Louis Post Dispatch just posted a story detailing some of the information from the Request for Proposals from Boeing for the 777X assembly site.
The Charlotte Observer–which obtained the RFP before the Post-Dispatch–has this story.
1pm PST: The Seattle Times now has a copy of the RFP, and here is its story.
I love how blatantly open they are (in the non-public RFP, anyway) about wanting to let the community/taxpayers cough up the money to cover much of the actual cost of setting up business. Rest assured that profits will be kept purely private, though.
Maybe someone can explain to me how this is “Just Business” and the Machinist’s Union’s desires to not give back what they have now “greed”.
Wow, corporate welfare at its worst. The list of requirements reads like a letter written by 5 years old to Santa asking for presents. And everything at zero or low cost please:)
What never ceases to amaze me is how many people are willing to defend that wishlist.
A distinct property of majority of those that rise in management:
Socialization arrested at a 5 year old’s competence. aka “spoiled brat” .
Not to mention a highly educated workforce, well-maintained roads, a fully dredged and buoyed port, strong police and fire services, and good universities for the executives’ children. All paid for by someone else.
Hmmm, you have described Everett, Washington. Surrounded by Marysville, Lynnwood and Mountlake Terrace. To the south and east are Seattle, Bellevue and Tacoma.
All bought and paid for by the local taxpayers. A skilled, knowledgeable, and experienced workforce is already in place.
p.s. Also the University of Washington (three local campuses) , Seattle Univ, PLU etc plus one of the nation’s finest set of local community colleges.
Well, it seems that whatever states comes up a winner will more than likely recoup the investment back, otherwise, why even summit a proposal? South Carolina did something similar to get the second 787 line (as did Alabama to get the A320 assembly line there) and I’m betting they would love to have the 777 assembly if Boeing decides to build it there.
Well, it seems that whatever states comes up a winner will more than likely recoup the investment back, otherwise, why even summit a proposal?
No offense, but that sounds a bit naive.
There are plenty of examples of companies using their (alleged) “we’ll create jobs” leverage to make cities, counties, states and whole countries sign up to deals that didn’t turn out to be that beneficial after all.
Nokia in Bochum (which they closed despite the fact that it was making a profit; the replacement plant in Romania was closed within four years), many regional airports served by Ryanair in the past and present, Dell in Limerick, etc. I’m sure there are more examples if you actually start looking for them.
As for recovering the cost – normally, for instance, one of the channels for the local, regional or federal government to recoup investments made upfront to facilitate businesses is the incoming stream of corporate corporate taxes paid when/if the company is successful. Except of course Boeing (and others) want generous exemption from taxes. Meaning: They want their cake and eat it, too.
Paying back the money that was spent so Boeing could profit is obviously something best left to anybody but Boeing. Their employees (via income and/or sales tax), local suppliers (who most certainly won’t get tax breaks on the same scale Boeing does), university students (via fees), etc.
Sure, it’s perfectly legal for Boeing to try and pull that off. Whether it’s clever (beyond the initial “Mayor Quimby brings Boeing to town” headlines) to actually entertain them is a different question, though.
And by the way – for me, the same applies to any company employing the same strategy, be it Airbus in Alabama, BMW in Leipzig, or Apple, Amazon and Starbucks worldwide.
I’m focusing on Boeing here, though, because a) this is an aviation blog and b) they actually propose closing an existing facility with a highly skilled workforce in favour of (possibly) a greenfield site. Something that neither Boeing nor Airbus have so far done (the Charleston 787 line is just an additional FAL, as are Airbus’ A320 FALs in China and the US).
So are these kinds of subsidies exempt from the WTO rules? Can someone familiar with the WTO subsidy rules comment on this? $10B+ (not to mention future tax breaks) is certainly non-trivial in terms of state aid.
Tax breaks in WA and Kansas were part of the WTO case. Any others not would have to be challenged.
There seems to be no limit to greed, poor Boeing 🙁
For Boeing to expect offers like this makes me wonder if we can call them the governments owners? The seem to think they are. No wonder US runs an uncontrollable deficient if healthy companies expect more corporate welfare then the crippled and elderly. US looking to join Greece here.
the correct answer from all these heavily republican “right to work” states should be “F#$K off Welfare Rat”, but of course welfare for corporate persons is just fine, but to hell with real people.
They forgot to ask for free whiskey. Nevertheless, back in the day, we used to call these types ‘freeloaders”.
I have been searching and struggling to find out how these demands (and that is what they are, no need to mince words) equate to free market capitalism. The only thing that gives it any appearance of freedom, is that in many countries, those propounding such terms would face quick execution by pistol shot.
