Monday, October 28, 2013

Boeing May Give South Carolina Plant a Bigger Role in Making New Jet: WSJ


The Wall Street Journal
By Jon Ostrower

Oct. 28, 2013 4:49 p.m. ET

Boeing Co. is evaluating whether to give its non-unionized South Carolina facility a bigger role in building the planned new version of its 777 long-range jet, according to industry officials briefed on the company's planning.

The plant, in the city of North Charleston, currently only builds sections and completes assembly for some Boeing 787 Dreamliners. Analysts have expected the site, which rolled its first finished plane off the line 18 months ago, would play a role in the 777X when that plane goes into production around 2017 or 2018, but that final assembly would be done at Boeing's huge facility in Everett, Wash.

However, Boeing is now evaluating using the South Carolina plant for both final assembly of the 777X and to build the jet's new carbon-fiber composite wings, according to two industry officials briefed on Boeing's development of the 777X. "South Carolina looks more and more promising," one of the officials said.

"We are studying our options," a Boeing spokesman said, adding that "777X production system decisions will be addressed at the appropriate time."

Boeing is nearing approval from its board of directors to formally launch the 777X, which is expected to start flying with airlines around 2020. The plane is expected to be a substantially updated version of its current 777—the company's best-selling large twin-engine jetliner—stretching its body and improving fuel efficiency by 20% over today's 777. The new plane is expected to hold 350 to 400 seats.

Assembling the 777X and its wings in North Charleston could mean the majority of Boeing's two most important twin-aisle manufacturing programs are in South Carolina, when combined with Boeing's plans to increase 787 production there by a further 40% by the end of the decade.

Assembly of the aircraft and the fabrication of its wings is one of the biggest aerospace industrial prizes in the U.S. since 2009, when Boeing selected North Charleston as its second final assembly line for the 787 Dreamliner, beating out its longtime manufacturing base in Washington state.

That expansion to South Carolina, a right-to-work state, triggered a row with its largest union, the International Association of Machinists and Aerospace Workers. The National Labor Relations Board alleged that Boeing was retaliating for a 2008 strike. The dispute was settled in 2011 after Boeing secured wage concessions from the membership and a contract extension to 2016 that keeps 737 Max assembly operations in unionized facilities.

A spokesman for the IAM in Seattle didn't immediately respond to requests for comment Monday.

Boeing is nearing completion of a deal to acquire around 270 more acres of land at the North Charleston site for $13.8 million, earmarked for future, unspecified "aircraft manufacturing," said Paul Campbell, Director of airports for the Charleston County Aviation Authority. The deal would more than double the current 240-acre site.

Boeing has built the existing 777 at its Everett, Wash., plant since the early 1990s. Initial manufacturing plans for the 777X had intended to use a factory bay there that is used today for the Dreamliner, according to three people familiar with those plans. That Dreamliner program is expected to stop using that bay in 2016, leaving it and a planned facility on the northern part of the Everett campus to build 777X's wings.

Along with North Charleston, S.C., and Everett, Wash., a third site in the U.S. Southwest is also being considered for 777X work, say two people familiar with the deliberations. Exactly where couldn't be determined.

Jay Inslee, Washington's Democratic governor, has been aggressively courting Boeing to land the 777X with a package of incentives, most recently proposing to extend tax breaks through 2040 that were first granted for the Dreamliner last decade, should Boeing choose to put both the wing and final assembly in the state. Labor and political officials say Washington state also offers a broader value for Boeing with a deep pool of experienced labor.

The South Carolina plant has had some hitches. Boeing initially planned to be building three 787s a month by the end of this year, but the new site wasn't prepared to make that jump and the company now expects to build two to three 787s a month there by year-end. The Everett plant will build eight 787 a month by year's end, relying further on its twin assembly lines. Boeing announced Wednesday it would accelerate total 787 production to 12 a month in 2016 and 14 a month before the end of the decade.

Boeing's sales teams are negotiating deals for 777X, aiming to win enough commitments to persuade its board to proceed with the plane's launch. It secured its first commitment for the 777X in September when Deutsche Lufthansa AG announced it would buy 34 of the 400-seat jets. It has been in talks with Emirates Airline for years on a deal that could be announced at the Dubai air show in November.


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