Nov. 11, 2015, © Leeham Co. Boeing’s two leading unions, the IAM District 751 and SPEEA, are girding for a second try in the Washington State Legislature to retroactivity tie job retention to $8.7bn in tax breaks given by the state in 2013 in exchange for the 777X final assembly line and the airplane’s wing production factory being located in Everett (WA).
IAM 751 is Boeing’s “touch labor” union that assembles all the 7 Series airplanes in Washington State. The District also represents some Boeing employees outside Washington. SPEEA is the engineers union that represents all in-state engineers and technicians under contract to Boeing.
The 787 assembly site in Charleston (SC) is not represented at this time by any union.
Leaders of 751 and SPEEA Monday said they will renew their efforts to tie jobs-for-tax breaks when the next session of the state Legislature convenes in January. Efforts in last January’s session came up short, largely overshadowed by the bi-annual budget session that required special sessions extending into the summer recess because no agreements could be reached.
Other states do it, why not Washington?
HB2147, the jobs/tax bill, never made it out of the House Committee to the floor for a vote, where 751’s political director Larry Brown thought there was a good chance of passage in the closely divided, but Democratically controlled chamber. If it passed the House, the bill’s chances in the Republican-controlled State Senate were less certain.
But Brown and Jon Holden, president of 751, said polling across the state indicated broad support for job guarantees tied to tax incentives. Eastern Washington (east
of the Cascade Mountains divide) and Southwestern Washington trend Republican and conservative. The Puget Sound area, where Boeing’s 737 and wide-body factories are located, and Northwestern Washington, trend Democrat and liberal. Because King and Snohomish counties are homes to Seattle, the two factory complexes and large blue-collar labor forces, politics in the state trends Democratic, though in recent years the state has become more closely divided.
This presents a dilemma for Gov. Jay Inslee, a Democrat who has to appease unions but who spent a lot of political capital supporting Boeing in the 777X contract give-back the company required of the IAM as part two of the two part prerequisite to site the 777X in Everett. Part 1 was the tax package, the largest in US history.
But there were no job guarantees tied to the package, claim the unions, and Boeing immediately announced engineering jobs would be moved out of state. There are 3,600 fewer Boeing jobs in Washington in 2015 than in 2013, when the tax package was approved, and this is what has 751 and SPEEA up in arms.
In a press conference Monday at 751 headquarters in South Seattle, Holden, SPEEA president Ryan Rule and State Rep. June Robinson (D-Everett), sponsor of HB2147, said that other states that have given Boeing tax incentives require new jobs in exchange. These states include South Carolina, Oklahoma, Missouri and Alabama, among others.
Not so in Washington, they said. Robinson said her bill would require a jobs guarantee, retroactive to 2013’s job levels. This provision is called a claw-back.
The officials claimed Boeing is moving jobs from Washington to these other states to meet the new, local job requirements. In effect, this permits Boeing to double-dip on tax breaks, they say: first, in Washington, where there is no new-job requirement, then with jobs taken from Washington, these are put in the states where there are job requirements.
One 751 official privately marvels at Boeing’s ingenuity.
Not surprisingly, Boeing has a different view. The company successfully kept the bill in committee last session. The company continues to oppose the new effort.
“[The] 777X will employ 10 percent more factory employees in Everett than today’s 777,” a spokesman wrote Leeham News. (Emphasis is the spokesman’s.) Boeing declined to be specific about job numbers.
The increased number of employees will be despite automation and robotics on the new wing production and final assembly line that does not exist today on the 777 Classic line, the spokesman wrote.
“As for advanced manufacturing, it will improve efficiency and quality while at the same time improve employee safety. Employees currently building the fuselage sections will either transition to working with FAUB or move to other positions on the 777 program– or to other programs where there is demand for their skill set.”
The Boeing spokesman rejected union demands for a jobs-for-tax break requirement.
“Washington state’s aerospace tax incentives already have the strictest accountability standards of any Washington tax incentives,” he wrote. “They are performance-based—the incentives require Boeing to build the 777X, including its all-new composite wing, exclusively in the state. Furthermore, since the 2003 incentives were enacted, Boeing has added nearly 30,000 employees locally. And the 2013 incentives will result in additional aerospace job growth, as 777X planning and production gets underway over the coming years. Indeed, significant expansion of Boeing’s Everett plant, where Washington employees will build the world’s most advanced wing, is already well underway.
“Second, while we can’t speak on behalf other states’ tax policies, what I can tell you is that each Boeing location operates with different business conditions, talent pools and capabilities. Our view is that in Washington state, linking already accountable and effective tax incentives to arbitrary job creation numbers is unnecessary and harmful to the competitiveness of the local aerospace industry.”
Indeed, during the previous Legislative session, Boeing lined up several businesses and at least one trade association to oppose the jobs bill–though most of their opposition was truly focused on a companion bill, HB1786, that requires a minimum $15/hr wage, a hot issue in the state. Seattle voters approved a $15 wage last year, as did voters in the suburb of Sea-Tac, where the commercial airport in located.
