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Originally published October 22, 2009 at 12:10 AM | Page modified October 22, 2009 at 11:14 AM

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Boeing, union deadlocked in secret talks over new 787 line

Boeing and the Machinists union are far apart in secret negotiations over a proposed no-strike agreement that would ensure a second 787 final assembly line goes to Everett instead of Charleston, S.C.

Seattle Times aerospace reporter

What's next

Within the next two weeks, Boeing will announce whether its second 787 final-assembly line will be in Everett or Charleston, S.C.

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Secret talks have been going on for weeks in Washington, D.C., and Chicago between Boeing and the Machinists union, with top leaders negotiating over a proposed no-strike agreement that would ensure a second 787 final-assembly line goes to Everett instead of Charleston, S.C.

But less than a week ahead of a Boeing board meeting to discuss the choice, the labor talks are deadlocked and hindered by distrust on each side, according to a high-level person close to the negotiations.

Boeing CEO Jim McNerney said in a conference call Wednesday morning that the decision will be announced within two weeks.

In the previously unreported talks, International Association of Machinists (IAM) leaders said they were prepared to agree to a no-strike deal through 2020, provided a list of conditions was met.

One important condition, the person close to the talks said, is that Boeing would guarantee future work on new jets will come to the Puget Sound-area factories.

"The 737 replacement is the big prize right now," he said, but Boeing is refusing to guarantee any work beyond the second 787 assembly line.

The IAM has not told its members anything about the discussions. Its international president, Tom Buffenbarger, is driving the talks for the union, the person close to the negotiations said.

Buffenbarger did not return a call requesting comment. Boeing spokesman Tim Healy acknowledged talks are going on but said they are "confidential discussions, and we will honor a mutual agreement to keep them that way."

In his Wednesday conference call with analysts, McNerney made clear that Boeing is considering Charleston specifically because of the recent history of repeated Machinists union strikes in the Puget Sound-area factories, most recently for two months last fall.

"The IAM and the company have had trouble figuring it out between themselves over the last few contract discussions," McNerney said.

"We just haven't figured out a way. The mix isn't working well," he said. "We've either got to satisfy ourselves that the mix is different or we've got to diversify our labor base."

McNerney has adopted a firm line in the negotiations, according to the person close to the talks.

"His position is very strong," the person said. "They need a 10-year (no-strike) contract extension. That's it. They need to break the cycle."

The current contract expires in 2012.

Boeing plans to open a second 787 final-assembly line by 2013 to ramp up its production of the new, strong-selling plane, which has yet to make its first flight.

Farther out, its next new jet after the 787 is likely to be a replacement for the Renton-built 737, and that may not enter service until around 2020.

Charleston already has two plants that build two-thirds of the Dreamliner fuselage. More than 2,500 people work there, and more than a third of them are outside contractors.

The addition of a production line for 787 final assembly would establish a complete airplane-manufacturing complex on the East Coast, posing a real threat that it could supplant the Puget Sound region as the center for building Boeing's future jets.

The person close to the talks said that including suppliers, Boeing envisions bringing around 3,000 direct jobs to Charleston if it picks that city.

Despite local fears Boeing has already decided on Charleston, company insiders insist this is not the case.

The person close to the talks said he believes Boeing is serious both in the threat to take the 787 line to Charleston without a no-strike deal, and in the promise to put it in Everett if a deal is reached.

Future at stake

"People in Washington state need to know that Boeing is not gone yet. But the future of building airplanes in Everett is at stake," he said.

Yet even if the Machinists were to concede to Boeing's no-strike demand and win the 787 second line, without a guarantee to the union of work on future planes, South Carolina would remain a viable option for Boeing's next airplane.

That raises the specter of another possible round of Boeing threats to leave and concession discussions five or six years from now.

Snohomish County Executive Aaron Reardon, while acknowledging that possibility, thinks the immediate competition is nevertheless crucial.

"We could find ourselves in a similar position" when Boeing launches its next airplane, Reardon said. "But we'll be in a much stronger position if Boeing doesn't have a final-assembly plant in South Carolina.

"Taking South Carolina off the table considerably strengthens the hand of the Machinists and of Washington state for future work, including the 737 replacement," Reardon said.

Industry analysts question whether choosing Charleston for a second 787 line makes business sense, since that would add cost and risk to the Dreamliner program, which is already billions of dollars over budget and more than two years late.

Instead of rearranging equipment to free up one of the airplane assembly bays in Everett, Boeing would have to build a whole new plant in South Carolina.

Instead of its seasoned mechanics and nearby program engineers assembling the 787 in Everett, it would have to hire new, inexperienced workers in Charleston.

Supply lines already stretched around the globe would have to converge on two widely separated locations.

John Monroe, a former Boeing executive who now consults for the Snohomish County Economic Development Council, said separate assembly lines in Everett and Charleston would inevitably result in costly duplication for Boeing and its suppliers.

But in the Wednesday conference call, McNerney insisted there is only "modest" additional risk to the 787 program from setting up a new assembly line and trying to operate parallel assembly operations on opposite coasts.

"There would be execution challenges associated with" choosing Charleston, he conceded. "Keep in mind, we have a good-size operation in Charleston today. There would be some duplication. We would obviously work to minimize that."

But McNerney pointedly added that "diversifying our labor pool and labor relationships has some benefits."

"Some of the modest inefficiencies associated with a move to Charleston are certainly more than overcome by strikes happening every three or four years in Puget Sound and the very negative financial impact on the company."

South Carolina is a so-called "right-to-work" state, meaning that employees do not have to join unions even if a workplace is unionized.

In Everett, all production workers are IAM members. In Charleston, the work force recently voted to oust the union.

Piercing distrust

The current discussions between the union and Boeing have been difficult, with a high level of initial distrust to be overcome on both sides, the person close to the talks said.

"The relationship is so fragmented, so damaged, that both sides question the other," he said.

Despite the extra costs and risk at Charleston, Monroe fears Boeing will go ahead anyway because of its bad relationship with the union, and he's concerned such a decision would do long-term damage to the broader aerospace industry in this state.

"I would really worry about the future," Monroe said. "It would make it much more difficult to recruit any new aerospace company to come up here. It would make it difficult to hold onto the ones we have and have them expand."

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

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