By Bryan Corliss
Sept. 7, 2020, © Leeham News: Stop me if you’ve heard this one: the pundits are saying Boeing is going to leave Puget Sound, leaving behind the hollow husk of a company doomed to wither and die on the vine.
Just like they did in 2003, in 2009, in 2013 and 2016.
Seattle-area political economist and author T.M. Sell, in fact, traces the company’s first threat to leave clear back to the 1920s, when company executives got into a fight with the Seattle City Council over building new roads to connect downtown with the airport we now call Boeing Field.
Boeing said it would pack up and move to southern California, if Seattle didn’t cooperate.
“Like rain in winter, this is a regular feature of the Puget Sound emotional landscape,” Sell opined back in 2009.
Of course, Boeing actually did move a big chunk of the 787 program to South Carolina in 2009, making North Charleston the second home of Boeing Commercial Airplanes. Now, the smart money is betting that as Boeing slashes 787 production rates to match cratering demand, it will consolidate that production in Charleston.
In the past, this kind of thinly veiled threat would have driven a Pavlovian response: the state’s Democratic governors, living in mortal fear of being branded by Republicans as “The One Who Lost Boeing,” would form a high-level task force to come up with an emergency strategy to “land” whichever program was at risk (7E7, 737 MAX, 777X, NMA and now, potentially, the 787).
The task force would come up with a recycled laundry list of initiatives: job-training, infrastructure improvement, regulatory streamlining, tax relief, and Gov. Locke/Gregoire/Inslee would ram it through the Legislature, then would launch new councils, offices or boards to implement the plan.
This is the last thing Washington state should do right now.
The thing is, the state of Washington already has most of the things aerospace companies need to be successful, especially in terms of workforce development. What it lacks – and very much needs at this moment — is a consistent, coherent approach to the aerospace industry, instead of another in a series of one-off crisis responses.
The Washington Office of Aerospace was created as part of Gov. Gary Locke’s “Project Olympus” deal with Boeing, which ensured the 787 would be built in Everett in return for the original $3.2bn tax break that Airbus and the European Union objected to.
But since its nominal creation, the office hasn’t had much of an impact. The state’s Legislature, at times, has failed to fully fund it – or even fund it at all. Directors of the office have cycled through after short tenures, leaving for better-paying, better-funded roles. The most-recent director lasted barely 18 months before he quit – not in a huff, he said – over frustration with the lack of funding his office had to carry out its basic functions, like attending trade shows.
He left at the end of 2018. The position has been vacant since. The task of recruiting and retaining aerospace companies has fallen on three staff people at the state’s Department of Commerce.
There are several problems with this, and they all have to do with perception.
Like most of the heavy hitters in business, aerospace industry CEOs have big — and often fragile – egos. They want to be catered to. They want to be seen and heard. And since they’re captains of commerce, they want to deal with equally high-ranking players from state governments.
Robin Toth is the aerospace industry sector lead for the state’s Commerce Department. She is – by all accounts – well-connected and well-respected. Her background is in economic development in Spokane, which has a cluster of more than 100 aerospace supply companies – larger than most states. She is well-qualified for the role.
The problem is with her position. Toth doesn’t report directly to the governor – she reports to the state Secretary of Commerce, who is the one who reports to the governor. In corporate terms, she’s not C-level, she’s not even a senior VP.
And what C-Level executive is going to bet the future of his or her OEM or Tier 1 supplier on the outcome of talks with the Washington state government equivalent of a corporate senior director?
Despite that, official Washington does take aerospace very seriously, and there are at least a dozen major public and public/private programs to address everything from advanced technology research funding to workforce development: the WATR Center, AJAC, JCATI, the WAP, the EASC, INWAC, the WSBCTC and its affiliates like EdCC, EvCC, RTC and CCS – even the OSPI through the auspices of ESDs like Sno-Isle.
And if you just got lost in that alphabet soup, you see the problem. There’s no one-stop shop for an out-of-state aerospace exec to email for site-selection data or information on entry-level training centers or apprenticeships to train high-skill workers.
Even in-state companies can be confused: Some community colleges offer flight-line maintenance programs, while others teach machining and manufacturing skills. Which one should I call? Where is the FAA Center for Excellence in composites? And what about that thing my neighbor’s nephew is doing at his high school, where he’s learning basic aircraft assembly skills. Who do I call about that?
