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Boeing digs deeper in South Carolina as union faces 777X vote

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young
The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young

By Harriet McLeod

NORTH CHARLESTON, South Carolina (Reuters) - The battle for Boeing jobs heated up on Tuesday as the plane maker broke ground for a new factory in South Carolina just as workers in Washington state prepared to vote on a deal that could bring the latest jet to that state.

Boeing Co said it will consider South Carolina and other states for the new jet program, known as the 777X, unless its Washington-based International Association of Machinists union approves a new contract in a vote set for Wednesday.

Japan's Mitsubishi Heavy Industries <7011.T> also has approached Boeing with a detailed proposal to build the 777X wings.

"It's in the IAM's hands to decide," Jack Jones, vice president and general manager of Boeing South Carolina, said on Tuesday at a groundbreaking ceremony on a new jet engine center in South Carolina, a state with a very small union presence.

If union members in Washington state reject the deal, "then we have the right, and Ray (Conner, president and CEO of Boeing Commercial Airplanes) has indicated that we will exercise the right we have, to move potentially outside the state of Washington."

Boeing said last week that approval of the labor deal, which extends the current machinist contract until 2024, and a package of state tax incentives, were necessary for it to build the jet and its wings in Washington.

The legislature approved $8.7 billion in tax incentives and other investments on Saturday.

But union leaders have not endorsed the labor contract and many members have urged a 'no' vote, because the proposal freezes pension benefits, raises health care costs and provides minimal wage increases.

Other states and countries also are vying for the 777X, likely to be the last new Boeing plane for 15 years. Boeing is widely expected to formally launch the new jet program next week at the Dubai Airshow, where gulf carriers are said to be planning to place orders for more than 100 planes.

On Tuesday, a person with knowledge of the matter said Mitsubishi had submitted a detailed and unsolicited proposal to Boeing about a cost-saving way to build the plane' wings, a "Plan B" should Boeing's workers reject a labor deal.

Industry experts say Texas, California and other states with Boeing facilities also are in the running for the work, which Washington state officials estimate supports 20,000 jobs at Boeing and 56,000 jobs in the state from restaurants to car repair.

Texas has about 5,500 Boeing employees in Texas, and Boeing says it spends about $2 billion a year there through suppliers.

"The governor's office regularly talks with Boeing on the merits of expanding their footprint in Texas," Josh Havens, a spokesman for Texas Gov. Rick Perry, told Reuters. He would not discuss details of the talks.

"We have a large and skilled workforce. We keep taxes low and we don't allow for over-regulation," Havens said.

In contrast, Boeing says it spends just $110 million a year in South Carolina and has about 6,300 employees there.

But Boeing has already spent at least $1 billion in South Carolina and has committed to investing another $1 billion hiring 2,000 workers over the next eight years. On Tuesday, it kicked off construction of a 225,000-square-foot propulsion center that will design and assemble part of the engine housing for another new jet, the 737 MAX.

The new plant is near a Boeing interiors facility and about 10 miles from the main campus near Charleston International Airport where the company makes some of its 787 Dreamliner jets.

Called Propulsion South Carolina, the new plant is "a major step in Boeing's strategy to bring propulsion-related structures design-and-build work back into the company," said center director Charlie Hix.

The facility will be completed in about a year, and will begin making engine nacelle inlets in May 2015, output ramping up quickly to 94 a month, said Nicole Piasecki, vice president and general manager of Boeing Commercial Airplanes Propulsion Systems Division.

The 737 MAX is on target for a first flight in 2016 and first delivery to customers in 2017, she said.

Based on performance, South Carolina could gain more propulsion projects in the future on "inlets, thrust reversers, exhaust systems, pylons and so forth," Hix said.

"We're just at the beginning of the journey on the 737 MAX," Piasecki said. "I could see us being a part of every single future airplane. My goal is to be part of every future Boeing airplane program."

(Reporting by Harriet McLeod in South Carolina. Additional reporting by Jonathan Herskovitz in Texas; Writing by Alwyn Scott; Editing by Ken Wills)

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