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Originally published July 1, 2009 at 11:43 AM | Page modified July 1, 2009 at 4:37 PM

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Guest columnist

How to keep Boeing in Puget Sound when South Carolina beckons

The Puget Sound region must not waste time in responding to signals that Boeing might be expanding its operations in South Carolina, argues guest columnist Scott Hamilton. "Action is needed now," he writes. "The plane is already pushing back from the gate."

Special to The Times

HOW do we keep Boeing in Puget Sound?

On June 21, the trade magazine Aviation Week wrote that Boeing had already selected Charleston, S.C., as the preferred site for its second assembly line for its 787. And a new round of speculation was touched off by Wednesday's report that Boeing would be acquiring the Vought Aircraft Industries plant in North Charleston.

Boeing is not commenting on the report, but I know from talking to many people that there is a lot of smoke out there. You know what they say about where there is smoke.

The region must act now to ensure Boeing's long-term future here for successor airplanes to the 737 and 777.

The odds are great that the 787's Line 2 will not be in Puget Sound. Boeing needs to move quickly and dramatically. The pressure to get the 787 program back on track is great, and the stakes are further elevated with the current structural problems adding to two years of delays. The company's credibility is nonexistent with customers. The deferred revenue amounts to the multibillions of dollars. Compensation costs to its customers are adding up to the billions of dollars. Cash levels have dropped alarmingly, with huge cash requirements coming due in just a few years. Boeing must get the 787 program moving. This means a Line 2 is the only answer.

It's almost certainly too late for local stakeholders to influence this decision.

A second line will enable Boeing to have two lines each producing seven planes a month, a higher rate than the total of 12 widely discussed. Boeing needs this capacity to catch up on delays for more than 50 customers with 850-plus orders stretching to 2017-20 — and to offer delivery slots to new customers. (This also begs the question of which line might be downsized in the inevitable future recession.)

Boeing has made it clear its labor troubles and the business climate in this state have been and continue to be issues. But more than that: Boeing does not want to be captive to any one state. It's not widely known or remembered, but in 1997 Boeing was about ready to put a second 737 line at its newly acquired McDonnell Douglas facilities in Long Beach when the production fiasco that year shut down the 737 and 747 lines — and plans to open a second one in California.

If Boeing opens a second line in Charleston, what comes next for Puget Sound?

It's all about cost, cost, cost. Stakeholders here must realize that to preserve Boeing's presence and all the related jobs and industries in the Puget Sound, a solid business case will have to be made to Boeing CEO James McNerney in the Chicago headquarters. Unlike Scott Carson, the president of Boeing Commercial Aircraft, or Pat Shanahan, vice president of product and services, McNerney has no emotional ties to Puget Sound — he grew up in Minnesota and spent most of his professional life east of the Mississippi.

McNerney needs to be persuaded that Puget Sound is competitive on all cost-based levels: wages, benefits, taxes, building costs, impact fees, energy costs, etc. Quality education at all levels — long a Boeing hot topic — is also important. To single out any particular stakeholder group, such as focusing on the unions or on the generic "business climate," isn't enough. It's true that labor will have to step up to guarantee stability. Boeing customers I talk to are fed up with strikes and work disruptions. This isn't just Boeing management rhetoric.

There has to be a realization that a "total package" approach is necessary to keep future airplane programs such as the successors to the 737 and 777 in Puget Sound.

This is what the new Washington Aerospace Council is all about, or so we would be led to believe. But it will take a year for this group just to find the keys to the loo. Action is needed now. The plane is already pushing back from the gate.

Scott Hamilton has been in commercial aviation for 30 years. He currently is managing director of Leeham Co., an aviation consulting firm in Issaquah.

Copyright © 2009 The Seattle Times Company

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