Even as Boeing announced it will open engineering centers outside the Puget Sound region, aerospace-industry players here insisted Friday that Washington state will remain the jet-maker’s core engineering base for the foreseeable future.
Boeing said it will transfer a chunk of engineering work employing some 300 people from Tukwila to Long Beach, Calif., and will create engineering centers for future work in South Carolina and possibly in Kiev, Ukraine.
“It doesn’t mean the sky is falling. They are not leaving. They are just diversifying, “ said Alex Pietsch, who heads Gov. Jay Inslee’s aerospace office.
“It’s the nature of the industry and the way things seem to be going,” he added. “But Boeing is continuing to invest in both Everett and Renton.”
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Pietsch cited Boeing’s newly opened $150 million airplane-delivery center in Everett — for a total of $1 billion invested in Everett’s widebody assembly plant over the past five years — as a reason to be confident. The plane-maker also spent $250 million over the past two years revamping the Renton single-aisle plant to increase production.
John Monroe, a former Boeing executive and an economic-development consultant to Snohomish County, pointed out that the work going to Long Beach — engineering support for airlines that fly out-of-production airplanes, such as older 737 classics and 757s — is by definition not cutting-edge.
“I’m not one of those that thinks 100 percent of the work has to be done in Washington state,” Monroe said. “It’s a balance.”
Certainly, the biggest winner in Boeing’s rebalancing is North Charleston, S.C.
Boeing said it will establish a propulsion operation there to design and assemble the engine nacelle inlet for the 737 MAX.
Goodrich performs the corresponding work on the current 737NG, so this move is not a shift of work from here.
However, Boeing said the South Carolina propulsion operation will “expand strategically on future airplane programs.”
All of Boeing’s in-house commercial jet-propulsion work is done today in Everett.
Boeing also said it will open an engineering-design center in South Carolina.
“The new centers will add internal capability and capacity in both engineering and propulsion as the company scales up to meet unprecedented demand,” the company said.
In April, Boeing announced a further $1 billion investment in North Charleston, following the jet-maker’s earlier purchase of 320 acres of land adjacent to its existing 265-acre factory site where big 787 fuselage sections are fabricated and complete jets are assembled and delivered.
At the same time, Boeing obtained rights to 500 acres nearby.
Scott Hamilton, an Issaquah-based aviation-industry analyst with Leeham.net, said Boeing is “not buying that land to preserve trees.”
“They are buying it to expand,” Hamilton said. “Boeing is going to make Charleston a major aerospace cluster.”
Still, he said the enormous growth projected in the airline business, with the world’s jet fleet expected to double in the next 20 years, “can support two aerospace clusters.”
“I don’t think Everett has any near-term, or even midterm, threat to it,” Hamilton said.
Boeing’s announcement also reflected a possible shift of work outsourced to overseas engineers.
The engineering union here — the Society of Professional Engineering Employees in Aerospace (SPEEA), which represents nearly 26,400 engineers and technical staff — has long decried Boeing’s outsourcing of engineering work to its design center in Moscow.
Boeing internal documents obtained by The Seattle Times in 2004 after the Moscow center was set up show the company could employ high-quality Russian engineers there at “approximately 1/3 to 1/5 of the U.S. cost.”
Friday, Boeing said it is exploring opening a new engineering-design center in Kiev, Ukraine, to provide support to Moscow, which employs about 1,200 people.
Boeing spokesman Doug Alder said many of the Moscow employees are Ukrainians who wish to return to Kiev and that a potential site in Ukraine might “better retain employees in that region.”
“The head count between Moscow and Kiev would still be 1,200,” Alder said.
Mike Delaney, Boeing’s vice president of engineering, in a media release announcing the engineering centers said the company intends to build its capabilities “across Boeing, the United States and around the world.”
Boeing’s moves Friday followed extended negotiations with SPEEA that ended with a new contract in March.
Last October, Delaney warned publicly that if the union forced an expensive contract, the company would inevitably move engineering work out of the Puget Sound region.
“It won’t be fast,” Delaney said then. “But slowly over time, if you become uncompetitive, you have to deal with the arbitrage and leverage other resources.”
Soon after the SPEEA contract was finalized, Boeing announced it would cut a small group of union pilot instructors, moving its work to Miami.
Then in April, the Commercial Airplanes unit announced it will reduce its engineering staff here by up to 1,700 positions by the end of this year.
“Die was cast”
Analyst Hamilton said “the ink was barely dry on the paper when the first layoffs were announced for SPEEA and the first jobs were moved elsewhere.”
Yet he said the union’s stance in those negotiations probably wasn’t decisive. He thinks Boeing Chairman Jim McNerney was already determined to transfer work.
“That die was cast,” Hamilton said. “Jim McNerney does not like Washington state. He doesn’t like unions. SPEEA could have got down on its knees and genuflected to Chicago, and they would still have moved jobs out.”
Union spokesman Bill Dugovich declined to comment on Friday’s announcement, saying there were new details in Delaney’s internal message to employees that the union’s executive board needs to discuss.
The internal message cited three specific motivations for creating the new engineering centers:
“First, they will enable us to use Boeing engineering capability more strategically across the company. … Second, they provide greater geographic distribution of work within Boeing. … Third, the centers also enhance Boeing’s ability to attract, develop and retain a talented engineering workforce by opening career paths in multiple locations,” Delaney wrote.
He made no mention of the fact the Long Beach and South Carolina sites are nonunion.
Friday’s announcement is the latest wave in a flood of negative news this year about local Boeing employment.
Before the April announcement concerning elimination of 1,700 jobs, Boeing announced in March it would cut some 2,000 to 2,300 machinist jobs this year, through attrition and about 800 layoffs.
In May, Boeing said it will shed 1,500 information-technology positions in the Puget Sound region over the next three years, transferring some of that work to St. Louis, Mo., and North Charleston.
Pietsch, director of the state aerospace office, said the harsh reality of the aerospace business is that “we need to work even harder to ensure that many of the jobs of the future are created here.”
He said Inslee, who has released a strategic plan to secure Washington’s aerospace future, has scheduled a meeting with McNerney at the Paris Air Show this month.
“The governor is eager to have it,” said Pietsch.
Dominic Gates: 206-464-2963 or firstname.lastname@example.org