Sven as thousands of workers gathered in the rain outside Boeing's Everett factory to celebrate delivery of the first 787, legislators, union leaders, and other local boosters hoping to keep Boeing production lines and their thousands of middle-class jobs here in the Puget Sound region had reason to lose heart. New documents released last week revealed "Project Gemini," the aerospace giant's long-term strategy to move production out of state.
Obtained under subpoena, the documents reveal that the supposed "competition" between Everett and Charleston, South Carolina, for the second 787 assembly line—which opened in Charleston in June after years of controversy—was anything but a competition. The various pros and cons, and risks and benefits, listed throughout the documents are consistently lopsided in favor of keeping 787 assembly in Everett.
Boeing determined that choosing the Everett line would result in lower start-up costs, faster ramp-up, higher productivity, and a simplified supply chain, whereas a Charleston line would introduce further production delays, dilute workforce skills, and result in a "negative impact to 787 program profitability." That is, moving the line would cost $1.5 billion up front, plus reduced earnings on one-third of the 787 backlog, according to Boeing's own internal numbers. The only consistent advantage attributed to Charleston was the ability to "leverage" the site placement decision toward "rebalancing an unbalanced and uncompetitive labor relationship."
In other words: sticking it to the unions.
The documents were obtained by the National Labor Relations Board, which has charged Boeing with illegally retaliating against the machinists union by moving production to Charleston explicitly in response to prior strikes. Boeing did not reply to a request for comment, but in a prepared statement, Boeing claims the documents show they "made a legitimate business decision based upon a variety of factors, including the need to ensure our future competitiveness."
But if Boeing's board was making a business decision, rather than an ideological or emotional one, the choice was obvious: A second Everett line would save the company billions of dollars and months if not years of delays, resulting in higher productivity, higher quality, and higher profits.
Unless, of course, the main "rationale" driving Chicago-based Boeing's decision-making was never higher productivity, higher quality, and higher profits, but rather, as the documents enunciate, to create "a non-union, competitive labor choice" that "lowers labor costs and avoids [the] current hostage situation." Indeed, the documents make clear that the goal of Project Gemini was never as much to speed up production and improve profitability as it was to "create long-term change in union leverage." Right at the top of the first Project Gemini document, dated April 27, 2009, Boeing clearly states its strategy and purpose: "Establishing long-term manufacturing capability outside of the Puget Sound, starting with a second 787 final assembly line and progressing to the next new airplane program."
"Boeing is not creating new jobs in Charleston," says Machinists Union Local 751 spokesman Bryan Corliss. Boeing already assembles 787s on a second "surge" line in Everett, but when that closes in 2014, Everett is projected to lose between 1,800 and 3,000 jobs. And the "next new airplane program" Project Gemini talks of moving is the soon-to-be re-engined/rebadged 737 MAX, currently built in Renton. "They are moving jobs from here to South Carolina," insists Corliss. And the numbers back him up.
Which raises the question: Are Washington taxpayers getting their money's worth? In 2003, the legislature granted Boeing a $3.92 billion, 20-year tax-incentive program in order to keep 787 production in the state.
"Legislators never dreamed that they didn't secure all of 787 final assembly," said the Machinists' Connie Kelliher, who worked closely with the legislators who negotiated the package. Boeing benefited from $62 million in B&O tax reductions in 2010 alone—money that would sure come in handy during the special session this fall, as the legislature struggles to close yet another $1.4 billion revenue shortfall.
So if Boeing won't keep its end of the bargain, isn't it time for cash-strapped state budget writers to ask, "Why should we?"