Bloomberg News

Boeing Papers Say 787 Plant Site Gave Upper Hand With Labor

September 24, 2011

(Updates with additional Boeing comment in fifth paragraph.)

Sept. 23 (Bloomberg) -- Boeing Co. told directors two years ago that locating a 787 Dreamliner plant outside the Seattle area would help gain the upper hand with unions even as it brought extra costs and risks, corporate documents show.

Executives in 2009 assessed the idea of a new factory in Charleston, South Carolina as having the highest danger of failing and worst consequences if it did. Their findings on the new plant and a proposed second assembly line in Everett, Washington, are outlined in presentations submitted as evidence in a National Labor Relations Board suit against the planemaker.

The slides covered studies reviewed by Boeing’s board starting in April 2009, five months after a two-month strike by Machinists, and detail the company’s plans to build a commercial-jet assembly line outside of Washington state for the first time. The union had struck three other times since 1989.

Adding the South Carolina plant “creates a non-union, competitive labor choice, lowers labor costs and avoids current hostage situation,” Boeing said in the documents.

Boeing said today the documents underscore its stance that the move was the best for the Chicago-based company.

“Far from supporting the NLRB’s claims, these documents confirm what Boeing has said from the outset,” Tim Neale, a spokesman in Washington, D.C., said in a statement. “We made a legitimate business decision based upon a variety of factors, including the need to ensure our future competitiveness and provide delivery stability for our customers.”

Retaliation Claim

The new plant, which opened in June and will produce its first 787 next year, is at the heart of the NLRB’s claim that Boeing illegally retaliated against striking unions. The case is being heard before an administrative law judge in Seattle, and some related documents were released today by the Machinists union.

The presentations show that as of April 2009, five months after the last strike was settled, Boeing had already started “Project Gemini” as a “solution for establishing long-term manufacturing capability outside of Puget Sound, starting with a second 787 final assembly line and progressing to the next new airplane program.”

That was three months before the union says it had any inkling that the 787 assembly work wasn’t guaranteed for Everett, since Washington state had approved a $3 billion tax- incentive package to secure the production line in 2003. There had been “low-level talks” about fitting a second line in the Everett factory in 2007, before the 2008 strike, said Bryan Corliss, a Machinists spokesman.

‘Already Hearing It’

Boeing says it never promised to build all the Dreamliners at the manufacturing hub, which was established when Bill Boeing formed the planemaker on the shores of Seattle’s Lake Union in 1916.

The NLRB investigated, at the Machinists’ behest, and accused Boeing in April 2011 of violating employees’ federally protected right to strike, saying public comments made by executives showed the decision was meant to chill future walkouts.

“I’m already hearing it from managers on the line, saying ‘Hurry up and get it done; if you don’t get it done, we’ll move this to South Carolina,’” Patrick Bertucci, a fuel-cell mechanic on the 737 program, said at a press conference hosted by the union today.

The NLRB is demanding that Boeing provide restitution by adding another line at its Everett plant to produce an additional three 787s a month -- the same amount planned in Charleston.

The hearing began in June, and lawyers are still wrangling before the judge over pre-evidentiary matters such as subpoenas and access, though some documents have been submitted.

Boeing Production

The company has continued to hire union workers in the Seattle area, adding more than 4,000, since deciding on the second plant, Boeing said in the statement.

The union has said those workers are mainly on other programs as Boeing boosts production to a record over the next three years, and that 1,800 to 3,000 of them will be fired once a temporary second line is shut down in mid-2014.

Boeing is trying to ramp up production on its two new jets after delays that have grown to three years for the 787 and two years for the 747-8, the latest version of Boeing’s largest plane. The smaller, composite-plastic 787 is the planemaker’s most important project, with orders valued at more than $152 billion at list prices.

Opening a plant in South Carolina, almost 3,000 miles (4,800 kilometers) away from the original line and its experienced workers in Everett, “risks achieving timely rate requirements,” Boeing said in an August 2009 presentation. At the same time, keeping the work in Everett “would not create long-term change in union leverage.”

Republican Support

The documents also cite gaining “important political support from a key state” as a goal with the new factory. With the backing of South Carolina’s Republican governor, Nikki Haley, the plant has become a litmus test for Republican presidential candidates and congressional delegations over their support of businesses’ rights.

Three objectives for the South Carolina plant were given in an Oct. 19, 2009, presentation, just before Boeing’s board approved the facility. The first two were regaining a reputation for reliability and improving cost competitiveness.

Some Boeing customers had threatened to consider buying jets elsewhere in the future, after deliveries were held up during the 2008 strike. And Boeing is facing rising competition as companies in countries including China, Canada and Brazil enter the commercial-jet market.

The third objective was to “leverage 787 final assembly placement decision by rebalancing an unbalanced and uncompetitive labor relationship.”

Startup Costs

Startup costs in South Carolina, where the company had to clear swampland to build a new factory, would be “significantly greater” than the expense of increasing capacity in Everett, the presentation notes.

Boeing Commercial Airplanes President Jim Albaugh, in a presentation on Oct. 26, 2009, two days before the decision was announced, said the Charleston plant would cost $1.5 billion in cash and would reduce earnings on one third of the 787 backlog.

That’s about how many of the 821 planes on order are expected to be built at the facility once total production ramps up to 10 a month. The documents don’t provide specific cost estimates for adding capacity in Everett. Many financial figures were considered proprietary and blacked out by Boeing lawyers.

‘Payback’ Strike

None of the documents released today mentioned past strikes. One cites the possibility of a “payback” strike in 2012, when the Machinists’ contract expires, as being a high risk in locating the new plant in Charleston.

South Carolina is among the least-unionized states, with 6 percent of workers covered by collective bargaining in 2010, compared with 21 percent in Washington, according to U.S. Census data. A “right-to-work” state, South Carolina forbids requiring union membership as a condition of employment.

The national average for union membership is 12 percent. About 36 percent of Boeing’s 157,000-person global workforce belongs to unions.

--Editors: James Langford, Ed Dufner

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


Hollywood Goes YouTube
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus