The Boeing Co. -- Wandering Eye -- Aerospace Company May Be Rethinking Commitment To The Puget Sound Area
When McDonnell Douglas said it planned to build a new airplane assembly plant outside crowded Southern California, nine communities rushed to offer hundreds of millions of dollars as incentives to snag the facility and the jobs it would create.
But when Boeing announced last year it would build its new 777 jetliner in Everett, local interest groups and government agencies demanded that the company mitigate the expected congestion and growth by paying for everything from better roads to low-income housing.
The final tab: $50 million, on top of the estimated construction cost of $1.6 billion. In Tacoma, where officials lobbied Boeing for years to bring jobs, the mitigation cost is $4.2 million.
Not only that, Boeing has been faced with costly delays in getting permits. And costs for land in the Puget Sound area capable of accommodating large manufacturing facilities have risen sharply as available sites have disappeared.
Meanwhile, planners looking for ways to bolster the state's ailing budget are quietly considering ways to make Boeing pay a bigger share of taxes.
It all appears to be giving Boeing, this area's largest private employer with a statewide work force of more than 105,000, reason to rethink its commitment to the Puget Sound region.
Serious talk is emerging, here and elsewhere, about the likelihood of Boeing building its next plane - possibly a 650- to 800-seat jetliner - someplace other than here. Wichita, Kan., is the frontrunner.
And one of Boeing's newest projects - a wind-tunnel complex worth hundreds of millions of dollars - will be built elsewhere; five out-of-state communities have been chosen as finalists. That decision came despite an available site here and a promise from City Light of adequate power for the energy-intensive facility.
No one is talking about moving existing Boeing operations elsewhere, or of scaling back the company's 777-expansion program in Everett and in Frederickson, in Pierce County. Rather, it is Boeing's future expansion that is more in doubt.
FIRST HINT OF CHANGE
One of the first signs of Boeing's changing posture about future growth in the Puget Sound region came almost as a postscript during a speech in September by Boeing Chairman Frank Shrontz.
At the end of an 11-page speech to the Greater Seattle Chamber of Commerce, Shrontz complained about the rising costs of doing business here, and said, "My point is not to revisit our recent business decision to expand in Puget Sound, because there were a number of good business reasons for doing so. But the necessity to stay competitive in the world market demands that we consider these costs as a significant factor in our plans to accommodate additional growth."
He cited studies indicating it is 30 percent to 40 percent cheaper for Boeing to build new facilities in Wichita or in Huntsville, Ala., where it already has plants.
His comments might have seemed offhanded, and some even thought he was bluffing. But insiders say there was intense talk and even disagreement among executives - how much should he say? how direct should he be? - before the speech.
But the message was clear: Boeing is looking elsewhere to expand.
Others in the Boeing organization are matching the message.
Gary Michaelson, Boeing vice president and Wichita plant manager, told the Wichita City Council that the city is a frontrunner to get a final assembly plant for the next commercial jetliner. The plant is expected to generate 8,000 to 10,000 new jobs, if Boeing proceeds. Boeing already produces some of its airplane parts in Wichita and once assembled B-52 bombers there, although that was discontinued 29 years ago.
Construction in Wichita of a 2 million- to 3 million-square-foot building complex apparently would be a breeze. Loren Deines, Wichita building plans examiner, said Boeing likely could get building permits in three to four weeks and there would be no mitigation, or offsets for growth.
At Everett, where the 747 and 767 already are assembled, it took 19 months to get approval of the site-development master plan for the 777 buildings, then more time for individual building permits.
Shrontz said it takes about as long to obtain permits and build in the Puget Sound area today as it does to design and build a new airplane (three to five years).
"It's hard to conceive that not many years ago (1966-67) Boeing developed its Everett complex from scratch in just 24 months," he said in his September speech.
George Behan, spokesman for Rep. Norm Dicks, D-Bremerton, said the time factor is an important element for Boeing today.
"It will have to produce a big plant in a hurry. Time is the biggest thing when you're competing with Airbus," an increasingly aggressive competitor that races to fill niches in the airliner market unfilled by others.
There is also new pressure from U.S. competitor McDonnell Douglas, which is selling up to 40 percent of its commercial-aircraft company to Taiwan investors. The use of cheaper labor in Asia would result in lower aircraft prices, forcing Boeing to find more ways to cut costs.
IMPACT ON STATE
A Boeing decision to build an assembly plant elsewhere could have significant long-term ramifications for the state - from jobs, to payroll dollars, to supplier companies, to tax revenues.
"Any Boeing movement makes a difference in the state's economy," said Chang Mook Sohn, the state's chief economist. "Boeing is the most important industry here."
Dick Conway, a Seattle economist who, in 1989, studied Boeing's impact on the region, said Boeing directly and indirectly accounts for nearly 18 percent of the gross state product. Just in state taxes alone, the company expects to pay $500 million during the 1989-91 biennium, said Boeing spokesman Paul Binder.
Boeing and its widespread impact "is the single most important factor affecting the Washington economy," Conway said. "Boeing is a positive or a drag. If it shifts any commercial production out of the Seattle area, it would be negative no matter how well the rest of the economy does."
Nevertheless, state officials don't expect to offer Boeing cash incentives to keep its new work here, as other states are doing.
Jeff Goldberg, spokesman for the Washington State Department of Trade & Economic Development, said the state won't offer anything special to keep Boeing expanding here.
"We are hoping and wishing that Boeing will make a decision to stay here," he said. "It is a superlative manufacturing company, but we can't expect all of its decisions to be in our favor."
Some Puget Sound residents resent the changes caused by Boeing's growth and want the company to pay more to deal with community problems. Traffic congestion, higher housing costs and a need for more public services are a few aspects some find worrisome about Boeing adding thousands of people to its payroll in the 1980s, along with scores of new or enlarged office and manufacturing buildings.
Ted Pankowski, director of the Washington Environmental Council, said he believes Boeing should do even more here to offset growth problems. But he still wants Boeing jobs here to keep the area healthy: "We'd not be happy if jobs would leave the area. The problems here are resolvable."
Neither would Tom Baker be happy about jobs leaving the area. As president of Local 751 of the International Association of Machinists and Aerospace Workers, Baker told Boeing managers recently that local workers are upset about the prospect of jobs going elsewhere.
The issue, no doubt, will come up at the bargaining table next fall when a new contract, covering nearly 40,000 members in this state, comes up for negotiation. The issue could be somewhat sticky for the union, however, because Boeing's Wichita workers are represented by the same union.
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