State officials need to act now, ahead of lean times coming at Boeing Everett

August 4, 2016 (c) Leeham Co.: With the news that Boeing may terminate the 747-8 program, effective around 2019 when the current backlog expires, the obvious

Washington Gov. Jay Inslee (D) is running for reelection. He needs to think about the coming lean times at the Boeing Everett plant in less than three years. So does his challenger and all the incumbents and candidates for Legislature. USA today photo via Google images.

question arises: what happens to the assembly line space now occupied by the massive airplane?

Given that the State of Washington elected and appointed officials generally view Boeing in a reactive rather than a proactive mode, an open letter to them seems appropriate.

It’s imperative that Washington officials begin planning now for some lean times ahead for the Everett plant. Waiting until 2019 is too little, too late.

Open Letter To:

Gov. Jay Inslee

Bill Bryant, Candidate for Governor

Incumbents and Candidates for the State Legislature

Employees of the Washington State Department of Commerce

Subject: Planning for Boeing Aerospace Activities 2017-2020

Ladies and Gentlemen:

Boeing finally owned up to the prospect the 747 program will be coming to an end. Then what happens to the huge bay at the Everett plant? Boeing photo.

At long last, Boeing acknowledged what many aerospace analysts on Wall Street, Leeham Co. and Leeham News and Comment (LNC) predicted for many years: the end of the iconic 747 program will happen sooner than later.

In its federal SEC filing for the second quarter, Boeing said it is “reasonable” that the program could be terminated. Orders only extend to 2019, the company said. This means it is almost certain that before the end of the decade, production of the 747-8 will end.

Filling the assembly site space in Everett (WA)

Ending the production means losing jobs directly associated with the assembly of the 747 at the Everett plant. Indirect jobs in Washington will also be at risk. The large 747 assembly bay at Everett becomes vacant.

The obvious question is, what happens to this space and the jobs that are associated with the 747 program?

Current programs won’t be the answer

Washington State cannot rest on its laurels and figure that the current Boeing 7-Series programs at Everett will fill the space or take up the slack.

  • The 777 Classic is struggling. Boeing said the production rate will decline to 5.5/mo by 2018 due to poor sales and the transition to the new 777X. Boeing so far sold just eight of the target 40 orders needed this year to maintain production rate. With 2016 being a poor year for wide-body sales, it’s unlikely Boeing will meet this target. This means Classic production is almost certainly to face a further reduction in 2018 or 2019 to four per month.
  • It will be several years before the 777X production ramps up, probably well into the early 2020 decade. So don’t count on this to be the savior.
  • The 767/KC-46A production rate is to top out at 2.5/mo. So this program isn’t a savior, either.
  • The 787 program won’t be the savior. Boeing already has backed off the prospect of increasing the production rate to 14/mo by the end of the decade. In any event, this is split between Everett and Charleston. Even the current production rate of 12/mo may have to be reduced by the end of the decade. The book-to-bill rate is well below the production rate. The backlog is being burned off rapidly. Boeing doesn’t want to sell the 787-8 and already has effectively abandoned it. Rate 12 isn’t sustainable. LNC analyzed the facts here.
Only one new program on the horizon

The only new, albeit prospective, program Boeing may have to fill the 747 space is the New Mid-range Airplane (NMA) for the so-called Middle of the Market sector.

Boeing continues to develop the concept of the plane and gauge market demand. Generally, this concept evolved into a replacement for the 767-200/300: a twin-aisle, twin jet seating 220-260 passengers and a range of 4,500nm-5,000nm. This is a low-volume production airplane, tailor-made for the 747 space. A decision to launch this airplane is likely next year.

Boeing being Boeing, this new airplane will be competed to other states. Washington cannot count on it being built here.

Another Option

Boeing is making a major push to make its services division a profit center, at least more so than it already is.

The 747 bay at Everett could become an MRO facility, should Boeing choose to take its services division to this level.

What’s left to give?

