Boeing decided to locate a 787 Dreamliner plant outside the Seattle area to gain the upper hand with employee unions, concluding that goal trumped the new site's higher risks and expenses, corporate documents show.
Boeing decided to locate a 787 Dreamliner plant outside the Seattle area to gain the upper hand with employee unions, concluding that goal trumped the new site’s higher risks and expenses, corporate documents show.
Executives in 2009 assessed the idea of a new factory in Charleston, S.C., 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, are outlined in presentations submitted as evidence in a National Labor Relations Board suit against the company.
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.
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Adding the South Carolina plant “creates a nonunion, competitive labor choice, lowers labor costs and avoids current hostage situation,” Boeing said in the documents.
The union had struck three other times since 1989.
Boeing said Friday the documents confirm its stance that the move was the best option.
“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,” Tim Neale, a Boeing spokesman in Washington, D.C., said in a statement.
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 Friday 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.
Boeing says it never promised to build all the Dreamliners in the Puget Sound area.
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 union news conference Friday.
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 number planned in Charleston.
The hearing began in June, and lawyers are still wrangling before the judge over matters such as subpoenas and access, though some documents have been submitted.
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 its 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 plane-maker’s most important project, with orders valued at more than $152 billion at list prices and first delivery scheduled Sunday to All Nippon Airways of Japan.
Opening a plant in South Carolina, almost 3,000 miles 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.”
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.
Objectives of plant
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 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.
None of the documents 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.