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As the S.C. General Assembly meets to rubber-stamp a massive incentive package for Boeing, the conjecture in Seattle is that talks between the Machinists union and the aerospace manufacturer are dead and that North Charleston is about to snag the second Dreamliner assembly line. “Basically, it’s over,” a Seattle-based aviation consultant said.
By Molly Parker
mparker@scbiznews.com
Published Oct. 28, 2009
As the S.C. General Assembly meets to rubber-stamp a massive incentive package for Boeing, the conjecture in Seattle is that talks between the Machinists union and the aerospace manufacturer are dead and that North Charleston is about to snag the second Dreamliner assembly line.
“I really wanted this marriage to work out, but I think it’s irreparably broken,” said John Monroe, a former Boeing executive who now acts as a volunteer with the Snohomish County Economic Development Council. He was referring to hopes of reconciliation between Boeing and the International Association of Machinists and Aerospace Workers.
The Seattle Times, quoting an unnamed source close to the negotiations, reported this morning that the discussions had flopped. Boeing was seeking a no-strike clause in response to a two-month walkout last year that led to further 787 production delays.
Scott Hamilton, a well-connected aviation consultant with Seattle-based Leeham Co., said he had heard the same thing from inside sources.
“Basically,” Hamilton said, “it’s over.”
In the face of Seattle’s deflated hope, the S.C. Senate was expected this afternoon to push a plush incentive package for Boeing over to the House with a largely procedural final vote. The tax incentive bill received a unanimous vote during Tuesday’s initial reading in the Senate, and a similar response is expected in the House.
Lawmakers have not specifically said the incentives are for Boeing — which has been coded Project Gemini — but the intended recipient of the fat carrot is a horribly kept secret.
The package includes a tax exemption on fuel used for “test flights” by a manufacturer and on fuel used in the transportation of major component parts for construction or assembly. The 787’s parts are assembled in manufacturing facilities around the globe. Boeing currently owns two parts suppliers in North Charleston that are responsible for two-thirds of the 787 fuselage section. Those pieces are transported to Everett, Wash., via the wide-bodied Dreamlifter, where the final assembly takes place.
Additionally, the measure would eliminate the sales tax liability on computer equipment for large manufacturers. This so-called “Google exemption” was added to the books in 2006 to lure the Internet search giant to Berkeley County.
Other tenets of the bill would allow Boeing to tap into $170 million worth of tax bonds for facility construction and would provide for the Department of Revenue to negotiate “special” apportionment agreements as relates to the figuring of Boeing’s corporate income tax.
Though not specific to Boeing, the threshold for a company to qualify for this package is that it must invest at least $750 million and create 3,800 direct full-time jobs in the state over seven years. In a conference call this morning, U.S. Sen. Lindsey Graham said a Boeing deal would be like “BMW on steroids.”
“It’s kind of like waiting for the baby to be born,” Graham said.
Graham’s Washington State colleague, Sen. Patty Murray, has reportedly called for one more last-ditch effort to bring the union and company back to the table.
Regardless, the 3,800-job threshold set by the S.C. lawmakers has raised eyebrows. Though Boeing does not specify the number of employees it has dedicated to each aircraft, Monroe, who spent 37 years with the company before retiring in 2003, estimated that the Dreamliner program employed about 1,200 people in Everett.
“It just seems to me that with just 787 production work, the 3,800 number seems a little bit on the high side,” said Monroe, who was program manager for the 777 program until his retirement.
Monroe and Hamilton said a requirement in the bill that the 3,800 positions all be direct Boeing jobs leads to speculation about what additional business Boeing might plant here. Hamilton said one rumor is that the company might move a portion of its tanker business from Wichita, Kan., to Charleston, if Boeing succeeds in securing all or some of that military work.
Boeing and Europe’s Airbus are fighting for the tanker business in a highly publicized battle. Hamilton said, the large employment figures might also relate to Boeing’s plans to bring more business back in-house, as supplier hang-ups have led to production delays.
Sen. Larry Grooms, R-Bonneau, said he could not talk about the exact nature of the jobs the legislation is targeting. But the number is not happenstance, he said.
“Any large aerospace manufacturing plant looking at coming to South Carolina may have expansion plans,” Grooms said. “The state wouldn’t be putting that threshold in if we didn’t expect those jobs to materialize.”
Reach Molly Parker at 843-849-3144.
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