After Washington legislators gave “Boeing” an $8.7bn tax break in exchange for the 777X assembly and wing production sites in Everett, running to 2040, what’s left to give? (the tax breaks weren’t just to Boeing, but rather the entire aerospace sector, but Boeing as the recipient was how even the governor positioned it.)

The time to think about what to do is now. Waiting until Boeing launches the NMA, probably in 2017, with a national competition for the assembly site, will be too late.

31 Comments on “State officials need to act now, ahead of lean times coming at Boeing Everett

  1. Its not necessarily the only available large scale production facility capqblr of building aircrafts. So Boeing would be right to have competing tenders from all states _in_ the US. Building the NMA there is certainly n option.

    Using it as a 737 MAX factory maybe is the other viable option. Build the MAX-10 there. And maybe even try to shoehorn in some kind of 737 MAX 11 “NMA” there too.

    • Yes Boeing can do whatever it wants for tenders.

      Scattering out your production increases costs.

      Hopefully the McNeneary insanity is over.

      No ther Max 10 is not going to built in Everett, all the setup is in Renton, moving it cost gobs of money and makes no sense.

  2. How about legislation to weaken the unions? Maybe not very popular but logical.

    • That will never happen in deep blue Washington State. As long as South Carolina stays non-union, Boeing will probably keep shifting jobs there and gradually reduce its presence in Washington.

      • And how much do you spend in adding buildings and the cost of underutilizing your existing.

        You then get faced with, hmmm, you want to cut costs but you have all that idle space, makes you look pretty stupid.

    • Oh come on. Sheese. they start at what, $18 an hour, janitors get paid close to that.

  3. Me thinks you’re talking out both sides of your mouth, per chance. Washington (state) should protect Boeing; Washington (DC) should not protect US jobs of airline employees.
    Is it a home team thing or does the logic flow from Boeing is my baby, so whatever they say, I want?

  4. The unions seem to be what Boeing (and, really, Airbus North America) are running from. Washington can’t do a state program like comac, and won’t consider hindering the likes of IAM 751.

    After yet again talking down the prospects of every Boeing product/concept, the MRO center idea seems like a non starter. Why would such a center benefit from being on the coast or in such a huge facility? Locating near either a customer base or existing MRO type facility (say okc) would seem much more logical.

    • I think it highly unlikely that Airbus was ‘running from unions’. Such would generate a massive storm in Europe – more likely, when the tanker issue initiated they picked out a state whose representatives in Congress would have political influence in over-riding the built in bias in favour of a Boeing product

      • Airbus also must have given preference to an east coast state with available low cost real estate next to a port with sufficient depth to receive parts shipped from Europe.

      • Which of course just happen to be anti union.

        China of course is fully unionized so that is not an issue/.

        VW, BMW etc selected the US SE region because the weather is nice.

        Me thinks that is a very erroneous statement.

        • China unionised ??? Where did you get that idea, when the state owns the business in a one party state, union rights go out the window. Think of it like a company town, its paternalistic but everyone is clear whos boss, with the incentive if they dont get orders they dont get paid at all.

          • Grubbie: sorry, I thought it was oblivious (grin)

            I will try to stay away from the Britt Sarcasm rice bowl but may not be able to help myself.

  5. If Boeing designs a good, reliable and cost effective MoM Aircraft they will need all space they can find making 20-35 a month of these 797’s for 125-155MUSD/ea.
    Especially if they pull the winding of a Composite fuselage in house with autoclave bake.

    • While I don’t disagree that it is the logical place for the 797, keep in mind that the auto clave bake is in Charleston SC.

      Well, some of it, some in Japan and some in Italy.

