Pontifications: Washington State out to lunch on aerospace–again

By Scott Hamilton

Nov. 13, 2017, © Leeham Co.: Washington State’s top aerospace official, John Thornquist, resigned early this month, complaining that the State Legislature cut the Department of Commerce’s budget 78% over the past three years—making it impossible for Commerce to promote Washington aerospace.

The Puget Sound Business Journal revealed the resignation Nov. 3. The Seattle Times followed later in the day.

Frequent target

Commerce has been a target of Legislative critics for years, even going back before 2010 when I did some consulting work for Commerce. Some legislators wanted to cut Commerce’s budget each time the Legislature dealt with the budget. They were successful in some years and not in others.

Early in her first term, 2005-2008, then-Gov. Christine Gregoire skipped the Paris and Farnborough air shows. The state had pathetically small presence in the Halls at the shows and little in the way of entertainment to promote Washington’s aerospace sectors in the Seattle, Spokane, Moses Lake and Bingen. (Bingen is where Boeing’s UAV subsidiary is located; Moses Lake is a flight testing center.)

LNC roundly criticized Gregoire for skipping the shows, and she resumed going the next year. Washington stepped up its promotional efforts from 2010, increased the size of its presence in the air show Halls and upped its program of helping small companies attend the air shows.

Now, Commerce is back to square one and, perhaps, even worse.

I encountered Thornquist a few weeks earlier at a conference at which he bemoaned the budget cuts, but he didn’t give any hint he was thinking of resigning. But we joked Washington would barely have a closest presence at the 2018 Farnborough Air Show.

Out to lunch, myopic view

When PSBJ reported the resignation, I Tweeted, “WA Legislators are so myopic. Takes aerospace for granted here. US SE aggressively competing. Boeing 797 isn’t a lock in WA at all.  North Charleston, maybe even Alabama, should be strong competitors. WA Out to Lunch again.”

Earlier this year, a long-time Boeing consultant, Tom Captain of Deloitte Touche, warned the state to “stop acting entitled” about aerospace, or the state will lose jobs.

The PSBJ wrote:

“Complacency and an entitlement attitude, they’re our worst enemy,” said Tom Captain, the recently retired vice chairman of Deloitte and leader of its global aerospace and defense practice.

Captain, a long-time Puget Sound area resident, made the remarks during a presentation about the competitiveness of Washington state’s aerospace sector during the Aerospace Futures Alliance annual summit Sept. 7.

“Other states and countries are competing fiercely for what we take for granted here,” Captain said. “We can lose and we have lost.”

In September 2016, I presented to the Governor’s Council of Economic Advisors and pointed to a dip coming in Boeing employment by the end of the decade as the 777 Classic production wound down, before the 777X production ramped up and increasing automation. I also said the state needed to start thinking about how to win the assembly site for the NMA (797) because Boeing is sure to compete the location.

And now the State’s top aerospace official resigned because of draconian budget cuts.

US Southeast

The US Southeast is already looking ahead to the NMA competition. My Tweets about Washington’s myopia were only minutes old when Charleston officials replied they were ready to go. Alabama officials, the new Airbus plant in Mobile notwithstanding, are aggressively promoting the state as a place to do aerospace business. With Boeing Defense in Huntsville, in the northern part of the state, officials already know Boeing.

Mississippi aggressively pursues establishment of more aerospace suppliers in this state. The four states in the Deep Southeast, which includes these two plus Florida and Louisiana, join together to have a big presence at the Paris and Farnborough air shows. Washington, as noted, will be lucky to have the proverbial closet next year at Farnborough.

Mobile is the host of the first Southeast Aerospace and Defense Conference (SADC), organized by Airfinance Journal and Leeham Co. Washington cuts its budget.

Beyond Boeing

While Boeing understandably gets the lion’s share of attention in Washington and some readers of The Seattle Times equated Commerce’s budget cut with incentives, this issue goes beyond Boeing and Commerce doesn’t offer tax incentives (this is the Legislature and county governments).

In my 2010 consulting project to Commerce, which remarkably until then didn’t have an aerospace strategy, I urged Commerce to look Beyond Boeing to expand its aerospace footprint. Airbus (that’s right), Bombardier, Embraer, COMAC and the broader supply chain all should be targets for Commerce’s efforts. Today, the supply chain and what OEMs it serves indeed go well beyond Boeing. (I had lunch recently with a company whose aerospace business is headquarter here and it sells more products to Airbus than to Boeing.)

The supply chain is Beyond Puget Sound (Seattle) as well. Spokane is the state’s second largest aerospace cluster. Bingen (those UAVs) is probably third and Moses Lake fourth.

This is what Commerce does. The electeds in the Legislature either don’t know or don’t care or are arrogant or complacent. Or all four.

Wake-up call

Way back in 2001, Boeing shocked Washington State officials when it announced it was moving its headquarters to Chicago. Officials didn’t even know Boeing was thinking about this.

The politicians, of course, bemoaned the announcement and declared it to be a “wake-up” call. More attention to Boeing (and, more generally, aerospace) was needed, they said.

In 2009, Boeing announced it would establish the second assembly line for the 787 in Charleston (SC). This came as no surprise, since Boeing was threatening the unions it would do so unless concessions were made. Nevertheless, once again the electeds declared this decision a “wake-up” call.

In 2011, Boeing said labor and the state shouldn’t assume the 737 MAX would be assembled in Renton, the site of the 737 factory since the 1960s. The state offered incentives and labor gave concessions. The MAX stayed here.

