Documents: Charleston was Boeing’s riskiest option

SEATTLE – Newly uncovered Boeing Co. documents show the company’s own executives believed that “Project Gemini” – their plan to establish a second 787 line in South Carolina – was the highest-risk option for their new Dreamliner jet and the one most likely to fail.

At the same time, a report by a public interest research group shows that Boeing follows a deliberate strategy of boosting profits by squeezing taxpayers for handouts in South Carolina, Washington and other states.

The Project Gemini documents and the report on Boeing’s tax strategy were released by Machinists Union District Lodge 751 Friday at the International Labor Communicators Association’s convention in Seattle.

“The Project Gemini documents prove what we’ve suspected all along – that Boeing moved to Charleston to punish our members for exercising their union rights,” said Connie Kelliher, a spokeswoman for District 751.

“In addition, the report on Boeing’s tax strategy shows the company considers state and local governments to be cash cows to be milked at every opportunity,” she said. “We’ve certainly seen that, with the 787 incentives in both Washington and South Carolina.”

The Project Gemini documents are part of the evidence subpoenaed by the National Labor Relations Board as part of its complaint against Boeing. The federal law enforcement agency alleges that Boeing is moving 787 work to Charleston in retaliation for strikes by Machinists District 751 in 2005 and 2008.

Project Gemini

The documents disclosed Friday were first presented to Boeing’s board of directors in April, August and October 2009. They show that:

  • Boeing Commercial Airplanes executives from Puget Sound considered Project Gemini to be the highest-risk option they studied, with the highest likelihood of failure and the most-serious consequences should failure occur.
  • Even if successful, the cost of Project Gemini would have a long-term “negative impact to 787 program profitability,” the executives warned. The new buildings would cost more than $1.5 billion, they said — “significantly greater” than the cost of keeping the line in Everett.
  • The new Charleston workers would not be as productive as those in Everett, increasing the likelihood of missed deliveries, they warned. That would mean payments of more late fees to angry customers that have already demanded billions of dollars in compensation after three years of delays.
  • Finally, Puget Sound executives feared that having separate 787 lines 3,000 miles apart would delay introduction of the 787-9, a new larger Dreamliner. They warned of “skill dilution” with managers and assembly workers spread between two sites, as well as the risk of “management distraction.”

Boeing’s Cash Cow

The report on Boeing’s tax strategy was written by the Institute for Wisconsin’s Future, which proclaims “there is no large company in America better at avoiding taxes than Boeing.”

It includes information from a workshop Boeing put on for other corporations in 2004, titled “Turning Your State Government Relations Department from a Money Pit into a Cash Cow.”

According to the Institute, Boeing has been spectacularly successful in extracting tax benefits from at least seven states and also local governments:

  • In 2003, Washington promised a $3 billion tax break for Boeing and its suppliers in return for guarantees the company would build 787s in the state;
  • Boeing built its new 787 plant in South Carolina after “extracting” a 63 percent discount on its local property taxes in 2009, plus reimbursement for half of the remaining taxes it agreed to pay; and
  • Boeing moved into its new Chicago headquarters in 2001 after obtaining $60 million worth of state and local tax breaks.

One way Boeing does that is to pit states against each other in a competitive bidding process, the Institute reported. That’s what happened in 2009, when Boeing’s decision to move the second 787 line out of Puget Sound sparked a bidding frenzy.

South Carolina officials offered a deal originally estimated at $450 million, but months after it was signed, they admitted that even they didn’t know how much they’d given away. A local newspaper calculated the total handouts at least $900 million, with a final value “well above $1 billion.”

As Boeing profits from the handouts, the governments that grant them are struggling to fund basic services. South Carolina, for example, has run budget deficits of more than $1 billion in each of the past two years, forcing deep cuts in public health, education, universities, aid to seniors and disabled people and job-training programs (except for Boeing’s $33 million training pact).

Originally formed in 1935 to represent hourly workers at Boeing, District Lodge 751 of the International Association of Machinists & Aerospace Workers now represents some 29,000 working men and women at 45 employers across Washington, Oregon and California. In 2010, District 751 members used collective bargaining to reach contracts with 22 of those employers, without a single work day lost to strikes.

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3 Responses to “Documents: Charleston was Boeing’s riskiest option”
  1. Rudy Hillinga says:

    Reference:
    The statement: “Boeing Commercial Airplanes executives from Puget Sound
    considered Project Gemini to be the highest-risk option they studied, with the
    highest likelihood of failure and the most-serious consequences should failure
    occur. Even if successful, the cost of Project Gemini would have a longterm
    “negative impact to 787 program profitability,” the executives warned!”
    If this statement is correct and I have no reason to believe it is not, than I
    strongly recommend that the Boeing Board of Directors and it’s shareholders
    seriously evaluate the competency of the present top members of Boeing
    Management, based on their failure to listen to the above strong advise NOT
    to open a second 787 production-line is S. C. and expand their Puget Sound
    facilities instead!
    Furthermore, that same Boeing Management should be held accountable
    for their even greater failure to listen the advise of Dr. L.J. Hart-Smith, a
    former MDD Phantom Work scientist, who warned MDD Management against
    “OUTSOURCING” work on the DC-10/MD-11 program and also Boeing
    Management after it purchased MDD in 1997, AGAINST OUTSOURCING of
    work on the 787 program, BEFORE this program was formally launched in
    2002!
    Both warnings from Dr. Hart-Smith, who was fired by Boeing when he persisted
    with his warnings, were based on the fact that excessive out-sourcing, which
    had already caused the demise of MDD, would cause the sub-contractrs of the
    787 program to retain all the profits and pass on all of the cost-overruns to the
    “parent Co.,” Boeing!
    Why, based on the above, the McBoeing team is still in charge, is a mystery!

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  1. […] IAM 751 blog on the topic is here, bearing in mind that theirs is hardly an objective view. LD_AddCustomAttr("AdOpt", "1"); […]

  2. […] documents – which were acquired under National Labor Relations Board subpoenas – show that Boeing executives in 2009 considered a new factory in Charleston to be their highest-risk option, the one most-likely to fail and one that would hurt profits for years to come even if it […]



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