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Viewpoint: Why Boeing's Not in Kansas Anymore

In the end, the Pentagon's 'price-shootout' strategy to break the impasse over the battle for the Air Force refueling-tanker contract drove jobs out of Wichita.

By Loren Thompson, COO, Lexington Institute

Jan. 10, 2012

The Kansas congressional delegation is angry that Boeing has decided to close its aircraft plant in Wichita, and it should be.

Throughout a decade-long struggle to secure the Air Force's next-generation tanker contract, the delegation vigorously supported Boeing's bid because the company said it intended to do much of the modification work at the Wichita facility.

Boeing finally won the contract by bidding very aggressively. But now the company says the Wichita site is too expensive, and it will do tanker modifications at its commercial-transport complex in Washington state.

So of course the Kansas delegation feels betrayed.

Although this story fits all too easily into the narrative that Boeing is a heartless industrial behemoth driven solely by profits -- the Bain & Co. of the aircraft business -- the truth is a bit more complex.

 
Thompson: To avoid losing money on the tanker program, Boeing had to cut costs everywhere it could -- including Wichita. 
It doesn't make sense for a big defense contractor to alienate its political base unless there are vital concerns at stake, and the reality is that the Wichita plant's revenue stream has been slowly drying up for some time.

With key programs coming to an end, the tanker effort would have had to carry much of the underutilized facility's overhead, making it unnecessarily expensive.

It's not that Boeing is trying to escape organized labor. Its Seattle-area workforce is famously militant. But the company has to find efficiencies everywhere it can to make a profit on the tanker program, and therein lies an overlooked fact about Pentagon purchasing practices.

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