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Originally published July 27, 2011 at 11:19 AM | Page modified July 28, 2011 at 1:09 PM

Boeing's McNerney: Renton can't count on new 737

Boeing Chairman and Chief Executive Jim McNerney jolted listeners on a morning conference call Wednesday when he said its revamped 737 single-aisle jet with a new engine wouldn't necessarily be built in Renton or in the Puget Sound region.

Seattle Times aerospace reporter

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Boeing Chairman and Chief Executive Jim McNerney jolted listeners on a morning conference call Wednesday when he said its revamped 737 single-aisle jet with a new engine wouldn't necessarily be built in Renton or in the Puget Sound region.

"We haven't made the final decision about where we're going to produce the re-engined airplane," McNerney told Wall Street analysts and journalists, after briefing them on the company's strong second-quarter earnings.

"There would be major investments (needed) in Renton beyond the currently planned production rates," he said on the conference call. "Until we sort that all out, we can't confirm where we're going to put it precisely."

Boeing unveiled last week, as part of a massive American Airlines order announcement, its plan to scrap development of an all-new narrowbody jet and instead to put next-generation engines on the 737 at a cost of roughly $2 billion.

The re-engined 737 will have a slightly modified version of the airframe assembled in Renton, where the work force numbers more than 10,000. The common assumption in the aviation industry was that Renton would build it.

On Wednesday, McNerney pricked that bubble.

"We have other options and we're going to study them all as we think this through," McNerney said.

Immediately after the conference call, Boeing public-relations executives scrambled to soften the impact of McNerney's suggestion that the plane could be built elsewhere.

Then later in the day, Boeing corporate headquarters in Chicago issued a statement disavowing the comments of those executives and insisting McNerney's remarks "stand as delivered."

One option McNerney specifically mentioned is Charleston, S.C., where Boeing is readying a final-assembly plant to build 787 Dreamliners in parallel with its Everett plant. Whether Charleston might get the work, he said, "would depend as we studied it how competitive they are as compared to Renton or compared to another site."

Renton is by far Boeing's most efficient plant, currently rolling out more than 31 jets a month on a moving assembly line. The company plans to raise that to 42 per month by the first half of 2014.

A finely tuned 737 supply chain converges on Renton. Among thousands of different parts deliveries, tail fins arrive from China, wingtips from Austria and wing flaps from Japan.

Entire fuselages come by rail from Wichita, Kan. The wings are put together on site in Renton.

To assemble the upgraded plane elsewhere would require redirecting all those parts to some new factory, an expensive logistical effort.

McNerney acknowledged Renton has a "strong case" to continue building the 737s, adding it is "one of the great aerospace factories in the world."

Boeing is contemplating raising 737 production rates as high as 60 airplanes a month in the latter part of this decade. Two assembly lines there can already go to the 42-per-month rate.

A third line in Renton is used only to assemble the P-8 military version of the 737, built as an anti-submarine plane for the Navy, at a rate of no more than a couple jets per month.

Bryan Corliss, a spokesman for the International Association of Machinists, said the union has had preliminary discussions with Renton management about how to get to 60 planes a month in the plant. One option discussed, he said, was moving out the P-8 line to make room.

P-8 assembly could possibly be moved to a plant beside Boeing Field where military systems are installed on the planes.

Other changes might be needed. For example, a new wing-production line could be needed to meet a rate of 60 jets per month. It's possible that such a wing plant might have to be somewhere else than Renton due to lack of space.

Even then, there would be advantages to building the extra wings nearby and to continue to make in Renton the wings currently built there.

Corliss said Boeing's customers want the re-engined plane because it can be produced relatively quickly with the current Renton infrastructure.

"We don't see how it makes any sense for Boeing to think about going anywhere besides Renton," he said.

But McNerney insisted that because Boeing will have to make "significant investments" to upgrade tooling and factory space, such details cannot yet be decided.

"After 42 per month, we do run into some challenges if Renton were the choice," McNerney said. "We have to study that and figure it out."

Soon after the teleconference ended, the two top public-relations executives at the local Boeing Commercial Airplanes (BCA) division called The Seattle Times to "add context" to McNerney's remarks.

Mary Foerster, BCA vice president of communications, said McNerney "didn't intend to signal that anything would move out of Puget Sound."

Mark Hooper, director of communications at BCA, said he was calling out of concern that media stories could alarm employees.

"If I'm an employee (in Renton) and I hear my job is at risk — that's not what we're saying," said Hooper. "We're committed to this place. Jim (McNerney) might have omitted some things."

He said BCA Chief Executive Jim Albaugh personally softened the company message in an address to a small number of employees after the earnings call ended.

What Albaugh conveyed, Hooper said, "was a lot less threatening than our chairman may have framed it earlier."

Hooper said McNerney is constrained in making firm commitments until a definite plan for producing the re-engined 737 is agreed upon internally.

"It doesn't mean a sea change in what we are doing," Hooper said. "He's just buying time for the planning process."

"People ask, 'Why aren't you just committing to Renton?' " said Hooper. "We will. It's just a matter of timing."

However, late Wednesday Boeing issued a statement from Chicago specifically disavowing the comments from the executives based in Seattle. It said their comments "were neither accurate nor representative of the company's or BCA's position."

A spokesman for Boeing's corporate headquarters in Chicago, John Dern, said the inaccuracy was not in the Times' reporting of the comments, but in the comments themselves.

Boeing's clarifying statement had this bottom line:

"While Renton, Wash., logically would be our first location considered, no decision has been made. ... The decision on where to build the airplane will be made in due course."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

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