Leeham News and Analysis
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Latest on Boeing v IAM v WA State in 777X drama
Here are some developments since Friday in the drama over Boeing vs the IAM 751 and Boeing vs the Legislators in Washington State in the effort to site the 777X at Everett, Boeing’s main wide-body production plant and the current location of what we’re now calling the 777 Classic:
- After a kumbaya moment when Gov. Jay Inslee announced his plan last Tuesday for a series of incentives the State could offer Boeing, including an $8.7bn extension of the (illegal) 787 tax breaks to encompass the 777X and a $10bn transportation tax over 10 years opposed by Republicans, the political on-line magazine of Washington politics, Crosscut, has this not-so-kumbaya wrap-up.
- Dominic Gates, the aerospace reporter for The Seattle Times, did a rare radio interview–this for Seattle public radio station KUOW–in which you can almost hear the plaintive, “Can’t everybody just get along?” call.
- Other states are salivating over the prospect that the Washington Legislature or IAM 751 will blow their opportunity to land the 777X. South Carolina has already said it can’t wait to step up. Texas, where Boeing has a facility in San Antonio, is presumed to be another option. California media is engaged in hyper-speculation over the prospect of Boeing’s Long Beach plant as a potential site, though even they admit this is a long shot. We know of another state that is ready to step up, but were told off the record so we can’t report the name.
- Adding to the hyperbole, Gov. Inslee told legislators that 49 other states are ready to make a bid. We doubt that placed like Alaska, Hawaii or Vermont (just to name a few) really are prepared to do so.
- Ray Conner, president of Boeing Commercial Airplanes, issued a letter Friday to all employees (but obviously intended for the IAM), urging contract approval.
Deadlines:
- This Wednesday, Nov. 13, for the IAM vote.
- This week for the Legislature, though a vote on some of the elements could come as early as today.
- The Dubai Air Show begins Nov. 17, where Boeing is expected to officially launch the 777X program and would like to have the site location controversy put to bed.
Boeing to explore options on 777X
Boeing issued this statement late last night on the news the IAM likely won’t approve the contract offer in exchange for Boeing siting the 777X assembly in Everett:
All of our options are still on the table, including those within Boeing and other interest we have received from outside.
We chose to engage in Puget Sound first, but without full acceptance by the union and legislature, we will be left with no choice but to open up the process competitively and pursue other options for locating 777X work. If this is not ratified per the scheduled union vote on November 13th, we will begin taking the next steps.
Our comment: Some IAM members evidently think Boeing is bluffing. This view is fantasy. Boeing will put the 777X elsewhere (Charleston being the obvious choice).
This is an extremely negative turn of events for Puget Sound, for Boeing and the IAM. If the IAM disapproves this contract and Boeing puts the 777X in Charleston (or Texas or anywhere else), we see open warfare between the union and Boeing, with union payback coming in 2016 when the current contract expires. The 2008 57-day strike was payback for prior outsourcing. We can easily see a strike in 2016.
Boeing will continue to move jobs out of Washington State if this deal is rejected. As distasteful as contract provisions are, it seems the IAM membership would rather cut its nose off to spite its face than to save and create jobs. We’ve seen this before. We hope we won’t see this again.
To set a flavor of member sentiment directly from them, see IAM 751’s Facebook page. When we looked last night, there were more than 400 comments, all but a handful negative.
This is a very negative, discouraging turn of events.
Other news:
Some Washington Legislators say that in exchange for tax breaks for the 777X, Boeing must commit to build all 777Xs and derivatives in this state, reports The Seattle Times. This requirement was absent from the 2003 tax breaks Washington granted Boeing for the 787 final assembly line, leaving it open for Boeing to place the 787 Line 2 elsewhere.
South Carolina is ready to step up on 777X, Tweets the Charleston Post and Courier.
It’s perhaps worth reading a couple of our own posts from 2009 when Boeing chose to put 787 Line 2 in Charleston:
Politics rears head over Boeing state incentives
It took no time at all for politics to rear its head in Washington State over Gov. Jay Inslee’s proposal for an incentive package for Boeing in exchange for siting the 777X in Everett.
Republicans, who oppose any tax hike for any reason under any circumstances, wasted no time in raising questions over the transportation tax proposal, or even if there was a need for the incentives to clinch the deal.
