Business

787 assembly line 'huge deal' for S.C.

CHARLESTON - Behind closed doors, business and local government leaders in South Carolina are working to deliver an electrifying jolt to the economy of this genteel city - at the expense of Washington state.

Already the site of side-by-side factories that produce two-thirds of the fuselage for Boeing's 787 Dreamliner, Charleston is in a tight race with Everett to be the location of a second final-assembly line for the new jet.

"It's a huge deal," said Pat Barber, a well-connected Charleston businessman who owns a trucking company that specializes in oversize loads and could win a lot of Boeing work if his city prevails.

"It'll be the biggest thing to happen in South Carolina in the last 25 to 30 years. ... Once people see Boeing can build an airplane successfully here, it's a matter of time before other companies and industries catch on."

Boeing is making a momentous choice for both regions. And Charleston has more going for it than is generally recognized in Washington.

The Boeing board of directors met Monday in Chicago without reaching a decision on siting a second 787 production line. CEO Jim McNerney said last week that the choice will be announced within two weeks.

Boeing is pressuring the Machinists union to make an immense concession - a 10-year agreement not to strike - that could secure the prize for Everett.

Meanwhile, it has filed for permits to clear land by the North Charleston airport for a potential new factory, has drawn up building plans, and is preparing for a potential announcement in South Carolina.

This old city's climate and the warmth of its laid-back Southern culture draw tourists to its historic downtown and to nearby beaches. The more elite neighborhoods are graced with million-dollar homes, avenues of palm trees, and stately live oaks draped with Spanish moss.

Yet it's the state with the nation's fifth-highest unemployment rate, and local officials are hungry for more of the global manufacturing work that Southern states have wooed so successfully in recent years.

Charleston boasts one of the deepest ports on the East Coast and a highway network that flows over soaring new bridges toward an airport with runways long enough to handle the largest airplanes built.

Beyond those logistical advantages, South Carolina's hand in this poker game includes three aces:

- A nonunion work force

- Financial incentives to ease Boeing's costs

- State-funded training at tech colleges to diminish the disadvantage of local workers' inexperience

Barber said business leaders here believe that only the trump card of a no-strike deal with the Machinists can thwart Charleston.

Beside the Charleston airport, which is shared by an Air Force unit that flies giant Boeing-built C-17 military transport jets, two 787 fuselage plants are already established.

At one plant, Boeing Charleston, about 900 workers operate impressive machinery to fabricate the 787's single-piece rear-fuselage barrels out of composite plastic.

Cylindrical tools shape the barrels, which are hardened in massive ovens. Giant fixtures like open jaws lined with suction cups delicately hold freshly baked barrels. Huge machines automatically drill and fasten. The workers then join the sections and install wiring, ducting and insulation.

Boeing acquired the operation from Vought for $1 billion in July, expanding the Charleston footprint it established in 2008 when it bought half of the adjacent plant, Global Aeronautica, also from Vought.

At the Global plant, 1,600 workers swarm over airplane sections along parallel production lines as they assemble the Dreamliner's central fuselage.

Industry analysts and a person close to Boeing management in Charleston say Boeing is also interested in buying the other half of Global from its Italian 787 partner, Alenia. That would advance the concept of a Boeing-owned complex in Charleston.

In the meantime, production at both plants is driven by Boeing managers.

Though the company's workers in the Pacific Northwest might disparage Charleston's lack of expertise in airplane making, Boeing's supplier network has been building large 787 sections here for more than three years - including the type of assembly and installation work formerly done only in Boeing's Puget Sound-area factories.

Initial production was plagued with problems, but Boeing claims it's flowing more smoothly now. Hundreds of employees from the partner companies, sent here to finish incomplete sections, have gone home to Italy and Japan.

IMPORTING WORKERS

Still, for all the technological wizardry, the assembly and installation work remains a challenge for local mechanics.

Two Boeing Charleston mechanics, speaking outside work, said they were happy Boeing had taken over from Vought.

Yet both described a production line and a workplace still under stress, with a furious pace of work demanded by managers.

"We're struggling," said one mechanic, who works 10-hour days and recently had mandatory weekend overtime. "They've got us running full tilt."

Without enough trained workers in Charleston, both Boeing and Global still import more experienced - and more expensive - contract workers.

The outside contractors, who make up some 35 percent of the work force in each plant, are experienced airplane mechanics paid about $26 an hour, compared with the $14 an hour for local employees, said a person familiar with the pay rates. (In Everett, Machinists on average earn about $26 an hour plus benefits.)

The two mechanics, speaking on condition of anonymity since the company doesn't allow employee interviews, described a cultural divide between the contractors and the local employees. Many of the contractors are Hispanic Americans, traveling journeymen from California, Florida or Texas, who often speak Spanish on the shop floor and mix little with the locals.

Gradually, both Boeing Charleston and Global aim to replace all the contractors with company employees.

