State offers no goodies for new Boeing 787 line

Washington state will not offer new financial incentives to induce Boeing to put a second assembly line for its 787 Dreamliner beside the first one in Everett rather than in Charleston, S.C.

And state officials said they are deliberately staying out of the one contentious issue that could change the competitive picture here: Boeing's push for a no-strike agreement with the Machinists union.

Gov. Chris Gregoire released a 32-page document Monday that outlined the business case for building a second 787 line here.

It includes no new concessions specific to Boeing or the aerospace industry, but instead summarizes the state's existing advantages as a center of aerospace manufacturing.

Boeing needs a second assembly line to get the production rate up to 10 jets a month by the end of 2013.

Last Friday, Gregoire presented the document to the new CEO of Boeing Commercial Airplanes, Jim Albaugh.

He is expected to send a recommendation to the Boeing board in Chicago possibly as soon as the end of October, with a firm decision on the assembly site by the end of the year, state officials said.

Rogers Weed, director of the state Department of Commerce and chairman of the Governor's Aerospace Council, said Monday some 700 to 900 jobs are immediately at stake.

"That's a lot of jobs, especially in this kind of economy," Weed said in an interview.

He acknowledged that manufacturing costs are higher here, but said the quality of work is higher than in Charleston, the risks to the already much-delayed 787 program are lower, and the broad infrastructure support for the aerospace industry is unmatched elsewhere.

Boeing will be able to build the Dreamliner more flexibly and more quickly if it works with the aerospace work force in Washington that already has valuable experience operating the first assembly line, Weed said.

The governor's document says Boeing will benefit from "the transfer of learning curve efficiencies" if the new line is alongside the existing one in Everett.

That judgment was echoed by International Association of Machinists (IAM) district President Tom Wroblewski.

"Nobody has shown me how having two separate assembly lines on opposite ends of the continent would be more efficient than having two of them next to each other in Everett," he said in a statement Monday.

Under previous Gov. Gary Locke, Washington secured the first 787 production line for Everett after an intense site-selection competition in 2003.

To win that competition, the state offered tax breaks and other incentives worth around $3 billion over 20 years.

South Carolina is expected to offer Boeing financial enticements.

State Republicans responded critically to the lack of specific incentives in Gregoire's business-case presentation.

"I am disappointed to learn that the state has not seen fit to offer additional financial incentives," said U.S. Rep. Dave Reichert, R-Auburn, in a statement. "The 787 being built in South Carolina would be a blow. ... We must think creatively and strategically."

And state Senate Minority Leader Mike Hewitt, R-Walla Walla, ridiculed the governor's document for citing selected surveys that rank Washington's business climate ahead of states in the South.

"While this report is beautiful and glossy and filled with rankings, is there really any substance here that Boeing hasn't already considered?" Hewitt said in a statement. "We should be taking action like we did in 2003."

A Deloitte Consulting report commissioned by the state and published in April noted Washington had higher labor costs, a more expensive workers' compensation system, and higher construction and utility costs than competing states.

Deloitte concluded that the state's "disadvantages outweigh the advantages in attracting and retaining aerospace companies relative to other states."

Bill McSherry, Gregoire's special adviser on aerospace, said in an interview that since April, the last legislative session had increased the state's competitiveness.

He cited changes to unemployment insurance that will lower costs for Boeing and other companies.

Boeing has not presented the state with a wish list of further legislation it wants implemented, McSherry said.

A key issue that's emerged in the competition is Boeing management's concern about its poor relationship with the Machinists union and the number of strikes in recent years, including a two-month work stoppage in 2008.

In an internal presentation to Boeing employees earlier this month, Doug Kight, vice president of labor relations at the commercial division, laid out how management sees the "tough, tough decision" regarding the second line:

"There's a lot of issues to look at, a lot being studied. No decision has been made," Kight told the employees. "But truthfully, it is very clear that this triennial disruption — our customers can't live with it anymore."

Boeing has been pressuring the union to agree not to strike when the next contract comes around in 2012, so far without success.

And while Everett is a union stronghold, South Carolina is a "right-to-work" state, not friendly to unions. Workers at the Boeing Charleston plant, where the rear fuselage of the 787 is built, recently ousted the union.

On this apparently crucial issue, the governor's report offers only an assurance that officials are trying to "contribute to an atmosphere of improving (labor) relations."

In July, both Gregoire and U.S. Rep. Norm Dicks, D-Bremerton, publicly asked both sides to make concessions. But that only drew a public rebuke from the union.

Weed said only labor and management can settle the issues between them.

"We're trying hard not to talk about it," Weed said.

Wroblewski said discussions continue.

"We're meeting with Boeing leadership on a regular basis," Wroblewski said.

"We firmly believe that if we improve our relationship now, we'll have a better outcome in 2012, and that will only be good for everyone."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com