The Battle for Boeing's Future

With Boeing facing another fight with its union, the company is weighing where to locate its second 787 Dreamliner production line.

For over 90 years, Boeing has been synonymous with the Seattle area for the production of aircraft. But continued labor strife could threaten that legacy, as the aerospace giant weighs where to locate the second production line for its 787 Dreamliner.

Aerospace is one of the lifeblood industries of Washington, with nearly 600 companies employing over 86,000 workers.

Boeing and the International Association of Machinists (IAM) are once again at a standoff, with the aircraft manufacturer pushing for a no-strike deal and the union, which signed a pact last fall after a two-month strike, suggesting the topic be revisited no sooner than 2012.

"I don't believe we have until 2012," said Boeing's Fred Kiga, vice president of state and local government relations, in an interview with The Seattle Times.

Though the Dreamliner hasn't even flown yet, there are already 850 orders for the plane, which is made of lightweight composite materials that Boeing says will make for a lighter, more fuel-efficient aircraft than any other on the market.

Boeing is expected to make a decision on the second production line sometime in the next six months.

On the same day that business, union and political leaders gathered near Seattle to discuss how to keep the future of aerospace in Washington, Dreamliner general manager Scott Fancher officially unveiled the company logo on the side of its newly acquired fuselage-assembly facility in Charleston, S.C.

To Richard Aboulafia, an analyst with the Virginia-based Teal Group, the message was unmistakable.

"It's safe to say that future Boeing final assembly lines wont' be in the Puget Sound area," says Aboulafia. "The attraction of right-to-work states is just too strong."

The second production line for the 787 could be a vital chess piece. Already, a worker from the Charleston assembly facility has filed a petition to decertify the Machinists union. Only two years ago, the IAM organized the factory on a narrow seven-vote margin.

If Boeing opens the 787 production line in Charleston, other right-to-work states could enjoy similar competitive advantages, setting the stage for Washington to perhaps lose assembly for a new jet to replace the 737 toward the end of the next decade.

"This could be Washington's finest hour or the most dismal setback and a loss of national leadership," says U.S. Rep. Norm Dicks (D-Bremerton).

Boeing faces risks as well. The Charleston facility, which was purchased from Vought Aircraft Industries in early July for approximately $580 million, would be too small to assemble the Dreamliner and would require significant construction. Perhaps more importantly, workers would need to be retrained to bring a second line into operation. Boeing created a complex global supply chain for its 787 supply system intended to help the company escape rising labor costs. Instead, the system made it harder to control the production process as suppliers, such as Vought, hit bottlenecks.

Another factor at play, says Aboulafia, is the rapidly changing nature of aerospace production, which has seen an increasing emphasis on out-sourcing and away from a single regional work body.

"The production line is being hallowed out, diminishing the competitiveness of a trained workforce," says Aboulafia. "It used to be that having tens of thousands of machinists with that tribal knowledge of how to build a plane was overwhelmingly important. Because so much of the work is done elsewhere now, it's much less important."

Which is one reason that right-to-work states, which dominate the South and Southwest, could become such a greater player in aerospace production going forward.

"The automobile industry and the aircraft industries are not the same, but boy, it teaches you a heck of a lesson," says Aboulafia. "It's easier to train new people in a more favorable labor climate than it is to rely on skilled and experienced people in a terrible labor climate."

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