One of the perks offered by South Carolina is state-funded training of new employees in courses lasting from six to eight weeks. The local Trident Technical College has classes geared specifically to Boeing's needs.

Global has about 200 employees due to come out of Trident and into the factory through November.

However, a person close to Boeing management said there is still concern about the readiness level of some of the employees coming out of Trident. Equipment for additional in-house training was recently set up in a corner of the plant to get incoming hires up to speed.

BMW SHOWS IT CAN BE DONE

Despite the growing pains Boeing and its partners have suffered, other manufacturers show it can be done in South Carolina.

BMW put its first U.S. factory in the Upstate 15 years ago, drawing 40 suppliers to the vicinity.

The nonunion BMW work force of more than 5,000 produces X-5 and X-6 crossover SUVs, most of which are exported through the Port of Charleston.

"You can't tell a German-produced BMW from a South Carolina-produced BMW," said business leader Barber.

A few miles north of Boeing's Charleston plants, engine-maker Cummins produces turbochargers for diesel engines in a factory that is meticulously organized. Each day, nonunion workers there complete precisely the number of turbochargers ordered by customers three days earlier.

Plant manager Vipul Tandon arrived there a year ago from Indiana.

"If I could have dreamt of a work force, I don't know if I could have dreamt this good," Tandon said.

RICH INCENTIVES

Gov. Mark Sanford and the state's Department of Commerce won't talk about their bid for the new Boeing plant.

"This is a business deal," Sanford said in a statement last week. "We are not doing it with news releases and publicity, because we don't think that's in the best interest of the negotiation process."

But Charleston business leaders and consultants involved in corporate siting decisions say state officials are aggressive in pursuing economic development.

"They know how to put a deal together," said John Krug, a vice president with N.C.-based location analysis firm Development Advisors.

Back in 2004, South Carolina produced a rich incentive package for Alenia and Vought.

It gave upfront grants of about $120 million to help pay construction costs, plus property tax and other credits worth another $50 million to $60 million over 20 years. It paid for the Trident training.

Despite a severe state budget crunch, South Carolina's legislators reconvened Tuesday to vote on special financial incentives to win the 787 assembly line.

NO UNIONS

Tom Risley, the CEO of Vought when the company chose Charleston, said he was impressed by the unqualified commitment from South Carolina's political and business elite.

And yet, Risley weighed one factor before all others when he embarked on his site search: avoiding unions.

Despite the aerospace tax breaks passed in Washington state to secure the first 787 final-assembly line, Risley said he didn't even consider Everett for the fuselage-section plants that ended up in Charleston.

"I would still have been facing a union environment, and I did not want that," Risley said. "A lot of our business case was based on what the labor rates would be. That was why I never wanted to go to the Northwest. ... It just wasn't on our radar."

South Carolina is a so-called "right-to-work" state, meaning employees don't have to join unions even if a workplace is unionized.

It's also an "at-will" state. According to the definition on the Web site of the state's Department of Labor, Licensing and Regulation, this "means that employees may be terminated for any reason, a good reason, a bad reason, or no reason."

Those laws make unions much weaker in South Carolina than in Washington.

In September, the Boeing Charleston work force voted to oust the Machinists union. A week later, Geoff Schuler, chief operating officer at the plant, sent a memo to employees announcing with "great pleasure" a one-time, 3 percent pay increase across the board as well as benefit improvements.

The two Boeing Charleston mechanics who described their working conditions took that as a sign of more to come. They expect Boeing will give them a more significant pay raise next year to ensure the facility stays union-free.

"We're certainly hopeful they'll do us right," one mechanic said.

"If they don't," the other said, and he mimed putting a phone to his ear: "Hello, union."

However, a person close to Boeing management, who asked not to be identified, said an additional large raise is unlikely. "That's false hopes," the person said.

While the nonunion work force of Charleston is clearly attractive to Boeing's leadership, choosing South Carolina does risk worsening labor relations in Washington.

In a stinging analysis posted at his Leeham.net Web site on Thursday, aviation-industry analyst Scott Hamilton warned Boeing that selecting South Carolina would "enrage the IAM 751 here, leading to 'work-by-the-rules' actions that will slow production" for all airplanes, not just the 787.

He predicted torturous contract talks in 2012 that would make the 2008 two-month strike "look like a Sunday picnic."

And any strike in Everett would likely close Charleston down too, wrote Hamilton, "because of the close production and assembly ties" that would have to be established between the two sites.

Boeing's leadership is on the brink of a fateful choice for Washington state.

If Charleston wins, Boeing will establish a complete airplane-manufacturing complex on the East Coast. Future Boeing airplanes could be built there instead of in the Puget Sound region.

In that case, ex-Vought CEO Risley foresees a chilling scenario for this region some years ahead.

"If (Boeing) does put a plant in Charleston, and the production rates drop back later to where they can only sustain one (787) line, I would suspect they'd sustain the line in Charleston," Risley said. "Because the economics are there."

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