A Governor’s Office of Aerospace could – and should — be the clearing house for that kind of information, while also serving as coordinating body to avoid duplication of efforts and ensuring that the needs of both industry and job-seekers are being met.
Part of Washington’s problem in competing for aerospace jobs is that it has never had a consistent message or messenger talking about all the things the state has done to make the aerospace industry successful: some of the nation’s cheapest energy, dozens of training programs and a constellation of suppliers in Tiers 1 through 5.
But do you ever hear about that? No. And that’s in large part because Boeing does a very effective job of communicating its dissatisfaction with the various elements of doing business in Puget Sound. (Ie., its unionized workforce, the high wages it must pay to attract local talent away from Amazon and Microsoft, snarled traffic that disrupts shipments between plants, the unions, the weather, and did we mention the unions?)
And this pays off in times like this, because Boeing doesn’t have to make any public demands – everyone already knows what Boeing wants, so it’s just a matter of negotiating how much we’re willing to give.
Washington needs to make itself part of the narrative. It needs an evangelist who can make the case that – as much as industry players complain about business conditions in Washington state – companies have made a whole lot of money here.
And if Washington can’t figure out how to make its own case for why it’s the best place for Boeing to be building jets, states like South Carolina, Texas – maybe even Utah – will gladly tell Boeing executives all the reasons why it isn’t.
Then there’s higher education. As Scott Hamilton noted last week, the University of Washington hosts the well-regarded (but small) William E. Boeing Department of Aeronautics and Astronautics.
There are also aerospace-related programs at just about every one of Washington’s four-year state schools: from materials science to manufacturing technology to aerospace-specific software code writing.
But if you’re an out-of-state company looking to recruit here, are you going to know that you’ve got to go to Eastern Washington University (17 miles southwest of Spokane) to find graduates of a specialized computer science program in aeronautical systems engineering? Or that you can find graduates who’ve studied composites manufacturing in both the far northwest (Western Washington University) and far southeast (Washington State University) corners of the state?
The state’s higher education system needs to do two things – both of them relatively low-cost and (to a non-academic outsider at least) not all that complex:
It may seem inevitable that Boeing will move the 787 line to North Charleston, and with the end in sight for the 747 – and the 777X market getting squeezed – then the end is nigh for Boeing in Everett. And when 737 MAX production runs out, that will be the end of Washington’s aerospace industry
However, Hamilton argued (and I wholeheartedly agree) that all that empty space in Everett represents a great opportunity. Nature abhors a vacuum – and Wall Street abhors bad ROA ratios. The fact that Boeing’s next new aircraft program could move into an existing site surrounded by North America’s biggest pool of trained labor, with all the necessary infrastructure, clearly makes Everett and Renton the low-cost, low-risk option for home of the Next Boeing Airplane, whatever that turns out to be.
That doesn’t mean Washington can count on Boeing management in Chicago to do the smart thing.
If Washington is serious about maintaining its status as home to North America’s premier aerospace cluster, Gov. Inslee needs to rebuild the Office of Aerospace as its own entity, reporting directly to his chief-of-staff.
And the state somehow – in Covid-dominated budget-writing session where red ink will flow like fake blood in a ’90s slasher movie – must come up with enough money for this office to adequately do its job.
This is not an easy sell. For all its complaints about its unionized workforce, Boeing used to be able to count on the Machinists (especially) and SPEEA to lean on recalcitrant Democrats. But after spending the past decade at war with its workers, it’s hard to see the unions rallying to management’s side.
Likewise, Gov. Inslee has talked about how he felt “mugged” by Boeing during the 777X site selection process. How excited will he be to help a Fortune 500 company that in the short term is going to be slashing jobs in his state?
Washington needs to do this, however. Tech industry jobs (Amazon, Microsoft) have changed the economy and culture of the Seattle area with their six-figure entry-level salaries. But the aerospace industry remains a major pipeline into the middle class for blue-collar workers.
If Washington is to remain a place where people can get out of poverty without a college degree, it needs to maintain a vibrant aerospace industry. Retooling the way state government relates to the industry would be an important step in that direction.
Bryan Corliss is a writer for Leeham News. He previously was a spokesman for IAM 751 and covered the aerospace industry for many years for the Everett Herald.