In the news:
It may be weeks before we have answers on the grounded 787 Dreamliner, which in a matter of days went from mission accomplished to concern to crisis for Boeing.
We do, however have one answer: The stakes are highest for the Puget Sound region. We have the most skin in the game.
In developing the Dreamliner, Boeing laid out a scheme to share costs and, perhaps, risks with its global supplier network. But there is no risk-sharing for regional economies. An assembly in North Charleston, S.C., in its infancy, represents a threat to jobs here. And the Dreamliner’s mounting troubles are the biggest danger to the Seattle area since the Great Recession.
Boeing employs 87,000 in Washington state, a remarkable concentration of well-paid positions in an America of Wal-Mart jobs and wages. The company added almost 5,000 jobs last year, in addition to 8,300 in 2010. This has been a critical cushion to recession and a jobless recovery.
The Washington aerospace cluster is one of the two most important in the world. According to the Washington Aerospace Training and Research Center, 90 percent of the airliners delivered in the United States are assembled here.
It is an ecosystem, as the new buzzword would have it, that includes some 700 supplier companies and underpins the state’s robust manufacturing exports.
To be sure, the region benefits from the 737 and stands to gain from the next-generation 737 MAX. It still assembles other Boeing jetliners and cargo planes, including the 777 and 747. We stand to get a further boost from the Air Force tanker program.
But the Dreamliner is huge. Its technologies promise the future of commercial aviation.
Ironically, its botched outsourcing added jobs and value to the Puget Sound area, especially the assembly plant in Everett where machinists and engineers have been working to get the much-delayed jet back on track.
For now, assembly will continue. That decision is not a guarantee, particularly if deeper problems are uncovered in the 787’s critical battery and electrical system.
A fix that requires replacing the cutting-edge lithium-ion batteries with heavier conventional ones would add work in the short term. But then questions begin about the Dreamliner’s key selling point: Will it remain light enough to deliver the fuel savings promised?
If not, wholesale cancellations by airlines are possible. More orders — the company hoped to sell 5,000 Dreamliners over 20 years — might be difficult to close, particularly if Airbus makes a leap ahead with its own planned composite jetliner.
The Dreamliner’s advanced materials already prompt worry about “flying in a plastic airplane” even if the carbon composites are stronger than aluminum. Readers are sending me Wikipedia entries about the de Havilland Comet, the advanced British jetliner that beat the 707 to market in 1952 but suffered three midair disasters from metal fatigue. The Comet’s reputation never recovered.
This is the thin edge of trustworthiness upon which the Dreamliner sits.
Meanwhile, Boeing management is in Chicago, far from the center of the action, not to mention Asia, which holds the greatest potential for future global sales. How will the brass react if the stock continues to come under pressure? And as the date at which the 787 finally becomes profitable keeps being pushed further and further out?
I’ve written before that the Dreamliner has the potential to break Boeing. That has never been more true than today.
It may be the region hasn’t faced more uncertainty about its aerospace crown jewel since the early 1970s. Then, after a decade of spectacular sales that drove Boeing employment to a 1968 high of more than 100,000, a series of calamities caused huge layoffs. By late 1971, the job count was 32,500.
Airlines, after the buying spree of the 1960s, faced overcapacity and stopped adding new jets. Starting in 1970, Boeing went 17 months without an order from a U.S. airline.
America was headed into peak oil in the Lower 48 states and fuel costs rose, soaring as OPEC gained control of pricing power in the early 1970s. Inflation became a cancer in the economy that would last throughout the decade, further depressing demand.
In 1971, the Senate refused to help fund the supersonic transport (SST), dooming Boeing’s revolutionary 733 SST before two prototypes were done.
Airlines had already placed orders for an airplane that at the time seemed the future of commercial aviation, one with far greater potential than the Anglo-French Concorde put in service.
But in addition to largely unfounded environmental concerns, the real SST killer was the spike in fuel prices.
What followed was the regional depression immortalized by the billboard that read: ”Will the last person leaving Seattle turn out the lights.”
At its worst, unemployment reached 17 percent.
Seattle’s economy was much less diversified then, but that explanation can be overstated. While Boeing’s importance was greater, the region still had other manufacturing, shipping, fishing and many more railroad jobs than today. Timber was still important.
Now Seattle is an alpha world software center, with a strong cluster in biotechnology, a great research university and a growing role in world health with the Bill & Melinda Gates Foundation. The ports of Seattle and Tacoma have extended their reach as trade hubs. This is, whether it wants to be or not, a world-class city and magnet for talent and capital.
But none of those assets is safe from a hypercompetitive world where slow growth is setting in place a zero-sum game. One where every place wants what we have and will go to great lengths to get it.
And it is still, after all these years, Jet City.
Now comes another revolutionary airplane and one far beyond the prototype phase. The Dreamliner is in service and being built, with the future of the company and this aerospace center are riding on it.
Yet it is grounded facing questions that cut to the heart of decisions Boeing’s leaders made years ago.
It will be up to the engineers — in a surly mood and talking strike — and machinists and other workers in the Puget Sound region to fix it.
Anxious weeks await.
You may reach Jon Talton at email@example.com
About Jon Talton
Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest