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Analyst: Boeing Could Leave Washington State

Thu, 04/23/2009 - 1:50pm
Michelle Dunlop, AP Writer

MILL CREEK, Wash. (AP) -- The Boeing Co.'s jet production in Washington could be a "mere ghost of itself" by 2020 or be gone entirely if the state doesn't take prudent steps quickly, an analyst says.

"For you stakeholders in keeping (Boeing's) 787 in Everett, the clock is already ticking," analyst Scott Hamilton, with Issaquah's Leeham Co., told business leaders at a Wednesday meeting hosted by the Economic Development Council of Snohomish County.

Hamilton predicts that Boeing may make a decision on where to locate a second production line for its Everett- assembled 787 jet by the end of this year or early 2010. Should Boeing go elsewhere with a second 787 line, the analyst says the company may close down Dreamliner production in Everett in 2013 or 2014, consolidating all 787 assembly at the new location.

In many regards, "Boeing is already leaving Washington," Hamilton said.

The analyst pointed to the relocation of Boeing's headquarters to Chicago from Seattle as an example. And Boeing drastically reduced the amount of work performed by Washington workers on its latest jet, the 787, he said.

Regardless of what Washington lawmakers do to pacify the aerospace giant, Boeing's chief executive, Jim McNerney, remains committed to increasing the company's use of outsourcing, Hamilton said.

"Even if Boeing stays, you're going to have fewer jobs in the Puget Sound region," he said.

That's Hamilton's best-case scenario. His worst-case scenario for Boeing's jet production in Washington: The company pulls up stakes by 2020, locating its next new jets -- replacements for the 737 and 777 -- elsewhere.

Still, Hamilton reserves some hope that Washington could still "pull the proverbial rabbit out of the hat."

Hamilton isn't alone in sounding the alarm that Boeing could leave Washington. Last fall, during the Machinists' strike, analyst Richard Aboulafia, with the Teal Group, predicted a Boeing exodus over the next decade.

"Over the next 10 years, (Boeing Commercial Airplanes) will move to southern states with weaker unions and right-to-work laws that diminish union power," Aboulafia wrote in a briefing. "This move will likely happen in phases, with new programs ... established elsewhere and the 787 line shifting locations."

Earlier this month, a study, paid for by the state, also found that Washington lagged behind others in business competitiveness. The study largely echoed findings of a 2003 survey, which said Washington's unemployment insurance and workers compensation rates are high, its labor relations are problematic, and its training programs are lacking.

The governor and lawmakers in Olympia have precious few days left in the legislative session to respond to the latest study or to the concerns raised by analysts. Late Tuesday, the House voted to create the Washington Institute of Aerospace Technology and Advanced Manufacturing in Snohomish County. The bill directs Edmonds Community College to oversee development of the institute. Once set up, this center will coordinate efforts in the state to educate and train aerospace workers and research and develop new technologies for the industry.

But the response by lawmakers in Olympia won't cut it, Hamilton warned.

The state needs to improve its business climate -- cutting unemployment insurance and workers compensation rates. And the state should create a "world class engineering school" in the Puget Sound area, Hamilton said, noting that neither the University of Washington nor Washington State University have programs ranked in the top 15 in the country.

"You can't have any more lip service," he said.

Snohomish County Executive Aaron Reardon joined Hamilton in calling lawmakers in Olympia out on the carpet. Boeing is Snohomish County's largest employer, with roughly 30,000 direct jobs and an estimated 120,000 indirect positions. "We have not made the progress that was promised" when the state lobbied to land the 787 line in 2003, Reardon said. "Our focus on education has not kept pace with other states."

For its part, Boeing isn't revealing its plans -- either for a second 787 line or for its future in Washington state. But the company agrees "that Washington needs to change its business climate," said spokesman Jim Proulx on Wednesday.

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