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oeing’s site search for its 1,500-worker, US$900-million 7E7 assembly plant has hit the home stretch, with Washington positioned as perhaps the place to beat.
As scheduled, Boeing on June 20 shut down submissions for 30-page proposals for the groundbreaking 7E7 Dreamliner plant, which touched off one of recent memory’s most wide-open recruiting wars.
“Now the hard work for us begins,” Mike Bair, 7E7 Dreamliner senior vice president, said as the proposal deadline passed.
Boeing’s hard work follows some hard political choices. Billion-dollar deficits notwithstanding, many states ponied up hefty 7E7 incentive offers. Publicly released bids included $500 million from Kansas, $300 million from Michigan and $250 million from California.
“We remain absolutely committed to ensuring a fair and rigorous process that results in the right decision for the 7E7,” Bair said. “We will build in a location that gives it the best opportunity to be successful.”
Incentives, though, will likely play a major role in determining the optimally successful site.
Incentives are obviously a huge plank in Washington’s bid. Boeing has 60,000 workers in the state, and it’s always assembled almost all of its passenger planes in the Seattle area, now building 777s in Everett and 737s in Renton.
The air giant, however, had large issues with Washington vis-a-vis “total cost of doing business,” a 7E7 site-selection criteria. Along with other prominent companies, Boeing has long openly criticized state business costs, particularly business and occupation taxes, and workers’ compensation. And Boeing claims that it pays $20 million a year in unemployment insurance to subsidize the state’s seasonal industries.
Not wanting to see a replay of March 2001, when Boeing moved its corporate headquarters to Chicago, Washington legislators have responded with an incentives whopper. The state is offering phased-in tax breaks that would give Boeing some $400 million over six years and $3.2 billion over 20 years.
In addition, lawmakers reformed the unemployment and workers’ compensation systems and upped the gas tax by 5 cents to fund the $4.2-billion Seattle-area transportation plan that Boeing wanted.
“We think we have submitted a tremendous, winning proposal – a competitive proposal that clearly, if Boeing analyzes it, will demonstrate that it will be cheaper for them to build the 7E7 here than in any other state,” Gov. Gary Locke (D) said at a Boeing-recruiting rally at Seattle’s Boeing Field.
Boeing’s huge tax package is actually aimed at the state’s entire aerospace industry, which accounts for 200,000 jobs.
But Boeing is clearly the target for the tax breaks, which include 40-percent cuts in business and occupation taxes. The package, in fact, only goes into effect if the 7E7 is assembled in Washington.
Washington’s tax breaks alone equal a jaw-dropping $2.1 million-plus per employee for 1,500 workers, the highest job projection. The tax package “goes to extraordinary measures to reduce Boeing’s cost structure,” Locke said in his cover letter accompanying the state’s bid.
Much more than the 7E7 plant, though, is at stake. The Dreamliner, which Bair called “a radically different airplane,” is a major sea change. Unlike Boeing’s existing commercial airliners, it’s a mid-sized 220- to 250-passenger craft with a 9,200-mile (14,720-km.) range. Consequently, the winning 7E7 site will likely land Boeing’s future mid-size iterations – which further fanned the incentives fire.
The 7E7 also marks a major manufacturing shift. The Dreamliner will be the first-ever commercial jet with most of its primary structure made of composites (mostly graphite and titanium). That will cut Boeing’s production costs, with suppliers delivering large, completed wings and fuselage sections. Accordingly, 7E7 assembly time will be only three days, a seventh of Boeing’s current standard.
That scenario ups the importance of Washington’s $15.5 million to fund a Port of Everett rail-barge dock (which Locke called “a gift” to skirt state constitutional prohibitions on private-sector grants). The dock would enable the port to carry much larger components like the 7E7’s.
But the 7E7 winner named later this year also gets the project’s risks. The 7E7’s composite materials will draw intense regulatory attention, and they’ll require a major production retooling.
In addition, the prolonged air-travel slump has slowed aircraft sales. And airlines may be wary of 7E7 commitments; Boeing in the last two years dropped two proposed jets, the 747X and the Sonic Cruiser.
Finally, airlines are the classic boom-or-bust business. Boeing’s Washington employment, for example, reached 142,000 in 1968, then dropped to 62,000 in 1971, only to leapfrog back to 127,000 in 1998.
That, though, hasn’t dimmed state recruiters’ ardor. And Washington seems the frontrunner to substantiate a sign hanging in Boeing’s Everett plant: “The Everett site,” the sign says, “represents Boeing to the world.”
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Fast-growing PayPal, the Internet payment service firm, didn’t stray far in its search for a new customer service center. The company, adding new customers at a clip of better than 30,000 per day, was virtually bursting at the seams in its leased space at two Omaha, Neb., office buildings. So, the company decided to look for a place to build a structure to consolidate its operations in the city while also accomm odating the company’s projected growth.
“We had 550 employees at the time and there is no way we were going to displace or replace them,” says Steve Kudlacek, PayPal’s director of information services, who also served as project manager for the move. So the site search concentrated on the Omaha area, giving consideration to minimizing increases in commuting time for current employees. During the process, Internet auction company eBay purchased PayPal.
Sites north and west of the city were on the table before the company settled on a 22-acre (9-hectare) site in Southport East Business Park in La Vista, a western Omaha suburb. The site is just off I-80, satisfying PayPal’s need for quick Interstate access.
Establishing a quick construction timetable and wanting to keep construction costs down, PayPal employed Workstage to design and build the facility. Workstage, a joint venture of office furniture maker Steelcase and real estate investment firm The Gale Co., builds structures primarily of glass panels on the exterior and an interior on an 18-inch floor or “stage” that houses electrical, HVAC, voice and data, lighting and other systems. The process gives the company considerable flexibility in adjusting office space.
“We had to be in the building by March or we would have been in big trouble,” Kudlacek says. PayPal in fact moved in during March 2003, just five and a half months after construction began.
The 115,000-sq.-ft. (10,700-sq.-m.) facility now houses about 800 employees who handle customer calls and e-mails and process all credit and debit card transactions. The 1000-seat center has a capacity of 1,300 employees.
“We’ve had a tremendous amount of success with the Omaha labor market,” Kudlacek says. “For us to have 800 people in this building is a testament to the fact we’ve not had any trouble getting good people here.” – John McCurry