In 2013, Boeing opened a national competition for siting the 777X wing production and assembly site. The state offered $8.7bn in tax breaks (it was for the entire aerospace sector, even though Boeing was the principal recipient). Labor gave more concessions. The 777X stayed here.

The trouble with these wake-up calls is that Washington repeated hits the snooze button. It has again, gutting Commerce’s budget.

You can bet the US Southeast heard the alarm going off.

14 Comments on “Pontifications: Washington State out to lunch on aerospace–again

  1. Wow. A lib gone superlib state (now part of the left coast “blue wall”) actually cutting a gov agency budget drastically? Who’d a thunk it? Well, it’s probably much more important getting a Wash state office of transgender rights—or some other lib hobby horse—funded anyway. LOL (“We got Amazon anyway. We don’t need no stinkin’ aerospace jobs.”)

    • Boeing up to now seems to have taken tax gifts from Wash.State and spent them elsewhere … with glee.

  2. Is the 797 at Everett the optimal spot for Boeing? The wing building and assembly buildings are there, but maybe congestion on the roads will be bad in the future. Is the 797 at Everett optimal for Washington? Commercial aircraft service may end up being a better use of Paine Field for the people of the metro area. Commercial aircraft production moved on from Southern CA as it became more congested. 797 at Spokane or Moses Lake?

    • Maybe Scott can confirm. I vaguely remember BA was “looking ahead” several years ago, and bought 300 hundred or so additional acres at the Charleston Airport—for potential future development.

      • Yeah they had to buy the Vought fuselage assembly business/building as well. That ‘wasnt planned’.
        Then again Boeing is talking big about getting into the servicing business, overhauls in Charleston may be the go

      • Found it, MyrtleBeachonline.com May 12, 2015 article “Plant Expansion to Highlight Conservation” touches on it. South Carolina has purchased—and is “holding”—468 additional acres for BA expansion. Sounds like, with the right state incentives package and this land, my old state can put up a hell of a fight for the 797. And, a good core of BA employees may want to migrate for: 1)their jobs, and 2) to leave a state probably going to get a lot more “whacked out” lib in the future.

        • SC has a state sales tax of 6%? and income tax of 7%? Maybe WA needs to copy that formula to be more successful. Rather ironic, that WA which is considered whacked out lib has the most regressive tax structure, and conservative SC has a more progressive tax structure.

          • Not the whole story by a country mile! Average home cost Dorchester County (Chas. Suburb with sizeable nice, housing stock near BA/Chas. Airport): $188,000. Snohomish County (Everett/Paine Field): $450,000. This is one example of a major cost of living difference in the two. And, generally, you don’t see S.C. gov spending for whacked out lib hobby horses! LOL

    • Traffic is said to be bad, but also parking might be the bigger problem. The local governments are trying to mitigate by improving transit. Bus rapid transit is coming in 2019. A light rail extension to Everett was approved last year, and the local county leaders forced the route to divert through the Paine Field industrial area, which sacrificed additional stations, more direct routing, and higher-density residential areas in the process. (Obviously I’m not a fan of the diversion.) Putting the 797 plant a little farther north in Arlington, where there’s a bit of an aerospace cluster, probably makes more sense.

      http://www.heraldnet.com/news/permits-unlikely-to-delay-boeings-777x-expansion/

      Parking is another issue. Today some 40,000 people work for Boeing in Everett, though not all simultaneously.

      “Parking’s a challenge today,” Boeing Commercial Airplanes CEO Ray Conner said during the press conference when the company announced that the 777X wings would be made in Everett.

      The company already has maxed out on 21,000 permitted parking spaces. A small number of spaces will have to be removed to make room for the wing building. Limiting the number of spaces is meant to lessen congestion on roadways.

  3. Well, this is what you get when you elect a bunch of ultra-left-wingers to run the asylum. Unless you are babbling about renewable energy, climate change, or biodynamic, organic, shade-grown, fair trade coffee, nobody in Washington State government will give you the time of the day. The exodus to the Southeast will continue.

  4. I think Washington state might well promote/support Eastern Washington for aerospace. Seattle area is expensive to live in and crowded. Although truly amazing (my opinion) aerospace which produces fabulous things doesn’t print money the way much of the tech sector does and maybe doesn’t fit in too well in a high cost of living area.

    Also the Pacific Northwest coastal area is (as is the east side of S.F. bay where I live) (over?)due for a major seismic event. The NW one promises to be a great quake (with tsunami). While one only has rough probabilities (like x %/yr.) about the chances of this, the consequences would be quite severe for a manufacturer.

    Other industries, like textiles, have moved to the S.E. on their way to Asia. Maybe the 797, whatever form it takes, should move further than the other corner of the U.S. but stay on the pacific rim.

    • I remember during the competition for the 777-X final assembly line (which probably inspired Amazon to do their HQ2 dog and pony show, BTW), Boeing had a deepwater port as a requirement. Would the 797 need the same thing? If so, that disqualifies Moses Lake and Spokane. Also, would Boeing consider an overseas FAL?

      If a deepwater port is needed, WA should offer up Bremerton or Tacoma, which would be lower-cost areas that are still near the existing Everett/Renton labor pool. Otherwise, go a little farther out to Olympia or Bellingham, or if a really cheap location is necessary, try Aberdeen, Port Angeles, or Shelton.

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