Boeing CEO: Puget Sound too Expensive for Boeing

[The Tim]

[Tejas]

Saber rattling in the midst of a labor negotiations. Nothing more.

Not to say that Boeing does relish the idea of lowering cost by moving or outsourcing; but they would never says so "for real". This is just stepping up the pressure of public opinion and an attempt to weaken the resolve of the rank and file.

[rose-colored-coolaid]

It's a little of both. The US south is cheaper, and Boeing is now a Chicago based company not a Seattle one. The brass have no real goal of staying in Seattle, but it's not cheap to move such massive operations. You either need to move people, or train new ones.

Face it, Seattle now has similar business costs to Chicago, LA, Boston, or D.C, and we're one step below NYC or San Fransisco for property/labor costs. When you do that, you can now only compete for jobs at the top of the food chain (Financials, Managerial, maybe Engineering). Unless this bust changes things, Seattle no longer makes sense as a place to manufacture anything. This is going to surprise a lot of people.

So, long term outlook in Seattle is probably not so great, but short term this is just the CEO telling the union they can shove it on their demands. What he left out is that Boeing helped create competition in Asia by giving away wing models, but he's right that you can't follow the example of Detroit if you want to remain competitive in a global marketplace.

[WestSideBilly]

I read it a bit different. Boeing wants it settled ASAP, but they want it on their terms.

It's no secret that corporations don't like unions. This is a horrible time for IAM to strike from Boeing's perspective, and the management team has been playing the PR game for 3 or 4 months now, hoping to capitulate IAM into taking the contract Boeing wants. And yes, that contract includes language that allows them to outsource more of the work and have those outsourced companies do their assembly in Renton/Everett.

As for moving manufacturing out of the Puget Sound, I don't really see it as viable, at least not without bankruptcy being involved or capitulating the unions. Moving corporate to Chicago is easy; office space in Chicago is the same as office space in Seattle, and most of the "knowledge" in running a business is easily replaceable in a big city. The facility in Everett would probably cost a $1-2B to duplicate; plus you need to find 30,000 people to do assembly, train them, etc. Even with generous incentives, Boeing would be lucky to have 20% transfer. The loss of knowledge would cripple the company for a decade at least, which would be long enough for EADS, Embraer, the Chinese companies, etc all take over the 737 market and figure out carbon fiber to wipe out the 787.

FWIW, with respect to outsourcing, most of the delays of the 787 are directly related to having companies who've never built an airplane trying to build an airplane. That, and a ludicrous time frame from the outset.

[rose-colored-coolaid]

Agree that replication from scratch is too expensive. But Puget Sound isn't the only Boeing location. They have sites in the south that already do maintenance and some manufacturing.

I could see Boeing slowly expanding those sites while slowly making Puget Sound smaller. If you move in 2 years, it is catastrophic. If you move in 20, the knowledge transfer is much more tenable.

[TJ_98370]

WestSideBilly said:
.
....And yes, that contract includes language that allows them to outsource more of the work and have those outsourced companies do their assembly in Renton/Everett.
.
I have no special knowledge of the situation, but judging from what I am hearing, outsourcing is a major sticking point, if not THE sticking point, hindering strike resolution. If true, these people are fighting for their jobs. How can you fault them?
.

[jon]

"If true, these people are fighting for their jobs. How can you fault them?"

Their jobs are not in any kind of danger unless their salary demands get out of line. They are going after more union power by preventing Boeing from shifting to other areas where workers are less inclined to value union power.

[WestSideBilly]

[WestSideBilly]

[WestSideBilly]

[rose-colored-coolaid]

[cheapseats]

It is not just the south that is cheaper, Michigan and Ohio have quite a few auto workers who have learned what the Unions could really do for them, the hard way. I have no idea about the similarity of the two workforce requirements, but I would guess there will be lots of municipalities lobbying Boeing hard for relocation if they get serious about it. Have you seen the cost of living in the rust belt lately?

[WestSideBilly]

I really don't know how many planes are parked inside at any given time. Boeing has some pictures of 4 747s inside, and they can produce 6 or 7 in a month... So 10 days to build one? Are there enough gains to get that down to 2.5 days so you only need to park one inside each location? I don't know. Seems like a long stretch. And with 4 in-production models, that's a lot of buildings and work forces.

#2 is basically what's going on with the 787, and I would imagine more so for future planes depending on contracts and how well the 787 works out. Final assembly is still in Everett, but most of the major chunks of the plane are made elsewhere. And based on the string of delays, it doesn't seem to be a very efficient process. In theory it'd be fairly easy to up and move 787 production anywhere you could have a sufficiently large building adjacent to a 6000' runway - sans the total loss of knowledge.

[rose-colored-coolaid]

WestSide, #1 is actually a 787 aspect as well. I don't recall the exact assembly time, but it's supposed to be in the neighborhood of two weeks once production is fully ramped up. 100 days is probably an exaggeration of current assembly times, but I believe it is at least a couple months. They might not be able to make the 747 or other legacy planes as lean as the 787, but this will have an impact on the workforce in Seattle. Either the productivity gains will mean more better paying jobs (as we sell more planes) or it will mean fewer better paying jobs (as we make those working more efficient).

[WestSideBilly]