Boo.
Flanked by Boeing and union leaders, Gov. Jay Inslee on Tuesday announced a tentative deal to win assembly of the Boeing 777X in Washington state.
The deal hinges on a legislative special session to pass $8 billion in tax incentives for Boeing through 2040. Other elements of the plan are a long-stalled $10 billion, 10-year transportation package, fast permitting for manufacturers, and education for aerospace workers.
“The bottom line is that this is what Boeing and the Machinists need to compete in the global marketplace and build this airplane in our state, and for us to secure our economic future,” Inslee said, adding that he hopes the package will be passed in the next week.
Look, I know that politicians know that if they don’t offer these sorts of deals, and Boeing up and moves production elsewhere, they’ll get some blame. And they should do some things to make sure Boeing does stay. But man are these sweetheart deals annoying. And as Goldy points out, Boeing is a profitable company.
Hopefully, as long as they’re using the special session to give Boeing everything it wants, the legislature can find time to pass a decent transit package.
Inslee knew what only a few others did at that point – Boeing and the IAM leadership were on the cusp of a new agreement extending the labor contract to 2014, and eliminating pension contributions in lieu of a 401(k) type plan. Current IAM members can get both the pension and the 401(k).
In return, the 777X wing will be build in the Puget Sound Region, and the 777X will be built at Everett.
These labor concessions, and the tax incentives, etc. requested by Inslee, are designed to “level the playing field” between Boeing and Charleston. Boeing had just contributed large sums of money at N. Charleston in order to expand their operations there.
Boeing’s initial bargaining position to Washington leaders was that Washington had to become a “right to work” state, but that was clearly a no go from the beginning.
The agreement still has to be ratified by the IAM membership. The big sticking point will be the loss of the pensions. Boeing has been attacking the pensions at each contract renewal, and the last two strikes were mostly over the pensions. The older workers will probably want to keep the pension contributions, the younger workers don’t see much value in them and are probably willing to discard them in return for the $10,000 signing bonus. But ratification by membership clearly isn’t guaranteed.
So what’s the clinker? The news reports don’t make any reference to future aircraft types or derivations. Boeing might see the 777X go to Everett, but the 787-10 to Charleston. And who knows what other aircraft programs could arise in the future? Also, the extended contract doesn’t protect the IAM from Boeing out-sourcing large services to other non-union companies, such as is currently done on the 767 program with New Breed (which sometimes takes days to deliver parts from their warehouse to the factory about 1-1/2 mile away). And after this, there isn’t much left for the IAM to give up in 2024.
So yes, it’s a sour pill to swallow, but probably necessary. I’m sure the IAM local leadership (Wroblewski) wouldn’t have agreed to it if the thought he had any other choice.
Note that the 777X wing will be built here, and not in Japan as it’s currently done for the 787. It’s probably necessary because there’s no way they could fit the considerably longer wing on a Dreamlifter, but it’s a blow to the Japanese manufacturer (I think it’s Kawasaki Heavy Industries) and the Japanese ministry in charge of industrial development. It’s one way for Boeing to give Japan the finger for JAL picking the A350/
Our state has a one-seat legislature — the only vote that counts is Boeing’s.
I’m wondering when Amazon, Microsoft, etc. will decide to hold up the state for money. It would be much easier for them to move than it would be for Boeing.
There is some good news here and there could be more. Some of what Boeing wants THEY HGAVE A RIGHT TO! If you want industry, the State needs to provide the infrastructure (eg roads) and education that make the company able to do its job!
The horrible thing is that this Chicago Boeing shows no support for the equally important issues that make WA a great place for its employees.
Imagine the impact if these folks were to INSIST we fully find education and develop housing, expand Obamacare so Boeing of Chicago could get its employees healthcare costs of of its back, and build a great waterfront over the new Boeing-serving tunnel?
# 5: in the early 1950’s, as jet programs were being developed at Boeing, McDonald Douglas, Lockheed, etc., there was a a shortage of engineers and attempts to raid them from other companies.
My own father benefited from this, in that he got an aerospace/manufacturing engineering job first at Pratt & Whitney, where he only stayed a year. Lockheed lured him away with a much better offer, but the real reason for the move is my mother, who grew up on South Alabama (less than a hundred miles from the Florida border) hated the cold and snow.
At Lockheed my Dad worked for a couple of years until the shortage of engineers caused was over and layoffs loomed. My mother, with a todler and another on the way (me) didn’t like him working long nights taking measurements of wind tunnell tests, and he hated the work and his boss. So he got a job in another field which held lots of promise of a bright future for generations to come – nuclear engineering.
But back to the main point. As the various companies fought with one another over aerospace engineers, Boeing had a big advantage – it would bring over recruits during the summer months and they fell in love with the area. Even when it started to rain they found lots of outdoor entertainment.
The new Boeing with headquarters in Chicago just doesn’t understand that.
@6 There are lots of things Boeing management doesn’t understand, and the more distance they put between themselves and their workers, the worse their incomprehension will get.
