Deal of the Decade
As the year comes to an end, we’re always busy assessing the nominees for Business Facilities‘ annual Economic Development Deal of the Year Awards competition. But as we prepare to send the project submissions for the 2013 DOTY awards to our blue-ribbon panel of judges, we’re also keeping our eyes peeled for an obvious front-runner for the 2014 contest.
In recent weeks, a leading contender for next year’s honors has roared into view: aircraft giant Boeing got everybody’s attention when they put out an RFP for a contract to build their new 777X, a passenger jet that’s expected to be Boeing’s flagship offering throughout the 2020s. The overall economic impact of the project will be measured in billions; the deal could create more than 8,000 jobs for the winning location.
The filing deadline for the mega-deal was Monday and, according to reports, at least eight states have weighed in with eye-popping proposals larded with billions in incentives. As this is being written, Missouri, South Carolina, Texas, Alabama, Utah, North Carolina, California and Washington reportedly have thrown their hats into the ring in what is shaping up as the biggest economic development contest in recent memory.
The RFP appears to be Boeing’s trump card aimed at breaking a long-running dispute with the Machinists union in Everett, WA, Boeing’s long-time production hub and current home to its 777 assembly line.
The aircraft giant fired a megaton shot across the union’s bow four years ago, when it opted to put its second 787 assembly line in North Charleston, SC (our 2009 Deal of the Year Gold Award winner). The decision to put the second 787 line in right-to-work South Carolina was taken after an acrimonious strike by the Machinists that delayed the long-anticipated rollout of the first 787 Dreamliner jets.
Last month, the Machinists rejected 777X-related concessions Boeing maintains are essential to keeping production in Washington, including deep cuts to pension and health benefits. Industry analysts view the RFP as a last-ditch effort to break the deadlock and bring the union back to the bargaining table. If a new deal with the union can be reached, they say, Washington will surge back into the front-runner position in the 777X contest.
According to reports, CEO Ray Connor of Boeing’s aircraft unit met on Tuesday with representatives of the Machinists union’s District 751 (which negotiates for aerospace workers in Washington and Oregon) for the first time since Nov. 13, when two-thirds of the district’s members voted to reject Boeing’s offer to keep the 777X in Washington if the union agreed to an eight-year contract extension including pension cuts. Neither side characterized the meeting as a negotiating session, but the union confirmed it’s been urged by WA Gov. Jay Inslee and Everett Mayor Ray Stephenson to resume talks.
The stakes could not be higher for Washington and Boeing: the state has been Boeing’s primary aircraft assembly hub for decades–it boasts the nation’s leading aerospace industry, with an established skilled workforce. Overall, losing the Boeing hub could cost the state up to 56,000 in direct/indirect jobs and $20 billion in economic activity tied to aircraft production. If Boeing chooses to relocate the 777 line it will sacrifice $8.7 billion in incentives (spread over the next 25 years) which the state has tied to a long-term commitment to Everett.
Missouri Gov. Jay Nixon has made public his state’s bid for the 777X, a package of up to $1.7 billion in incentives tied to the number of jobs created by the project over the next 20 years. The bid to build the assembly plant in St. Louis County includes a unique offer from local construction labor councils, who reportedly have agreed to work a 24-hour schedule–without overtime–to reduce by up to a year the timeline for building a new 777X assembly plant.
SC Gov. Nikki Haley is declining to speculate about what’s included in South Carolina’s bid (the state’s successful 2009 bid for the 787 included $570 million in incentives). A successful bid for the 777X could make SC the nation’s leading commercial aircraft hub.
Alabama, which landed Airbus’s first North American assembly facility for Mobile with an incentives deal worth about $159 million, reportedly brought Huntsville officials to a meeting with Boeing last month. Boeing already owns about 300 acres at the Huntsville International Airport, a site large enough to accommodate the 1 million square feet of production space that will be needed for the 777X.
California, a perennial aerospace leader, waited until Tuesday night to send in its bid, which is said to be loaded with billions in tax breaks, available property, favorable labor deals and a customized training program. A Long Beach facility currently producing Boeing’s C-17 military cargo plane and scheduled to close in 2015 (due to lack of orders from the Pentagon) is believed to be the Golden State’s candidate site for the 777X project, which is scheduled to begin production in 2017.
Analysts believe Utah’s bid for the 777X is centered on Salt Lake City, currently home to a major composites fabrication unit for Boeing. While Texas Gov. Rick Perry declined to provide specifics about the Lone Star State’s bid, San Antonio currently hosts a facility that maintains and overhauls Boeing jets, including the Air Force One fleet.
North Carolina reportedly is centering it entry on two potential sites for the Boeing plant, Charlotte Douglas International Airport and Global TransPark in Kinston, NC, 250 miles east of Charlotte. The TransPark is a logistics complex featuring an 11,500-foot runway for cargo planes, a rail spur, available manufacturing facilities and undeveloped land.