The IAM 751 local, which has its own problems with its membership over the proposed give-backs in the contract extension, lost no time in marshaling a team to lobby the legislators.
The Tacoma News Tribune asks why a special session is needed at all.
The IAM members vote next Wednesday, Nov. 13, on the contract. It’s unknown yet how the Legislature dynamics will play out.
New 777X facilities to be 1.5m sf, one third the size of Boeing’s Everett plant: IAM
With the release by IAM 751 of the summary of the contract terms to be voted on next week by the membership as one step required for Boeing to select Everett as the assembly site for the 777X, the cover letter reveals Boeing will build “buildings” totaling 1.5m sf–to “house 777X final assembly and wing production.”
The total square footage equals one-third the size of the 4.5m sf of the entire Everett Boeing plant.
A Boeing spokesman declined to comment on the IAM 751 facilities statement, saying the company isn’t commenting on the “specifics” of the contract. We learned separately that a wetland assessment has been underway at Paine Field at the prospective site; Snohomish County (where Paine Field is located) undertook the study.
Assessing the 777X events for Washington State, IAM, Boeing
Update, Nov. 6, 10:00am PST: A summary by IAM 751 of the contract details is here.
Original Post:
Here’s our take on the news that the IAM and Boeing reached a tentative agreement leading to the selection of Washington State as the assembly site for the 777X, contingent on contract ratification and the Legislature approving an incentive package:
- IAM 751 is both a winner and a loser. Members lose the defined pension plan benefits and pays more for health care benefits. But they keep jobs assembling the 777X, and the siting of the composite wing production here reinforces the expertise of composite development in the Seattle area. These wins outweigh the loss of the benefits.
- Washington State is a winner. This is self evident. The fact that a transportation package is a must–one has been stalled for a long time–not only benefits Boeing but it benefits the state as a whole. Let’s hope the “no new taxes under any circumstances” Republican Party finally wakes up and votes for this thing. These extremists could kill the entire deal.
- Boeing is a winner. It gets labor peace from the IAM through 2024. It gets an experienced, high quality workforce instead of gambling Boeing Charleston–which remains problematic–would be up to the task in five years, when assembly begins. It gets cost reductions on the pension plans and health care benefits.
- Customers are winners. See number 3 re: Everett vs Charleston.
- SPEEA is probably a winner. With the wing and airframe coming to Puget Sound, SPEEA engineers here will certainly get its share of the work, despite the recent announcement that Boeing was putting engineering everywhere but here.
- Boeing Charleston and South Carolina, the presumptive alternative site, are losers. No explanation required.
A big question mark:
As we previously wrote, extending the 787 tax breaks to the 777X through 2040 (with a value of $8bn, more or less) is problematic. These were ruled illegal by the World Trade Organization in the US (Boeing) vs Europe (Airbus) trade dispute claims and counter-claims. The finding is under appeal, but what happens if the finding is upheld? Then what?
Lots to do:
The IAM membership has to approve the tentative contract; a vote is planned next week. Members will have to get past the benefit reductions, offset to some degree by a generous signing bonus and additional benefits for early retirees.
The Legislature has a lot of moving parts to look at in the next week. The challenges are daunting.
Recommendation:
IAM: Although perhaps painful and anathema, ratify the contract.
Legislature: Approve the package, including the new transportation taxes.
IAM, Boeing have tentative deal; Washington State steps up for 777X
The International Association of Machinists and Boeing have a tentative agreement that means the Boeing 777X will be built in Everett. The new contract is eight years, to 2024.
The IAM membership is to vote on the contract next week.
Gov. Jay Inslee has called a special session beginning tomorrow to approve a bi-partisan incentive package. Inslee said that if the IAM membership and the Legislature approve the packages, the 777X will be built here.
The state package includes:
- A package of statewide transportation improvements, which Inslee calls an essential piece of the aerospace future as well as the state generally;
- Expand investments in education;
- Expansion of policies for industry;
- Extend the 787 tax incentives to 2040 and to include the 777X. This has a “ballpark” value of $8bn through 2040.
All this has to be approved in a week.
Inslee noted that this deal “reverses the outflow of work from this state.”
Inslee’s statement is below the jump.