“Hopefully, as long as they’re using the special session to give Boeing everything it wants, the legislature can find time to pass a decent transit package.”
Find a way to claim that the transit package is good for Boeing and that anyone who’s against it is anti-business.
SJ says: “If you want industry, the State needs to provide the infrastructure (eg roads) and education that make the company able to do its job!”
If you add cheap labor to your list, I think that you’d be on target. What about Boeing’s responsibility to provide a stable job base in exchange for the community providing all of the free infrastructure and free training?
Is the training free to the student?
The notion that a significant draw would be to start a state “Medicare for all” expansion and take the responsibility of providing health care coverage off of employers is interesting. Employer paid health care is a remnant of WWII labor peace. Maybe it’s time once again for Washington to be a leader in public policy.
I’m always appalled at the puppyish eagerness of public officials to throw away what little bargaining position they might have by stating that they will do anything to seal a deal. Couldn’t Inslee even posture a bit and say that, while Boeing is a valued part of the state blah blah blah, we want to reach an agreement fair to the citizens. He’s lawyer, Locke was a lawyer, but neither seem to know anything about negotiation. Boeing does have options other than Washington but those options have their own costs. A smarter negotiator would at least remind Boeing of that fact.
I’m a Boeing engineer, so I have that perspective, but still, you guys are hilarious! Earlier in this year, you were shilling for Seattle to blow hundreds of millions of dollars in bonding authority so a professional gambler would have a sports palace for an NBA team. (When we pointed out such palaces and teams don’t create any real value for their hosts, you had nothing.) Now, a deal which will help ensure thousands of union, family-wage jobs, and increase education funding, is something you criticize. (Maybe your problem is the Boeing/IAM deal isn’t enough of a one-sided give-away?)
Who was shilling for a stadium? Not me.
re SJ @ 5. There is no real need for the state to provide education for Boeing’s employees. Boeing should step up to the plate and start its own school of engineer. Remember in the real world there are places like MIT, Cooper-Union and a whole bunch more that are private and were started by private citizens. The same goes for Microsoft, Google and Amazon.
@12,
I’m opposed to most stadium deals because most sports deals are bad for the municipality. But the specific deal where the economic incentive was, and remains, pro-Seattle. Seattle and King County are the entities with the least risk. To compare that to giving away 8 Billion in tax revenue to Boeing is pretty much apples and oranges. As I said in the post, the state should do some things to keep Boeing here. But this is quite a lot.
The deal also hinges on a proposed 8-year no-strike union contract that’s so bad the IAM president called it “a piece of crap” and union members are reacting angrily. In short, it looks like Boeing’s options are to return to the negotiating table with the union or take its business elsewhere. The state should not commit to any Boeing concessions until the company resolves its labor issues, because if there’s no agreement with the union there will be no need for the concessions Boeing is demanding from the legislature.
@15 All of these stadium deals are predatory. They’re structured to soak out-of-towners who can’t vote by funding stadiums with outrageously high taxes on hotel rooms and rental cars. You could argue that other cities do it to Seattleites visiting their cities, so Seattle should do it to their residents when they visit our city. For me personally, a better option is I don’t visit cities that have sports stadiums. I mean, when someone tells you in advance they’re going to rob you if you come to their city, why would you go there?
Note that the better education and public infrastructure my employer wants will benefit far more than one company, while the failed Sonics sports palace’s economic benefits would have gone to a very small number of persons.
Mayor McGinn’s year of secret “negotiations” was also contrary to the spirit of R-91, which we citizens of Seattle passed after the Sonics demanded even more freebies in 2006. For city-provided sports palaces, R-91 requires the city to realize value equal to that provided by a 30-year US Treasury Bond; since sports palaces don’t provide their civic owners with anywhere near that much value, offering our bonding capacity was the work-around to outmaneuver R-91.
If the various and possible owners of the Somics were as good at running a sports franchise as they were at rolling foolish politicians for subsidies, they wouldn’t need public help.
“But the specific deal where the economic incentive was, and remains, pro-Seattle. Seattle and King County are the entities with the least risk.”
This claim seems impervious to actual examination of the deal. Here, again, is MikeBoyScout showing how “small” the risk was:
The arena that the city of Seattle will obligate $200M of limited bond authority to build shall generate revenue with an NBA team and possibly an NHL team. These are the stated primary tenants.
Less than 2 years ago the NBA had a 161-day lockout which began on July 1, 2011 and ended on December 8, 2011. It delayed the start of the 2011–12 regular season from November 1 to December 25, and it reduced the regular season from 82 to 66 games. The previous lockout in 1998–99 had shortened the season to 50 games.
The NHL also had a recent lockout this 2012-2013 season.
The lockout shortened the 2012–13 NHL season, originally scheduled to begin on October 11, 2012, from 82 to 48 games, a reduction of 41.5 percent.
Would anyone of you boosters care to show me where in the financial plan the risk of a revenue ending season stoppage is mitigated?
Don’t bother looking. It is not there. It is like it never happens, even though it happens with surprising regularity.