The closest thing I can find to it would be a mob protection racket. ‘pay us off, and we’ll let your citizens eat’.
Of course there is the fascist model, but that does not work, because true fascists ensure things occur on time. And neither politicians nor Boeing executives seem to make that happen with any regularity, so I will stick with the good-fellas meme.
“Nevertheless, back in the day, we used to call these types ‘freeloaders”. ”
I believe many Americans would call them socialist, well nigh communist type Europeeeans. The difference between this and the European model is that they at least try to portray what the common person gets out of such a deal. Boeing seems to be above that.
Ask Charleston SC about how many new buisneses are springing up.( paying taxes and providing jobs) also how thr Real estate market is getting a lot better.(new property taxes) Also check with the Greenville/Spartanburg area in SC about the 900 mil addition BMW is building at their facility. ( 300 new jobs, and when they are done will employ over 7200. Think some deals were involved? Did it bother them that it is a right to work state? Ever figure out what the rusults are showing to the local economy? Need to take a bit longer look down the road and see just how many people will benifit in the future
Even if you count on 10,000 new jobs, it takes an awfully long time for those jobs to pay back $10B in subsidies. Even if you figure on a 2:1 ratio for supporting employment (an awfully optimistic number, I think — and some of those supporting jobs will be at minimum wage) that would mean 30,000 jobs for $10B — each and every job would need to generate $300K in tax revenue. How long would that take? 50 years?
And how long will Boeing guarantee to stay? No guarantees, you say? I think this is a fools’ game …
Take that to your local bank manager and see what he says!
Hummm, sounds like Mobile, Alabama. Roads: I-10, Rail: Next to I-10, Deep-Water port. 4 Major Universities, State Training facilities for aircraft manufacturing skills, existing aircraft composite manufacturing facility within 50 miles, Jet engine over-haul facility on-site. State incentives and existing aircraft modification and manufacturing facilities. Also a lot of available acreage.
Time for machinists to give up defined benefit and get the work in Everett ;blame the management as you want , but unions to realize where to stop .Both should talk and put it in Everett where the -8/9 belongs. Win win for all.
Corporate welfare, greed, yadda, yadda. If this is indicative of how labor views its relationship with Boeing, no wonder Boeing seems intent on leaving. I am not assigning blame for how this relationship got to this point, just pointing out that at this juncture if labor seems more interested in assigning blame rather than offering ways to keep the 777x in WA, then the game is over.
So you think this is a D/S relationship and the workers should just bend over and submit?
Think again. Any Dom shows more responsibility than Boeing does!
“…should just bend over and submit?” — see that shows a mind-set of inflexibility that supports my point.
While Boing may be saying it is ‘my way or the highway’, your comment seems to imply a similar ‘my way or the highway’ approach. If this view is shared within the IAM in general, then the 777x is going elsewhere.
Unreasonable demands will have to be met with inflexibility.
Boeing’s modus operandi appears to be to take any offered compromise
as new status quo and then demand for the next major compromise.
Landing a company with 4,000 jobs that are high paying probably means $250M annual payroll of ‘new’ money, as in money from elsewhere entering your economy. With the multiplier that is around .5B added activity, and about 50M of added tax revenue just from the payroll.
Sure Boeing wants the sweetest deal, anybody would. In the long run there are some big pluses from being diverse geographically. I would guess AL, San Antonio, Dallas, and MO are the main contenders. I believe Boeing is basically done with Everett.
The big-dollar local incentives game got rolling around 1980 for general businesses and 1990 for sports teams. Every single analysis done by neutral third parties since 1990 has shown that these deals are net losers for the regions & states that undertake them. Every one – it isn’t even close. And that’s not taking into account the race to the bottom effects across regions.
Around here entities that signed 20-year deals ten years ago under which communities are just starting to see some benefits are coming back and threatening to break the deals/close up shop unless they get another round of incentives good for (you guessed it) 20 more years. Freedom!
Based on your math, if there is really $500M of new income, I don’t see how you get $50M of tax revenue in most states. Alabama state income tax maxes out at 6%, Missouri is the same, and Texas has none at all. At 5%, the incremental tax revenue would be only $25M, and the payback 40 years — even before you consider the cost of the government debt that would need to be issued to hand over the money to BA.
It’s very easy to be anti-labor when unemployment is high. Let’s all forget how we got from here to there shall we not? Indeed.
Yet another example why income inequality increases in this country. The large corporations operate tax free and pass on the savings to the shareholders (the wealthy) while the employees and small businesses pay all the taxes to run the local and state governments.
