Washington state congressional delegates pitch for Boeing plant

Reuters News
Posted: Dec 10, 2013 5:11 PM
Washington state congressional delegates pitch for  Boeing plant

By Alwyn Scott and Harriet McLeod

WASHINGTON, D.C. (Reuters) - Washington's full congressional delegation pleaded with Boeing Co on Tuesday to keep its next-generation jetliner in the state as rival states made their own pitches to lure the 777X in a contest worth billions of dollars.

In an open letter on Tuesday to Boeing Chief Executive Jim McNerney and Boeing Commercial Airplanes Chief Executive Ray Conner, the state's two senators and 10 representatives emphasized the congressional support that would come with putting the jet factory in their state.

"We are the aerospace industry's strongest allies and loudest advocates in Congress," the letter said.

The appeal comes as Missouri, Georgia, Alabama, California, Kansas and Charlotte and Greensboro, North Carolina, offered varying mixtures of tax credits, monetary grants, free land, infrastructure spending and other incentives to win the factory. Many of the states declined to provide details of their proposals, citing a confidentiality agreement imposed by Boeing.

Boeing said proposals have started to arrive and it expected to have a firm count later in the week. It declined to name any locations and said it plans to choose a factory location early next year.

The race to land the new jetliner program shows the desperation of states for new industrial investment and the well-paid jobs that come with it. Washington state officials estimated last month that the program would support 56,000 jobs and pay back $21 billion in economic benefits.

The contest also affirms the masterful strategy used by Boeing to find the best deal it can. The company offered to build the aircraft in Washington state last month, provided the state gave Boeing a major tax cut and unionized machinists approved a long-term contract eliminating the possibility of a strike until 2024.

Washington state lawmakers convened a special session and passed a package of tax incentives for the aerospace industry worth $8.7 billion over 27 years. But the machinists balked at Boeing's contract offer, which would have eliminated their pension plan, slowed pay raises and increased the cost of employee healthcare plans.

"All of this is a way of getting leverage against the union and the government in Washington state," said Richard Aboulafia, an analyst at the Teal Group in Fairfax, Virginia.

Competing states are offering smaller sums. But Boeing is considering a range of factors, including wages, access to air and sea ports, highway connections and energy costs.

In St. Louis, Missouri, Gov. Jay Nixon stood in front of a locally built Mercury space capsule on Tuesday as he signed an incentive package, staging meant to emphasize the city's history of aerospace manufacturing.

The bill provides tax incentives worth up to $1.7 billion over 23 years, provided Boeing creates 8,000 jobs and invests in infrastructure and meets other criteria.

"I think all the states are putting their best foot forward," Rep. Anne Zerr, sponsor of Missouri's legislation, said on Tuesday, noting Boeing plans to make its decision by mid to late January. "Now it's up to Boeing."

Other states that confirmed they were submitting proposals included Alabama, California, Georgia, Kansas and Wisconsin. Other states that have received requests for proposals or have significant Boeing presence, such as Florida, South Carolina, Texas and Utah, declined to comment.

Boeing is willing to spend up to $10 billion on the 777X factory, covering about 4.2 million square feet, and wants free or low-cost land, according to published reports about its request. Boeing declined to comment on the reports.

Washington's effort to win the work began in mid-October, when machinist union leaders began holding confidential talks with the company about a labor deal that could clinch the location for the state.

The talks, revealed exclusively by Reuters, eventually led to a formal offer that machinists rejected on November 13. Now, both sides are struggling to restart talks, according to a person familiar with the matter.

Boeing appears to be moving quickly to make a first cut of the list, perhaps as early as the end of the week, the source said, speaking on condition of anonymity because the information was not public.

That has put pressure on the sides to come together.

"They are struggling to figure out how to save face and get back to the table," the source added.

(Reporting by Alwyn Scott.; Additional reporting by Harriet McLeod. Editing by Andre Grenon)