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Spokane, Washington  Est. May 19, 1883

Inslee says Boeing tax breaks in danger if 787 line moves

A Boeing 787 airplane being built for Norwegian Air Shuttle is shown at Boeing Co.'s assembly facility, in Everett, Wash. on June 12, 2017.  (Ted S. Warren/AP)
By Jim Camden and Amy Edelen The Spokesman-Review

OLYMPIA – The favorable tax breaks the Boeing Co. gets could be in danger if it moves all production of its 787 jetliner to South Carolina, Gov. Jay Inslee said Wednesday.

The Wall Street Journal reported late Tuesday that the company will consolidate production of the Dreamliner at its North Charleston facilities, closing the other assembly line in Everett.

Inslee apparently has not received confirmation of that plan from the state’s largest manufacturer, although he said the state has reached out to Boeing to see what steps could persuade the company to keep the line in Washington.

“If the Wall Street Journal report is accurate, Boeing would be turning its back on the finest workers and the best place in the world to build airplanes,” Inslee said in a news release. “Washington state has supported the company with a well-trained workforce, a robust supply line, unparalleled infrastructure, world-class research institutions and the best business climate in America.

“If this report is true, it would force a review of that partnership, including a hard look at the company’s favorable tax treatment.”

Boeing spokesman Ivan Gale declined to comment Wednesday on the Wall Street Journal report. In an email response, Gale provided a company statement about its 787 Dreamliner consolidation study.

“We will prudently evaluate the most efficient way to build airplanes, including studying the feasibility of consolidating 787 production in one location. We are engaging with our stakeholders, including the unions, as we conduct this study,” the company said in an email. “We will take into account a number of factors and keep an eye on future requirements as we think through the long-term health of our production system.

“Boeing remains committed to Washington state and South Carolina. We understand that our employees have questions and we will communicate details, including any potential workforce impact, as soon as possible.”

U.S. Sen. Maria Cantwell, D-Washington, said Boeing should not cut its workforce in Everett without a plan to retain and retrain those workers.

“Everett provides capacity that will be needed,” Cantwell said.

“We should be taking the opportunity now to prepare for a recovery in aviation demand by retaining a production workforce in Everett and keeping the supply chain hot and ready for higher production levels.”

State Senate Majority Leader Andy Billig, D-Spokane, echoed comments that Washington has the best aerospace workers in the country, adding that if reports are true, Boeing is making a “tremendous mistake” by putting 787 production solely in South Carolina, where workers have had problems.

“It’s a decision that would not be in the best interests of the company,” Billig said.

The company has not confirmed the reports, and the state and Boeing have a long history of a mutually beneficial relationship, he said.

If reports are true, “it makes sense we would evaluate all aspects of that relationship,” Billig said.

In 2003, the Legislature approved tax breaks for aerospace companies in Washington with an estimated value of $3.2 billion in a bid to keep at least some 787 production in the state as Boeing was planning to open a second line at a facility it bought in North Charleston.

In a short special session in 2013, Inslee and the Legislature extended those tax breaks as a way of persuading Boeing to build major portions of the 787 in Washington.

At the time, Inslee described the deal as “a great day for Washington.” During his brief run for president last year, he described it as being “mugged.”

The aerospace tax breaks are a topic of discussion during most legislative sessions, said House Appropriations Chairman Timm Ormsby, D-Spokane. They cover all aerospace manufacturers in Washington, and small and medium-sized suppliers as well as Boeing.

If the 787 line leaves Everett, and like others Ormsby said he hadn’t heard anything from Boeing, “we don’t know what impact it is going to have on their ability to be suppliers.”

Last week the state’s Economic and Revenue Forecast projected that the state’s economy was coming back faster than officials thought in June and cut in half a projected shortfall. But economist Steve Lerch said at the time that was without potential losses of jobs at Boeing, which at the time had just surfaced as rumors.

The impact of Boeing’s potential 787 assembly line move to South Carolina wouldn’t likely be felt right away among Eastern Washington aerospace manufacturers, said Mark Norton, chairman of the Inland Northwest Aerospace Consortium.

INWAC is a regional alliance of aerospace manufacturers along the I-90 corridor from Central Washington to Central Montana. It has about 25 Spokane-area companies that are involved in some type of aerospace manufacturing.

Because Boeing’s 787 Dreamliner program is “very specific” it would impact only about four or five Eastern Washington aerospace manufacturers, which are second- and third-tier suppliers in Boeing’s supply chain, meaning they make products that are shipped elsewhere before reaching the Everett plant, Norton said.

“Boeing’s external vendors are not something you can change at the drop of the hat, so as long as they are still making the planes, the supply chain for parts and components will stay pretty intact for the short term,” Norton said.

However, the long-term impact of Boeing’s potential 787 assembly line move could be significant for employees at its Everett plant, in addition to the workforce of tier 2 and 3 suppliers in the state, especially if tier 1 suppliers choose to partner with manufacturers closer to South Carolina, he said.

“Hopefully, the public understands Boeing is one of the major exporters for the state, so this is a pretty serious situation longer term,” Norton said.