Jan. 11, 2021, © Leeham News: Last week appeared to be an ominous week for Washington State for aerospace.
On Monday, The Seattle Times reported that Amazon surpassed Boeing as Washington’s largest employer. The retailer now employs more than 80,000 in the state. Boeing, following COVID- and 737 MAX-grounding induced layoffs, employs just under 59,000 in Washington.
The Times reported Tuesday that Boeing’s research and development center at Boeing Field will be closed. At its peak, the center was to employ 900. The expansion began a mere 10 years ago.
Previously, Boeing announced Oct. 1 that it will close the Everett 787 production line and consolidate the final assembly at the Charleston (SC) plant.
The exodus by Boeing from Puget Sound and Washington State is underway. But was closing the R&D center as significant as it seemed?
Closing the R&D building may be more symbolic than another tangible step in the exodus already underway, says a retired SPEEA member. (SPEEA is Boeing’s engineer’s union.)
“It was an interesting but not unexpected event. Remember, Boeing closed its Anacortes (WA) R&D facility with no fanfare a few years ago,” the SPEEA member said. “They spent $2bn in that warehouse.”
From the projected high of 900 employees assigned to the Boeing Field center, there were fewer than 30 there when the closing news emerged.
“Decommissioning the place is probably an acknowledgement that the point of vastly diminishing returns in composites processing was reached long ago,” the SPEEA engineer told me.
The news that Amazon overtook Boeing as Washington’s largest employer shouldn’t come as a surprise. It probably was going to happen even without the COVID-induced crisis at Boeing. But that said, the state had its head in the sand about the long-term presence of Boeing in Washington irrespective of COVID.
Boeing’s product strategy needs a generational overhaul. The 777X’s future was bleak before COVID. Changing market conditions undermined the business case pre-COVID. The 777X was launched in 2013. Since then, the success of Boeing 787 and Airbus A350 in opening new routes fragmented the hub-focus needed by the 777-9 to fill its seats. Airbus launched the A330neo. While this model hasn’t sold well and its skyline was weak even pre-COVID, it nevertheless nibbled at the fragmentation.
The Boeing 737-8 can fly thin trans-Atlantic routes up to eight hours. The Airbus A321LR/XLR can fly up to 10 hours. These also further fragment routes.
Some orders for the 777X were canceled even pre-COVID. Post-COVID, more cancellations are likely.
The 737 product line is weaker than the competing Airbus A320 family. There are more than 1,000 MAX orders that were canceled or reclassified as iffy since the grounding. (Not all were directly due to the grounding; some were because of failing carriers.)
Boeing needs to replace the 737. Washington is probably not high on the list as the final assembly site when this comes.
More than 10 years ago, consulting to the state Department of Commerce, I urged the state to prepare for this day. Washington, I told Commerce in a study, needed to look beyond Boeing. It needed to attract and create other aerospace jobs and industries. Washington needed to beef up training for engineers. The 20-year need for new pilots and mechanics worldwide needed new training sites.
The state needed to look beyond its infatuation with brick-and-mortar factories. Washington could establish an Embry-Riddle-style aerospace training center, expanding what was then an annex of Embry.
Aggressively pursuing expanding business for the supply chain was recommended. There has been some success in this area.
At the time, Boeing and EADS (the name of Airbus’ parent then) had cybersecurity units. I recommended that Washington promote a cybersecurity center, supporting the aerospace companies or serving them as well as governments. The electrical grid could someday become a target of cyberattacks.
Moses Lake could become an airliner recycling center.
Many of the recommendations were ignored. The state’s focus on brick-and-mortar continued unchecked.
The state did make some progress in training. As LNA’s Bryan Corliss pointed out, the state expanded touch-labor training. But it failed to focus on engineering training. The state continues to under fund its aerospace office.
After Boeing announced the 787 production would be consolidated in Charleston, Gov. Jay Inslee had a temper tantrum criticizing Boeing. Inslee declared Boeing couldn’t (not wouldn’t, but “couldn’t”) move 777 and 737 production out of state.
Boeing has since announced it’s closing and selling the Longacres BCA headquarters. Don’t be so sure Boeing couldn’t move some 737 production out of state.
Pre-MAX grounding, Boeing produced 52 737s a month at Renton on three lines. Today, only one line is active. Boeing hopes to build 31/mo by early 2022. If Boeing wanted to move one or two lines out of state, now’s the time to do so while these are inactive.
I hasten to note that I’ve heard nothing to suggest this is contemplated. There also would be massive union issues. There would be major moving and set-up costs. Operating two production locations has ongoing costs.
But knowing Boeing as I do, I do not doubt that this option has been studied. Such a move would be about the long-term production strategy. The need for short-term cost savings may well preclude a move.
Establishing a 737 line in another location (presumably, non-union) would enable Boeing to create an experienced workforce in advance of the next new airplane, assembled at the new site.
LNA predicted in August that the 737 Renton plant might close in 2033. Some speculated that after Boeing announced in October the Everett 787 line will close this year, Boeing could open a 737 line in the 787 bay. Although final assembly at Everett ends in March, the bay will be used to fix technical issues on the 787 that discovered late last year. Boeing Global Services also is pondering some use for the bay.
Washington needs to consider a future with Boeing at least having a much, much smaller footprint here. It also needs to consider what happens if Boeing picks up lock, stock and barrel.
Contingency plans must be in place. Handwringing, shock and dismay after the fact won’t be productive.
Neither will temper tantrums.