How Boeing conned Carolina
News reports out of South Carolina show how Boeing Co. executives used the charade of talks with the Machinists Union to press nervous Charleston-area officials into granting even bigger tax breaks.
This even though it was clear to insiders that Boeing had made the decision to turn its back on Puget Sound as far back as February.
As a result, Boeing was able to con Carolina for an estimated $450 million in tax breaks — including the oft-discussed $170 million loan. The total cost may end up being much higher, notes one conservative South Carolina think tank: state officials there have yet to provide a realistic estimate of how much the state’s taxpayers will have to pay to Boeing.
To hear South Carolina politicians tell it, Boeing’s decision to put a second 787 assembly line in Charleston was the result of years of quiet, bi-partisan cooperation and cool nerves in the clutch. The crunch time came two weeks ago, as Boeing pretended to negotiate in good faith with Machinists Union delegates, who had proposed a long-term contract extension to give Boeing the labor stability executives said they needed here. According to newspaper reports, Boeing asked South Carolina to borrow an additional $37 million. The Carolina Legislature and governor quickly caved, and Boeing opted to move south.
This even though it was clear that Boeing had no intention of putting the plant anywhere but Charleston. According to Sen. Patty Murray — Boeing’s leading advocate in the Senate — it was pretty obvious as far back as February that Boeing wasn’t seriously considering putting the second line in Everett. Boeing’s demand for a 10-year “no strike” guarantee seemed calculated to antagonize the Union. Boeing’s subsequent decision to break off talks with the Machinists once they offered one — makes it seem pretty obvious that Boeing ” may not have wanted to get to the finish line,” Murray spokeswoman Alex Glass told The Herald in Everett.
Leeham Co. analyst Scott Hamilton noted that Boeing executives have been wildly inconsistent in the reasons they gave for considering South Carolina, telling officials here one thing and officials in Charleston another. When he heard a Boeing spokesman say that Carolina’s business climate and incentives were the deciding factor, he says he “immediately called Boeing to ask that if business climate was indeed a factor, why wasn’t Washington state so advised and given the opportunity to consider more incentives rather than proceeding under the understanding that labor, not business climate, not incentives, was the issue.” The “push back” he got was that his seemingly valid question “was simply off-base.”
So what’s the future hold? While Hamilton is critical of IAM leaders for “demanding more than Boeing could accept,” he also dismisses many of the claims Boeing management is making as they tout the benefits of the Charleston expansion:
- Boeing’s claim that the Charleston plant insulates the 787 from future work stoppages in Everett is wrong because “Charleston and Everett are so inter-connected … a strike in Everett will have spillover to Charleston; you can’t totally divorce the two.”
- Boeing sees right-to-work South Carolina as a more-friendly, union-free environment, but that’s not likely to last, Hamilton says. One of his sources — a former long-time Boeing executive — predicts “Boeing management will mistreat the Charleston workers such that he thinks the plant will be unionized within 30 months.”
- Boeing is assuring investors that it will be able to get the Charleston plant running on schedule and efficiently operate duplicate factories on opposite coasts. But Hamilton doubts it, saying he’s “not impressed with Boeing’s track record in evaluating risks. Management has been consistently wrong on the 787’s program risks; they were wrong on the 747-8 program challenges; and last year, they were wrong on the risks of a strike.” The 787 is already a high-risk program, Hamilton says, and this Carolina venture only adds another layer of risk and complexity.
And in South Carolina, conservatives are wondering just what they’ll gain by pandering to Boeing. “In 2004, Washington state gave Boeing $3.2 billion in incentives, but the company chose to build their new plant in North Charleston,” the South Carolina Policy Council noted. “Clearly, there is no guarantee the company will reward South Carolina’s taxpayers down the road.”