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Tuesday, June 7, 2005 - Page updated at 12:00 AM

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As competition heats up, jobs fly into China

Seattle Times business reporter

TIANJIN, China — Jessica Hu, a petite 26-year-old worker in a cotton blouse and jeans, clutches a metal clipboard and inspects a bin of parts on the floor of a factory in north China. The products she monitors, including wing parts for the Boeing 737, help the world's airplanes fly smoothly.

She earns about $3 a day.

Throughout the factory, young Chinese women in hairnets and white aprons are hard at work assembling composite parts for various Boeing planes.

The steady transfer of airplane manufacturing from Seattle to countries like China shows little sign of slowing. Lower labor costs are only part of the reason.

In China, the heated competition between Boeing and Airbus for nearly $200 billion in sales over the next two decades hinges not just on prices and politics. The more willing Boeing and Airbus are to share technology and provide local jobs, the more likely they are to win Chinese orders.

Along the way, investments by the two airplane builders are helping China become a global aviation manufacturing center. A third of all Boeing planes now flying have major parts and assemblies built in China.

Such work falls to people like Hu. She grew up in a nearby town and, after studying accounting in vocational school, began working at the factory three years ago. Like most of the plant's employees, Hu speaks some English and chose an English name for herself.

Hu considers her job difficult, with a lot of procedures to master. But she strives to do well. "It gives me a sense of pride," she said.

The tedious process of building composite parts requires precision and concentration, work that managers think is best done by young women. Workers cut lightweight sheets of material with a laser, tape the pieces together and seal them in a vacuum pack to be fused into a solid mass overnight in high-temperature autoclaves.

Sharp chemical smells of glue and paint permeate the work area. It's nearly lunchtime, and the music of Strauss' "Blue Danube Waltz" filters in over the speaker system.

Ubiquitous white poster boards with company slogans hang in the hallways, cafeteria and on the factory floor. "Don't try to explain why it won't work. Think of a way to make it work," one slogan proclaims.

As one of the largest composite factories in China, BHA Aero Composite Parts produces about 200 different parts for Boeing, including the 737 trailing edge, interior panels for the 777, and the wing-to-body fairing panels and tail cone for the Next-Generation 737.

Boeing, Hexcel and the state-run China Aviation Industry invested a combined $60 million to open the plant in 2001. The joint venture, which employs 350 people, supplies parts to Boeing through Connecticut-based Hexcel and to other companies around the world. BHA also is bidding to furnish parts for the new 787, which uses composites to reduce the number of parts and the overall weight.

Like China itself, the aviation industry is going through the upheavals of modernization. Factories are facing pressure to improve their efficiency, quality control and management.

Some Puget Sound families have several generations who've spent their careers working for Boeing. By contrast, in China, it's hard to train good workers fast enough or hold on to them for long.

The aviation industry is losing its appeal for talented young people like Zhou Xianfeng. Young engineers leave state-run aircraft companies the first chance they get, he said. Low salaries, inefficiency and nepotism drive them away.

Zhou, an engineer with experience at state-run and private companies, grew up in the far northeast and spent the first years of his career working for Hafei Aviation in Harbin. When an offer came from the repair division of German airline Lufthansa, he moved to the southern boomtown of Shenzhen at the opposite end of the country. Last year, he moved again when he was hired by MID American Supply, a small U.S. company in Tianjin.

His wife and young daughter still live hundreds of miles away in Harbin. But airplane travel makes it possible for Zhou to return home in a few hours. He earns about $1,000 a month, six times more than he did in Harbin, and he has the freedom to work independently.

Struggling, learning

Technical expertise continues to grow

These days, Chinese workers prefer jobs at private companies, joint ventures or foreign enterprises, said Liu Xu Ji, a veteran manager in a factory of the state-owned Xian Aircraft.

As a career choice, jobs in state-run factories are "not the best," he conceded. "But a lot of people want to come here because it's stable," he added. "No one can be fired."

Joint ventures like BHA have their own problems attracting the right people.

It's a challenge to persuade good U.S. managers to come to China, said Jerry Zheng, a BHA manufacturing engineer with 20 years' experience.

Often, "the ones who are sent here are expensive, but they don't understand," he said. "The ones who are qualified don't come."

"China is a mystery to them," he added. "They think China is still like the Qing Dynasty, with men in long braids and women with bound feet."

