Boeing Warns It Could Build 777X Outside Washington State: Company Says it May Have No Choice But to Open Up the Process Competitively

The Wall Street Journal

By  Jon Ostrower

Nov. 8, 2013 3:07 a.m. ET

Boeing Co. warned that it could look to build its planned 777X jetliner outside Washington state, amid signs of union resistance to a proposed contract designed to keep the production work at the aerospace giant's traditional manufacturing base.

The Boeing statement late Thursday came after members of the International Association of Machinists and Aerospace Workers, which represents more than 33,000 Boeing employees, met with their union leaders in Seattle to discuss a proposed contract from Boeing. That contract, and a package of state government incentives that the legislature is considering, are aimed at getting Boeing to build the 777X at its unionized plants in Washington.

Union members in recent days had criticized the proposed eight-year deal, which seeks significant concessions from the union, and local media reports of Thursday night's meeting, and a person briefed on its contents, said resistance there to the contract was strong.

A Boeing spokesman said the company "chose to engage in Puget Sound first" over where to build the 777X. "But without full acceptance by the union and legislature, we will be left with no choice but to open up the process competitively and pursue other options for locating the 777X work," he said in an emailed statement.

Representatives for the machinists union, known as the IAM, didn't immediately respond to requests for comment.

The 777X, a long-range jetliner scheduled to start commercial deliveries around the end of the decade, is likely to be the last major new jet from Boeing for many years, and there has been intense speculation over where the plane and its huge carbon-fiber composite wings would be built. Boeing recently opened a nonunion factory in South Carolina that is also considered a contender for the work.

Thursday's Boeing statement and the union meeting marked a stark contrast to the optimism on Tuesday, when union officials stood with Washington Gov. Jay Inslee and Ray Conner, chief executive of Boeing's commercial airplanes division, at a news conference to announce the proposed contract and incentives package.

Mr. Inslee at the event urged legislators to approve his proposed tax breaks and infrastructure spending, which his office valued around $18.7 billion, saying both the incentives and ratification of the contract were necessary for Boeing to commit to build the 777X in the state. The state legislature is now considering the incentives.

The proposed contract would cover the period from the end of the IAM's current deal in 2016 to 2024. It entails labor concessions including shifting from a defined-benefit pension system to a defined-contribution system and significantly shifts health care costs to members. Those have rankled some members, who have also complained that they felt Boeing issued an ultimatum rather than negotiating.

At Thursday's meeting of stewards and rank-and-file members at the Seattle headquarters of the IAM's local chapter, more than 100 attendees expressed their ire at the proposed contract, said the person briefed on the meeting.

The Seattle Times reported that the union's leadership may seek to cancel the Nov. 13 vote. That couldn't immediately be verified.

The Boeing spokesman, Marc Birtel, declined to comment on the meeting and said the union hasn't informed the company of any changes to its plan next Wednesday. But Mr. Birtel said that if the contract isn't ratified "per the scheduled vote on Nov. 13," Boeing "will begin taking the next steps" to consider other locations for the 777X. 

Source:  http://online.wsj.com