“Due the global nature of our business, when it comes to employment, there will be occasional fluctuations as Boeing assesses risk and responds to marketplace imperatives,” the spokesman wrote. “The important thing is the big picture, which shows a strong commitment by Boeing to Washington state which it further confirmed by committing to build the 777X, including its all-new composite wing, in the state. We expect successful and long production runs of the 777X and firmly believe the tax incentives have the strictest accountability standards of any incentives in the state. Claw backs are unnecessary and harmful because they undermine the ability of aerospace companies to respond nimbly to competitive threats. Claw back provisions added to incentives after Washington companies have already relied on them are particularly harmful, as they cast doubt on the state’s willingness to stand behind bills that have been signed into law. Such uncertainty would make Washington a less attractive place to do business.
“Additionally, while the 2013 tax incentives are tied directly to the 777X, Boeing continues to invest in numerous other airplane programs in Washington state, including the 737 MAX, 747-8, 767, 787, P-8, and Tanker. Imposing arbitrary job number requirements on Boeing could impair its ability to respond to economic and business realities by optimizing resources across these programs.”
Neither side has any credibility left.
For Boeing’s part, their claims are pie in the sky. How can they possibly know that there will be 10% more “factory employees”, when thy can only hope at this point to predict production rates. Further, just what constitutes a “factory employee” IAM represented? SPEEA? Contractor labor?
Boeing is just making this all up on the fly. It’s typical boilerplate PR, and nothing more.
For the IAM’s part, and to a lesser degree SPEEA (who faces labor contract Armageddon next year) It’s all an attempt to ingratiate themselves to their memberships, a sort of band-Aid to the lousy deals they have cut in recent years, and the complete outmaneuvering by Boeing that makes them look the fools they are.
They just haven’t learned. The fix is in. Inslee will NEVER sign the bill, even if it makes it through both houses. For him, it’s all about taxes, and how to keep them coming in NOW. The hell with the future. If any politician in this state was the least bit interested in the future labor market and jobs base, they would be talking about how to diversify AWAY from Boeing.
The leadership of the IAM in Seattle, in particular, is just playing it’s members for suckers. Playing in Olympia is a lot easier than actually doing something for their membership. Boeing continues to run roughshod over them, and it would appear their union leadership isn’t interested. Just look at the China deal. barely a whimper from the IAM in Seattle, and nothing at all from the parent international.
So maybe the fix is in with the IAM as well, and this is all just cover.
Should Boeing only create jobs in Washington state? Do they always have to ask for permission for any decision they take concerning any part or completion of any plane they make even if it does not impact the current number of worker in hand? For example, Boeing is building 42 737 a month as of now. If they decide to increase that number to 50 per month, would they have not to increase productivity (hence likely more workers at the main production line in Seattle? So, if they say that those 8 extra frames are going to be furnished in China, where do the Washington workers come out as looser on this deal? Is Boeing obligated to build and complete any and whatever number of 737 they ever decide to build just in that spot?
Would any other aerospace company would want to establish itself there under those conditions?
Well Oscar, when Boeing takes Washington taxpayer money while seeming committing to do so, yes. It’s called behaving honorably.
Boeing speaks often about ethics, a concept which they seem to think they invented and control the definition of. Theirs has quite a bit of leeway built in, and astounding amount of flexibility. It would go something like this:
‘If it’s not in writing somewhere, we don’t have to do it, even if we said we would. And even if we did reduce it to writing, or a contract, if we can buy our way out of it, or our legal department can weasel us out of it, it’s still OK. If that doesn’t work, we still have economic fear, politics, and a houseful of lobbyists in Olympia’.
As to the 737, their obligations are contractual to the IAM. At least until the theoretical capacity of the Renton Facility is achieved.
That the Union hierarchy seems not to desire to enforce it’s contract on behalf of it’s members is neither here nor there, but it is an indication that once again, the fix is in.
What I don’t get from this “Tax Gift” the state gives to Boeing is: Tax is supposed to be paid (at least for businesses as far as I know) if the business have a “taxable earnings” or profit. But what happens if the Boeing company looses money the next tree years in a row (MD did once) (and Boeing would more likely had lost money the last few years has they not used program accounting for the b787), then no taxes should be paid to the state (and the supposed “gift” would not matter and some of that was then never given (or does it?). I wonder why almost no one complains about Apple building all its product somewhere other than US and making huge profit in the process (believe me, the get tax breaks).
YEP both sides made screwups- The mcBoeing types ( spelled McNerney and minions dating back to Harry Stonecipher and the Jack Welch wannabees ) made sure everyone understood that the first and only priority was shareholder and executive values – and that employees were simply ‘ resources ‘ to be used , screwed, and discarded while pursuing the first priority.
The unions overplayed their position from time to time by NOT paying attention to management games- and in the case of IAM- allowing the national bosses to rule ( poorly written Constitution and internal documents)
And SPEEA in the last negotiations allowed some incompetent staff to yell ‘ look a squirrel ” re both pension and medical instead of using outside qualified con sultants for both issues.
Its unfortunate that on both sides- the ‘political’ issues overruled common sense.
I think the ‘ jobs’ plane left the runway a long time ago
On the subject of Boeing there’s a very interesting piece in today’s guardian on Rolls Royce share buyback.(I’m afraid I don’t have the necessary I T skills to provide a direct link) 12 months ago they were buying back shares for £10,now they’re worth 1/2 of that,and a bit of a crisis has developed. I don’t really understand what is going on, but it seems that these super bright business people don’t either.