The BHA factory sits in an industrial development area near the gritty port of Tanggu, about two hours from Beijing. Residents say pollution from years of heavy industry has spoiled the environment. Nearby construction projects rise from dusty fields. A neon-lighted boardwalk with enormous modern art pieces suggests Las Vegas By The Sea.

Among local Chinese workers, turnover is high and training a challenge. All around Tanggu, other foreign companies beckon: Motorola, Honeywell, IBM, Mitsubishi. Job hopping is common.

In spite of the problems, China's technical expertise continues to grow.

Besides BHA, Boeing also is working with China's state-run aviation companies: China's Chengdu Aircraft will supply the 787 rudder, Hafei Aviation the 787 wing-to-body fairing panels, and Shenyang Aircraft the 787 vertical fin leading edge. Boeing said those contracts are worth $600 million, adding to $1 billion in earlier purchases from China.

Airbus is going further by transferring complete production of A320 wings from Wales to China by next year and moving some design work to China. The wing will be produced by Chinese manufacturers in the northern cities of Shenyang and Xian. Shenyang is already the single supplier of emergency-exit doors for the A320.

In Beijing, Airbus is transforming a field of weeds into a new design center that will employ 200 people and design up to 5 percent of the A350, a new mid-size plane Airbus has proposed to compete with the 787.

Chinese aviation officials want more such projects. Keeping workers employed helps promote social stability in places where bankrupt state-owned enterprises have left millions idle. And learning the technology could help Chinese companies build their own airplane.

Sharing risk

Partners play key role in building the 787

Are Boeing and Airbus sacrificing their future by transferring more work to China?

Airbus is not outsourcing any of its cutting-edge technology, said Airbus China marketing director Rick Jones.

The company is starting new designs in Europe while shifting older technology to China. European laws restrict Airbus from laying off European workers even as the company expands operations elsewhere, he said.

In Boeing's case, retaining manufacturing expertise won't matter as much in the future, says Boeing China President David Wang. The company wants to focus on large-scale integration.

"To us the ability to make machine parts is not important," he said. "We would rather have partners do that."

Chinese manufacturing partners will play a key role in building the 787. For instance, Chengdu Aircraft in southwestern Sichuan province will be the sole supplier of the plane's rudder.

"This is really risk sharing," Wang said. "If they don't make this successful, the plane won't fly."

McDonnell Douglas made the first foray into aircraft manufacturing in China 20 years ago when it set up assembly of the MD-80 in Shanghai. It lasted less than 10 years, producing only 35 planes.

"What we came to realize is that Chinese industries were not fully ready," said Peter Chang, managing director of China Aviation Marketing in Redmond and a veteran of the McDonnell Douglas project.

But with its experience of the past two decades, China is embarking on a new venture, this time on its own. AVIC Commercial Aircraft is moving forward on production of an indigenous regional jet, the 80-seat ARJ-21, with an initial government investment of $600 million.

The jet, numbered for the 21st century, will have an engine from GE, a flight-control system from Honeywell and onboard electronics from Rockwell. Such a plane would not compete directly with Boeing or Airbus, but it could challenge smaller jets made by Canada's Bombardier. Brazil's Embraer has a joint venture with a different arm of China's civil-aviation authority to produce a similar regional jet.

Regional jets will find plenty of customers within China's huge domestic market, said Michael Allen, chief operating officer at Back Aviation Solutions. And China's aviation leaders have the drive to become more self-reliant and the ambition to compete globally in the future.

"They have a view of time that is a lot longer than the typical American may consider in thinking through a business decision," he said.

Only a few countries in the world are large enough to support a viable airplane-manufacturing industry. China is the only one with a huge and growing market, low-cost manufacturing and a continuous supply of technical talent, Chang said. Its technical prowess was demonstrated two years ago when it launched an astronaut into space.

Now, with the Airbus deal to build A320 wings, Chinese manufacturers are finally gaining some of the critical airplane wing technology they have sought for two decades. Chang compares China's aviation industry today to the Japanese automobile industry in its infancy.

Perhaps, he says, "in 30 years when we're retired and golfing, China will rule the aviation world."

Kristi Heim: 206-464-2718 or kheim@seattletimes.com

Copyright © 2005 The Seattle Times Company

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