Decisions, Decisions!

decisionsIn our email in August entitled “Right To Work” we discussed the potential impact of Boeing moving much of its work out of Washington State and the impact of that decision.

In that writing, we stated:

” … Boeing, or any other company, is going to build its products where it is the most cost effective for them as a company.”

The recent machinists vote may have brought that day closer than we could have imagined last summer.   Without commenting on the quality or “fairness” of Boeing’s offer, we can see some of the areas in which the battle lines were drawn and the possible impacts.

One of the basic rules of negotiation is to never negotiate in a public forum.   With social media and TV, every comment becomes a part of the serious negotiation.   One of the comments from the machinists rally, made very publicly was: “They wouldn’t dare not build it here.” Several more comments following the vote were along the lines of: “I guessed we showed them!” All made to a media hanging on every word.

The basic premise appears to be that Washington State has the best and most experienced work force in Boeing and given the problems with the 787, the company has to build the 777X with that experienced workforce.

But Is That Assumption True? 

Boeing and other aerospace companies are undergoing a major technology shift.   The “experienced” workforce in Washington has years of experience in building aluminum aircraft.   But as the technology shifts the relevant experience may be no greater than in other locations.

Tomorrow’s aircraft are going to be composite. Today it’s the wings and tail. Tomorrow it will be the entire aircraft.   As composites are the new technology, they have to be learned.   And that learning can take place in South Carolina, Utah, California, or anywhere as well as Washington.

We’ve seen this in looking at other technologies.   During the minicomputer age, the center of the technology was Route 128 in Massachusetts. Digital Equipment, Data General, Wang, etc. all were the leaders in that industry.   But as the microcomputer became prevalent, the center of technology shifted to Silicon Valley in California.

… An Echoing Wasteland

Aviation analyst Scott Hamilton described the aircraft manufacturing industry as “a bleak future for Puget Sound.”   As the current lines of aircraft phase out toward 2021, he foresees that loss of the 747, 777 and 767 could turn the Everett plant into “an echoing wasteland.”

Even the Renton plant which builds the 737 and now has more than 1600 orders will eventually see that plane replaced by a composite technology aircraft.

Decisions are made on both a short and long term basis.   2021 is not that far away and there is at least one more contract negotiation before that. But, on a long term basis, it appears that a decision by Boeing to build the 777X elsewhere may have a long term impact on employment in Washington.

But wait, you are probably saying.   This is not the 1970’s when a slump by Boeing led to billboards asking the last person out of Seattle to turn out the lights. We have Microsoft, Google, Amazon, a thriving biotech sector and other technology jobs.

All true, and for those with the right college degree and / or an advanced degree, the future in the Puget Sound area looks very bright

But a Boeing or related aerospace manufacturing job is one that provides that good solid middle class wage that enables the non-college graduate to raise a family and buy a home.   As we all have decried as we watch those jobs disappear, those jobs are continually becoming fewer.

Today they exist in aircraft and aerospace manufacturing, the auto industry, the oil patch and a few other industries.   And for those of us in Washington, it’s been aircraft.   Those losses may have already started.   The latest October jobs report for the State of Washington shows a decline in aerospace manufacturing of 1,000 jobs, led by layoffs at Boeing.

The loss of those jobs in the state impacts all of those companies that support and provide services for Boeing and its employees.   It affects housing values near the manufacturing plants. And most importantly, it affects the funding for the schools that we need to create the next generation of skilled workers needed in our state.

The Full Impact …

The full impact of the machinists vote and Boeing’s decision on where to build its next generation of aircraft will not be fully felt for eight or nine years.   But impactful it definitely will be.