Friday, September 23, 2011

Boeing Papers Show South Carolina 787 Site Picked to Gain Edge Over Unions

Boeing Co.  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 assessed the idea of a new factory in Charleston, South Carolina as having the highest danger of failing and worst consequences if it did in 2009. Their findings on the new plant and a proposed second assembly line in Everett, Washington, are outlined in documents submitted as evidence in a National Labor Relations Board suit against the planemaker.

The documents 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. The union had struck three other times since 1989.

Adding the South Carolina plant “creates a non-union, competitive labor choice, lowers labor costs and avoids current hostage situation,” Boeing said in the documents.

The new plant, which opened in June and is set to produce its first 787 next year, is at the heart of the labor board’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 by the Machinists union today.

They 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.”

Washington Incentives

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.

Boeing says it never promised to build all the Dreamliners at the manufacturing hub, which was established when Bill Boeing formed the company on the shores of Seattle’s Lake Union in 1916. The company has said its decision to branch out geographically was made to boost its competitiveness.

The NLRB investigated, at the Machinists’ behest, and accused Boeing in April of violating employees’ federally protected right to strike, saying public comments made by executives showed the decision was meant to chill future walkouts.

The agency is demanding that Boeing provide restitution by adding another line at its Everett, Washington, plant to produce an additional three 787s a month -- the same amount planned in Charleston.
Boeing Production

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 planemaker’s most important project, with orders valued at more than $152 billion at list prices.

The factory in question has also drawn support from Republican presidential candidates and congressional delegations citing support for businesses’ rights. The Republican-controlled U.S. House of Representatives passed legislation last week, prompted by the Boeing case, that would curb the NLRB’s powers to punish companies violating federal labor laws.

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.
‘Unbalanced and Uncompetitive’

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.

‘Payback’ Strike

None of the documents released today mentioned past strikes. One cites the possibility of a “payback” strike in 2012, when the Machinists’ contract expires, as being a high risk in the decision for the new plant.

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 so-called right-to-work state, South Carolina forbids requiring union membership as a condition of employment.

The national average for union membership is 11.9 percent. About 36 percent of Boeing’s 157,000-person global workforce belongs to unions.

http://www.bloomberg.com

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