Judging from the early returns, the Boeing Company’s 777X will be a hit, garnering hundreds of advance orders by combining fuel-efficient materials and technology with a popular existing-plane design.
Now, for the United States, comes the crucial question: Where will it be built?
In a decision with implications for the country’s top export industry, a dispute between Boeing and the machinists union at the company’s traditional base in Washington state has put the 777X up for grabs – not just among competing states, but among countries such as Japan with the expertise to build the plane’s most sophisticated components.
That there is even a discussion is a sign of change in an industry that is increasingly willing to spread production away from legacy manufacturing plants. South Carolina and Alabama have built burgeoning aerospace hubs with the lure of a union-free, “right-to-work” atmosphere, while Boeing’s 787 Dreamliner is built in pieces around the world.
Companies such as Europe’s Airbus also have moved production away from long-standing sites, potentially putting the aviation industry on the same path that other manufacturers have followed by spreading supply chains around the world, relying more on subcontractors and reducing their reliance on any particular pool of labor.
As company officials revel in the pace of orders for the 777X, “I don’t think there is any confidence at all” about where Boeing will build the plane, and in particular its massive, high-tech wings, said Dan Swank, a union steward with the International Association of Machinists District 751 . “They may hate the union badly enough” to take the work elsewhere, he said.
Boeing has said it would decide by early next year how to organize production for the 777X, a next-generation version of the 777 airliner that is the workhorse of many international carriers.
The recent Dubai Airshow emphasized the plane’s appeal. Boeing received orders for as many as 200 of the jets — which cost about $350 million each — from fast-growing United ArabEmirates Airline alone, a company that has tapped economic growth in Southeast Asia and positioned Dubai as a global transit point. Emirates and two other Gulf-based carriers — Qatar Airways and Etihad Airways — are fueling what Boeing and industry analysts forecast as booming demand for perhaps 35,000 new planes over the next 20 years.
That should be good news for the United States. Boeing is a top global aerospace company and is perhaps the largest single exporter in the country. Its non-U.S. sales last year exceeded $44 billion, more than half of total revenue.
But, as Washington state officials note, recent developments in the industry mean that the location of the associated jobs is no longer a certainty. In an earlier era, said Alex Pietsch, director of the state’s Office of Aerospace, companies like Boeing concentrated production in locations where they were near key suppliers, a trained labor force and adequate ports and other infrastructure.
But look to Alabama, where there’s a final assembly line for Airbus taking shape in Mobile. Major components of Boeing’s Dreamliner are built in Japan and Italy, then sent to South Carolina and Washington state for final assembly.
The dispersion of Dreamliner production has not been problem-free. The South Carolina plant has not reached the production levels Boeing expected, and problems throughout the supply arrangement added to long delays in delivery of the first planes. Even as the Dubai Airshow orders tumbled in, Boeing’s customers urged the company to avoid a repeat of those problems as they organize for the 777X, scheduled for first delivery in 2020.
Despite the hiccups, the Dreamliner added to the sense that airplane companies were becoming as mobile as the next guy.
“The world has changed,” Pietsch said. “Now we are trying to see how we compete. If 50 governors could [vie for the work], they would. . . . In Nagoya [Japan] there is certainly strong interest — if not to build the whole thing then to have a significant role.”
In an effort to keep the 777X in-state, the Washington legislature at Boeing’s request extended tax breaks worth billions of dollars over the next 17 years and promised new investments in roads, worker training and some other infrastructure.
Discussions with the union did not go as well.
Boeing said it was willing to place the entire 777X project in Washington state. That would basically guarantee many of the jobs for the 3,000 or so people who work on the existing 777 models. Perhaps more importantly, it would mean adding the production lines and next-generation technology needed to build the plane’s wings — redesigned, foldable and made of the lightweight composite material used on the Dreamliner. The Dreamliner’s wings are built in Japan, and bringing that technology back to the United States was considered a plus for the workforce.
For that offer of job stability and the wing construction, the company wanted to reduce annual raises and cut pensions.
At a machinist’s local whose 33,000 members have been willing to strike twice in the past eight years to protect benefits, there was no contest: the proposal failed by a 2 to 1 margin.
Swank said there has been some local consternation from non-machinists who feel job stability at Boeing is important for the state as a whole: The company employs 84,000 people in Washington, more than twice as many as the state’s other corporate titan, Microsoft.
Among machinists, the offer was considered an insult from a profitable company that, given the problems with the Dreamliner, should be more appreciative of local aerospace talent.
“Does it make sense to build it elsewhere? No,” Swank said.
Some industry analysts agree and argue that Boeing may in the end hold to its roots. Whatever misgivings the company has about its union relations, the Puget Sound’s deep-water ports, the depth of local skills and the difficulties with the Dreamliner argue in favor of keeping the 777X close to home, said Richard Aboulafia, a vice president and aviation expert at the Teal Group consulting firm.
As a top U.S. exporter approaches its decision, “I don’t know what scares me more — the possibility that they see the advantages of Washington state but choose to alienate the union, or that they don’t see it and will take a chance on a completely new site with a much higher level of risk,” Aboulafia said.