Latest Contract Rejection Leaves 777X Prospects Wide Open

AIN Air Transport Perspective » December 16, 2013
The Boeing 777X represents a potential boon for one or more of several states offering production sites and tax incentives. (Photo: Boeing)
December 16, 2013, 11:00 AM

No sooner did Boeing begin evaluating bids from 22 U.S. states to build all or part of the new 777X last week when it re-entered talks with its machinists union, suddenly brightening the prospects for the incumbent, Washington state. By Thursday, however, it seemed the sides had gained little or no ground in their efforts to strike a deal for a contract extension, as union leaders quickly rejected Boeing’s most recent “best and final” offer. It marked the second rejection of a proposal by the company’s machinists that would have guaranteed production would stay in Washington’s Puget Sound region.

Boeing said it plans to decide on where it will build all or parts of the 777X “early next year.” Among the states vying for the prize, South Carolina, California, Missouri and Georgia have offered what each characterizes as generous proposals to attract the work.

In response, Washington’s delegation of two senators and 10 House representatives made their case in a letter to Boeing that promised that “no state’s federal delegation can compare to our enthusiasm and commitment.”

The publicly distributed letter made no mention of the financial incentives Washington must offer to compete with the likes of South Carolina, where Boeing already builds 787s and where legislators plan to offer an adjacent 267-acre plot of land to build the 777X. However, Washington’s state legislature recently approved $8.7 billion worth of tax incentives for Boeing, an offer that, on its face, seems to dwarf the $1.7 billion offered by Missouri, for example.

For its part, the Washington delegation reminded Boeing CEO Jim McNerney and Boeing Commercial Airplanes CEO Ray Conner of its contributions to ensuring favorable trade conditions for the company, including voting unanimously to extend authority for the Export-Import Bank. The letter also referred to its role in securing Boeing’s contract for the KC-46A refueling tanker, its unanimous vote for the Korea and Panama trade agreements, its help in creating a jet biofuel research facility in Washington state and its delivery of a $20 million federal workforce training grant for more than 2,600 aerospace workers. “We are focused on opening new markets through trade, on investing in our skilled workforce, on building and maintaining a strong transportation infrastructure, and on prioritizing defense dollars on American products,” the letter said. “We are the aerospace industry’s strongest allies and loudest advocates in Congress.”

The sudden offer of a new contract proposal last Thursday came as something of a surprise given Boeing’s earlier characterization of the meetings. A company spokesman on Tuesday insisted that day’s meeting didn’t constitute a negotiating session, adding that the company and the IAM converse regularly on a variety of topics. However, an IAM official told AIN on Wednesday that, in fact, district president Tom Wroblewski and senior union staff members did talk with Conner about potential steps toward reaching a resolution.

On Friday Boeing issued a statement confirming that the IAM rejected a new offer. “We entered these discussions to address the concerns we were hearing from our employees,” said Conner. “We’ve listened to the union leadership and had an open dialogue in hopes of moving toward each other. Unfortunately the offer, which would have ensured this great airplane for the Puget Sound region, was immediately rejected by the union leadership.”

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