Thinking Tech

Is Boeing opting to expand in S.C. really a good idea?

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Boeing opts for anti-union South Carolina to build second 787 assembly line. I think Seattle got a raw deal. Here's why.

The headline this morning at Seattlepi.com is reminiscent of "last one to leave Seattle, turn out the lights" when Boeing laid off tens of thousands of workers in 1970-71:

Today's headline? "Gone.  What now? Boeing move send state scrambling."

Boeing announced last night it has chosen North Charleston, S.C. for the second assembly line for the Boeing 787 Dreamliner. While the news has been rumored for months, the decision is sending shock waves through the Seattle area where Boeing continues to wind down its future. It's Everett plant there was the main rival to North Charleston.

"This decision allows us to continue building on the synergies we have established in South Carolina with Boeing Charleston and Global Aeronautica," president and CEO of Boeing Commercial Airplanes Jim Albaugh said in a press release whose boilerplate added "the move will strengthen the company's competitiveness and sustainability and help it grow for the long term."

Few doubt Boeing's move is chiefly based on a more labor friendly environment in North Charleston where the Internal Machinists Union (IAM)  was decertified a few weeks ago at the plant Boeing uses now to build the 787's aft fuselage.

South Carolina is a so-called Right to Work state which greatly dilutes the power of unions. The IAM struck  Boeing for two months in 2007 and that probably sealed their fate. The strike has been blamed for some of the 787's delays which have been primarily technical.

Boeing CEO W. James McNerney has hinted that he was leaning toward North Charleston by saying the risk at setting up the second line in a new locale would be modest. Recent coverage in Seattle concluded that Boeing was done talking with the IAM over locating the second assembly line in Everett where the 787 is put together now.

The machinists feel betrayed because they claim they offered Boeing a 10-year no strike promise and that Boeing never countered. That's not to say the machinists are innocent in all this, but McNerney's mind was made up long ago in my estimation. He's a believer in Six Sigma, a zero defect manufacturing philosophy which essentially does more with less, ergo fewer people.

As CEO at 3M from 2001-05, McNerney oversaw a doubling of the share price, but was unpopular among many researchers and scientists who felt hamstrung by Six Sigma strictures. His Six Sigma edicts were tossed out by his successor because at 3M's legendary research organization. I wrote a feature "3M Shelves Six Sigma in R&D" a couple of years ago.

As head of GE's jet engine business among others, McNerney also learned at the knee of former GE CEO Jack Welch who regularly sold off non-performing divisions, often leaving behind shelled-out communities. Just drive through Pittsfield, Mass. or around the greater Albany, N.Y. area. After all, life is all about enriching shareholders, right? I don't know if there's a top five or ten rules to creating a smarter planet, but if there were, that wouldn't one of them.

Boeing's enmity toward the Seattle area began long before McNerney's arrival.

Boeing's headquarters move to Chicago in 2000 for was also strong indication of Boeing's tiring of Seattle. "We are here not because we wanted to leave Seattle, but because we wanted to build, a bigger more capable Boeing Co. Having our world headquarters separate from any one of our major businesses (Commercial Airplanes in the case of Seattle) will help us achieve out goals of growing this company," then Boeing chairman Phil Condit said at the time.

It sounded hollow then and still does. Boeing wanted out from under a strong labor movement.

Also, manufacturing the 787 largely depends on third party contractors as opposed to a permament inhouse workforce. The scheme  has been problematic for Boeing and has contributed the 787's delays.

As for North Charleston, congratulations. Bear in mind: the appeal of cheaper labor in the south lured textile, shoe and other industries from the north over the past 100 years. Those are largely gone now.

I found an interesting discussion thread entitled "Will Boeing move to Beijing?" Sound ridiculous? Not so much given that many of the 840 or so standing orders for the 787 come from that of part of the world. And think of not only the labor savings in China, but on executive compensation, too.

More coverage of Boeing's 787 Dreamliner on SmartPlanet:

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John Dodge

Contributing Editor

Contributing Editor John Dodge has written for the Wall Street Journal, Boston Globe, PC Week (now eWeek), EDN, Design News, Electronic Business, Bio-IT World, Health-IT World, Lowell Sun, Haverhill Gazette and Newburyport Daily News. He is based in Massachusetts. Follow him on Twitter. Disclosure