Boeing is moving its corporate headquarters from Chicago to the Washington, D.C., area, the company announced Thursday.
In a statement, Boeing CEO Dave Calhoun said the move to the company’s existing government relations campus in Arlington, Virginia, “makes strategic sense … given its proximity to our customers and stakeholders.”
The shift to the D.C. area moves Boeing’s top leadership close to key government officials and lawmakers in the nation’s capital.
Arlington is the home of Boeing’s major customer on the defense side: the Pentagon.
And following the tightening of government safety oversight after the MAX crashes, the commercial airplanes division increasingly must work closely with Federal Aviation Administration leadership in D.C. and with lawmakers in the U.S. House and Senate.
The choice of Virginia dashes the hopes of many in the Pacific Northwest that Boeing, facing a litany of troubles that have sunk the company’s fortunes, might consider moving back to Seattle.
Aviation analyst Richard Aboulafia, of Aerodynamic Advisory, said the FAA would have been more impressed by a return to Seattle, signaling a focus on fixing the huge challenges Boeing faces in its major business of making commercial airplanes.
“Boeing’s problem is not with government relations,” he said. “I don’t see doubling down the emphasis on D.C. lobbying as a breakthrough moment. It looks like a recipe for more of the same.”
“Boeing’s pressing need is to restore technical excellence in its most important and neglected business unit, commercial airplanes,” Aboulafia added. “A move back to Seattle would have sent an incredibly powerful message. This is a missed opportunity.”
U.S. Rep. Peter DeFazio, D-Ore., chair of the House Committee on Transportation, agreed, calling the headquarters move to Arlington “another step in the wrong direction.”
“Boeing’s problem isn’t a lack of access to government, but rather its ongoing production problems and the failures of management and the board that led to the fatal crashes of the 737 MAX,” DeFazio said in a statement. “Boeing should focus on making safe airplanes — not lobbying federal regulators and Congress.”
A former senior Boeing executive, who asked for anonymity to maintain relations with those inside the company, questioned the timing of the move.
“Now is the time when the company ought to be thinking of getting back to its roots,” the executive said. “Making an announcement now that has nothing to do with running the company or fixing its problems is puzzling.”
Easing the decision, which was first reported Thursday morning by The Wall Street Journal, the tax incentives the city of Chicago provided Boeing for going there expired in 2021.
In addition, the Chicago office tower headquarters has been largely empty for the past two years during the COVID-19 pandemic as top leaders and most of the staff worked from home and held virtual meetings.
The pandemic’s massive impact on the company’s business has forced Boeing to sell off real estate, including the Boeing commercial airplanes headquarters in Renton, and to implement virtual work options for many white-collar employees.
Calhoun said part of the context for the move is Boeing “taking steps to be more efficient within a reduced footprint.”
Adding engineers in D.C.
Boeing said that in addition to setting up its global headquarters in Arlington, it also “plans to develop a research & technology hub in the area to harness and attract engineering and technical capabilities.”
That hub will work on “innovations in the areas of cyber security, autonomous operations, quantum sciences and software and systems engineering,” Boeing said.
“The future of Boeing is digital,” said Greg Hyslop, Boeing executive vice president and chief engineer, who added that the company is banking on digital innovation to fuel the new, cutting-edge capabilities.
“This new hub in Northern Virginia will follow the successful implementation of this technology strategy in other regions,” he said.
Ray Goforth, executive director of Boeing’s white-collar union, the Society of Professional Engineering Employees in Aerospace, said this continues the company strategy of geographically dispersing its engineering talent.
In addition to the Puget Sound region, Boeing now has engineering hubs in North Charleston, South Carolina; St. Louis; Seal Beach, California; as well as India. Its engineering centers in Moscow and Kyiv are currently closed due to the war in Ukraine.
With aviation beginning to recover from the pandemic downturn, Boeing has been aggressively hiring. Union data shows the company added 446 local SPEEA engineers since the middle of last year.
While Goforth acknowledges that there is a lot of engineering and technical talent in Virginia, close to the Pentagon, he said Boeing’s strategy of separating engineers from where the products they design are manufactured hasn’t worked out well.
“The engineers lose the interactions with those who face the day-to-day problems,” he said. “Time has shown, you lose some fidelity there.”
Chicago move a failure
Boeing’s move to Chicago in 2001 from its historical Seattle location ripped apart the company’s legacy in the Pacific Northwest.
The decision to leave Chicago makes clear that move 21 years ago has proved a major flop.
There was never any real rationale offered for choosing Chicago that made sense for the company’s business. Boeing’s then-CEO, Phil Condit, and its president, Harry Stonecipher, said at the time they wanted the headquarters relocated to a city set apart from Boeing’s main business units.
Aboulafia ridiculed the notion that such corporate separation, pioneered by Jack Welch at GE, would lead to clear-eyed investment decisions.
“Let’s move somewhere unconnected with our business and our customers. What could go wrong?” he said derisively.
Chicago won against bids from Denver and Dallas. Boeing insiders said later it appealed to the egos of Condit and Stonecipher as a major city of commerce with a macho, steakhouse culture for executives. The city’s offer of as much as $20 million in tax incentives over two decades sealed the decision.
The new headquarters quickly was seen as an ivory tower, separated from the realities and complexities of the work that produced the airplanes and the technology that determined the company’s fate.
The skyscraper location in downtown Chicago was also a corporate aerie that separated the top executives from their employees.
Many in the Pacific Northwest and elsewhere grew alienated by what they saw as cold decisions about their lives made from afar without much apparent concern about the consequences for individuals.
With the succession of missteps by Boeing’s leadership in the past three years, that distance from the work began to look increasingly untenable.
With the real work of building aerospace products done elsewhere around the country, only just over 400 people out of a total Boeing workforce of more than 140,000 are based in Chicago, many of them working remotely.
Boeing said the Chicago head count won’t decrease a lot as the top leaders and their administrative staff head to D.C. And with many of those in Chicago working remotely on a permanent basis, Boeing said it will give up some floors of the building it occupies.