      • 787 fuselage sections are ‘baked’ in Italy, Witchita, Japan and South Carolina. The wing sections are baked in Japan.
        As the 757 front and rear fuselage sections were built at the same place as the 737, Wichita could be a likely location for a 797 fuselage, as they can do all the cockpit fit out as well.
        http://www.cnet.com/news/in-wichita-the-787-dreamliner-gets-its-head-start/ ( Cool pics of the 787 front fuselage in the oven and then being finished up and fitted out)
        For a smaller wing like a 797, its easier to transport than the monster 777X which is made in Everett, so could be made any ware the subsidies are highest.

        • All that scattered out cost you money.

          Wichita only does Section 42 which is not a spun section.

          And I did list where the fuselage spun sections are being done, wing will be done wherever the assembly is.

        • Anything larger in Diameter or longer that a 737-900 cannot be shipped by rail. Bridges, underpasses, track radius insufficient.

          A composite fuselage would make the aircraft too expensive.

  6. Alternative idea: Perhaps the good State of WA would be better served by focusing its efforts on further diversifying its workforce into other industries that don’t demand massive state subsidies every time they want to conduct business?

    • Trouble is Boeing is such a trophy business its hard for politicians to say no, and of course the campaign finance contributions help too.

    • Well, someone gets it. I think Scott has talked this several times.

      But the local pols are brain dead Boeing slaves.

  7. For overall cost to a society concentrating into a giga manufacturing site is expensive. Worker transit, exploding real estate pricing .. and last but not least “all eggs in one basket.

    The Airbus model of moderately sized centers of excellence is rather more efficient than simplistic thinking would indicate.
    Especially valid for high value products like airplanes.

    The US unions and forex the German “Mitbestimmung” model underpinned by unions don’t have much in common. ( having healthcare and pensions beyond union and company grasp helps to no end. )

  8. Seeing A350s being reworked in the JL Lagardere (?) building in Toulouse, the one built for but only half used manufacturing the A380 gave me some appreciation of the mismatch in size between the building and what is a pretty sizeable aircraft. It is a truly vast space and as we walked along the main A380 jig and the three Further A380s in stages of being fitted out it looked in keeping.

    The A350s (including the first A351 if I am not mistaken) looked like toys in comparison. Unless you can effectively use the extreme height by use of some sort of ‘double deck line’ possibly for wing to body join or something then it is so much wasted space.

    This mismatch would presumably also be the case with the use of the original Everett site but even more so if it were to be building MoM sized aircraft at something like 2/3 or less the size of the A350. I suppose using up existing space is cost effective.

    • Once the building is paid for, the height does not cost you any m,ore

      Footprint on the other hand does.

      And as an aside, Everett uses no heat or Air Conditioning , they had heat, not used. They throttle temp with opening doors.

      Charleston on the other hand has massive A/C. Not only big cost in power, the cost of the units and servicing is huge (I know, I have done it)

      In that case space is a cost.

      the most economical move would be to shift all the 787 production to Charleston (assume I am right on Rate 8) and then do the 797 in Everett where cost are low, assembly line is there, workers trained in both aluminum and composite construci8ton (of course I am thinking only as a true business person)

      • Boeing-Charleston has solar cells over the entire roof of the assembly building. Energy costs are a relative non-issue.

  9. Anyway the whole tenor of this comment shows the socialist nee almost communist process by which the Boeing corporation tries to compete with Airbus. The repayable launch aid offered occasionally to Airbus by the pro competition EU members are simply a means by which the respective governments are covering future deficits as they reap the rewards of the successful programmes with massive surpluses over and above that or iginally advanced. More than enough to cover an occasional dud.

    In Boeing and Washington state we see protectionism and vested interest on all sides. Free customer financing through Exim bank, massive NON repayable state aid in the form of tax breaks and the sourcing of govt financing from all those other participant nations. Further they are supporting a pampered workforce that is unwilling to forego the benefits of yesteryear. Organised labour as a key participant in the socialist experiment kept going in the northwest.

    What Boeing needs is to be required to stand on its own two feet and compete against Airbus without all this state intervention. It should not be run as a workfare schemes by the federal and state government. This is unfair competition and should be brought to the attention of trade negotiators.

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