Week of December 15, 2003
  Blockbuster Deal
   from Site Selection's exclusive New Plant database

Boeing Back Where It Belongs
by ADAM BRUNS, Site Selection Managing Editor

Harry Stonecipher (left), president and chief executive officer of The Boeing Company
Harry Stonecipher, president and chief executive officer of The Boeing Company, left, shared the Boeing Board of Directors' unanimous decision to grant authority to offer the 7E7 Dreamliner to airlines worldwide. The plane will be manufactured in longtime Boeing stronghold Everett, Wash. Alan Mulally, Boeing Commercial Airplanes president and chief executive officer, right, sees a rebounding commercial air travel market, particularly in Asia, as supportive of the company's decision to go forward with the aircraft.

It was nearly three years ago, in March 2001, when Seattle, the state of Washington, and their Boeing-employed residents got their wake-up call: the company would be moving its headquarters to Chicago. (See the Online Insider's "Top Incentive Deal" from June 2001 and Site Selection's September 2001 Cover Story.)
        They have since experienced the shared nightmare of 9/11, and its effects on the aerospace industry. And they have felt the nagging anxiety associated with slow but steady staff reductions of some 30,000 by Boeing, whose executive ranks and military division have had their own share of sleepless nights this year.
        But on the evening of Tuesday, Dec. 16, they all got to rest a little easier, after Boeing announced its pick of the company's longstanding site at Paine Field (www.painefield.com) in Everett, Wash., as the location for its US$900-million 7E7 commercial aircraft assembly plant. It's the third time the site has been chosen by Boeing: The first was in 1966, when it chose to build the 747 there. Today, the complex makes the 777 as well. But the new model signals a new day.
Chart: 7E7 Structures Work Share
Boeing; Japan's Fuji Heavy Industries, Kawasaki Heavy Industries, and Mitsubishi Heavy Industries; Vought Aircraft Industries of Dallas; and Italy's Alenia Aeronautica will provide major structure for the 7E7 Dreamliner airplane.

        "Savor this moment," Boeing Commercial Airplanes President and Chief Executive Officer Alan Mulally told the 3,000 members of the 7E7 team assembled in Seattle. "This is a great way to start the second century of powered flight."

A Time for Change
Mulally and 7E7 Senior Vice President Mike Bair presented the 7E7 business case to the board of directors at a meeting in Chicago on Dec. 15. Then it was a quick flight from the company's new home to its old one to make the long-anticipated announcement.
        It's been a dramatic turnaround for a state that was literally jumping off the short list of sites for Boeing (www.boeing.com) and other companies a few years ago (the headquarters showdown was between Chicago, Denver and Dallas). In Site Selection's recent business climate survey of corporate executives, the state ranked 33rd. Even as recently as October, Mulally reportedly offered this summation of the state's business climate to the Seattle Rotary Club: "I think we suck."
        But a renewed and collaborative economic development effort focused on direct incentives and a more friendly overall business environment has at least stopped the sucking sound - even in a state where the business property tax burden has historically been skewed by the large and relatively under-taxed land holdings of timber and paper companies. Presumably, the direct results of such efforts enlivened the atmosphere at the Rotary Club's Dec. 17 holiday luncheon.
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Snohomish County-Paine Field, originally constructed as a WPA project in 1936, will now benefit indirectly from a whole new kind of subsidy, as the State of Washington's $3.2-billion incentives package helped to lure Boeing's 7E7 assembly plant to its grounds.

        "We are excited to continue our partnership with the state of Washington and the city of Everett on the 7E7," said Bair at the announcement extravaganza. "Many states submitted extremely competitive proposals and many factors weighed into the decision. But it's clear that the best overall solution for Boeing and the 7E7 is to place final assembly in Everett."
        Among the factors weighed by Boeing and site selection consultants McCallum Sweeney (www.mccallumsweeney.com) were proximity to a round-the-clock port; available infrastructure to accommodate supplier collocation; training partnership opportunities; and the all-important community support.
        That sometime vague notion has been given flesh and bones in Washington, first by the lowering of unemployment insurance rates. A $16-million project to smooth barge and rail delivery was concocted by the Port of Everett and economic development officials, while the legislature chimed in with a higher gasoline tax, all in an effort to pay for some $4.2 billion in transport improvements. And in May 2003, the state legislature approved two sets of incentives: a $3.2-billion aerospace package aimed squarely at Boeing's 7E7 plant, and a new package of tax breaks for semiconductor manufacturers that are willing to make a $1-billion investment over three years.

Keep the Home Fires Burning
Boeing's investment is almost on that level. But more importantly, its 1,200 production jobs are expected to spawn an additional 3,400 support jobs by 2015 and up to 12,700 other jobs in the state of Washington. All of which should bring in around $65 million annually in state tax revenue.
        While some parts of the 7E7 supply chain will be internationally based, Boeing has made a point of locating major parts of the operation in the U.S. Boeing announced last month that the 7E7 program management and design integration teams will also be based in Everett. Its flight deck and forward fuselage work will be done in Wichita, Kan. Some wing components will be made at the company’s Tulsa, Okla., plant, adding 500 jobs to the payroll. The company expects to announce airplane systems and engine partners for the 7E7 in 2004. Significantly, Boeing is a leading champion of pending federal corporate tax relief, partnering with such firms as Microsoft and Caterpillar to form the Coalition for U.S.-Based Employment, as Congress debates new measures to replace the longstanding export subsidy recently declared illegal under international law.
        While 50 airlines have helped the company design the plane, none have necessarily stepped up to purchase it yet. Nevertheless, Boeing forecasts a need for between 2,000 and 3,000 airplanes in the 7E7's market segment over the next 20 years.
        "The 7E7 is all about taking passengers where they want to go, when they want to go there, more comfortably and affordably than ever before," said Mulally on Wednesday.
        The same could have been said of the hospitality extended by Washington to its old corporate friend.

Editor's Note: Look for more detailed coverage of Boeing's site selection process
in the March 2004 issue of Site Selection.

bd1215bbd1215b ©2003 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.