I don’t get it! They forgot to ask for free labor in the RFP. Oh, that is what they were trying to nibble at with their IAM deal. After all if you could get labor free or close to free you would only have material costs with these request. Can you imagine the profits and the pocket filling these aristocrats could be doing if they could cut labor cost.
Takes me back to my American history class in high school. If I remember right I think honest Abe Lincoln put an end to that kind of stuff back in the 1860’s. Looks like history is trying to repeat itself. Oh there are no honest Abes left in todays world, but that is only my two cents on the subject.
And America keeps going down while Europe roars ahead. Sad, the company that gave wings to the world. That always wanted new models, designed and built in house, can be taken over by a group of corporate vulture thugs, is now solliciting itself for the cheapest bidder. You’d think the US government would find it a ‘strategic’ company and meddled in it’s affairs, just like Europe, China, Russia, Brazil and Japan do. But no, you’re ‘exceptional’. Sad to see this. To say nothing of the 777x, which should be a cleen sheat design. I don’t think Boeing will be around long after 2025 anyway. Sad but true.
I do think they’re going to be around beyond 2025. But thanks to the kind of shenanigans they pulled with the 787 outsourcing and 2nd line, labour relations, 777X production locations, etc., they’re not going to be as strong as they could be.
But as in many big companies these days, a short-sighted fixation on quarterly results and a single-minded focus on numbers that don’t survive any reality-check (the numbers that whetted Boeing’s appetite for outsourcing much of the 787 work must have brought tears to some people’s eyes) trump sustainable product planning any day. Basically, some things simply don’t score anywhere – things like talent fostering and other stuff that requires effort and doesn’t yield results immediately measurable by some metric that the bonus of somebody who won’t even be in the same position in two year’s time is tied to.
That’s partially how the American automotive industry got into the sorry state it’s in these days; for those people who are going to start saying “but that was the bad guys – the unions, not management!”, just look at how GM and Ford nearly ruined their European brands without any help whatsoever from the US unions, while particularly the unionised German car markers flourished. Also look at how new management particularly at Ford made all the difference – ironically led by Boeing Commercial’s former CEO.
Misreading the market, delaying innovations, planning projects with more focus on numbers than on sound engineering decisions, trying to save money at any cost (pun intended) and similar approaches will jeopardise the future of a company far more than any union could ever hope to. If you p*ss off your workers in the process as well – which is a likely consequence – you’re in a real pickle once you do try to turn the ship around, as they’re the ones you’ll have to rely on to save the company (witness how the IAM did just that in the 787 debacle).
You can’t run a sustainably successful company if you’re engaged in a constant battle with your staff and if you treat the counties and regions you place your plants in as mere commodities, people that should be happy about the fact that you grace them with your presence.
“I don’t think Boeing will be around long after 2025 anyway.”
Not so fast. The global airline industry cannot be dependent on a single aircraft supplier (Airbus) for widebody aircraft. The airlines would be totally exposed to whatever one manufacturer wants in terms of pricing. As of now, other suppliers (Bombardier, Embraer, China, Russia) don’t even make an aircraft that completes with the A320 class or 737. So it will be a very long time before there is competition in widebodies – at least 2030, I’m thinking.
So don’t write Boeing’s obituary yet. The airlines won’t let it happen.
They let it happen ( or it happened to them ) before Airbus rise.
A market dominated by a single manufacturer : Boeing.
To say nothing of the 777x, which should be a cleen sheat design.
Boeing seems to assume that Airbus will be standing still in the wide-body sector post 2020. What would happen if Airbus should develop a clean sheet design for a new large wide-body (i.e. A360X) designed to bridge the gap between the A350-1000 and a stretched A380 model?
The 777-9X will need engines that are 5 percent more efficient than the ones on the A350-1000 just to match it in fuel burn per seat. In 2025, the A350-1000 could be re-engined with the same engine that would be developed for the all new A360X; an engine that could be at least 5 percent more efficient than the GE9X on the 777X.
The 777X program is, therefore, IMO in risk of being abridged a few short years after the EIS of the 777-9X. The 777X is maxed out in MTOW, hence it has no further growth potential. An all composite A360-800X having the same MTOW and performance could be designed to have a 10-15 percent higher passenger capacity than the 777-9X.
Yet, Boeing is running around telling the know-nothing states that it’s the best thing since sliced bread. It’s absurd, really. Only if the 777-9X would have been an all new program that would easily last for 20 years, would it have made sense to look for sites other than the one at Puget Sound.
OV-099’s post is a wonderful analysis of the price of thinking short term. How many years between clean sheet designs can Boeing get away with? Looks like they may be shooting for 20.
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