Incentives Deal of the Month
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Seattle the Site to Beat?
The Battle to Land Boeing's 7E7: California, Texas, Washington Look Like Early Favoritesby JACK LYNE, Site Selection Executive Editor of Interactive Publishing
SEATTLE A major U.S. incentives tug of war - most of it flying under radar - is shaping up to land the 800- to 1,200-worker plant for Boeing's (www.boeing.com) mold-breaking 7E7 passenger airliner.
The Chicago-based air giant has fully loosed the bidding floodgates. All interested states and regions have until June 20 to fill out Boeing's request for proposal - all 30 pages of it. Incentives-packed RFPs are surely stacking up faster than planes over an out-of-synch airport - and not only because of the plant's jumbo-sized benefits. The 7E7 project is virtually certain to generate subsequent, likely far larger long-term expansions.
"We are in search of the site that will allow us to meet our needs most successfully and deliver to the world a safe and efficient airplane," Mike Bair, Boeing Commercial Airplanes' newly appointed senior vice president of the 7E7 program, said as the company publicly released its site selection criteria in Seattle. Boeing has hired Greenville, S.C.-based McCallum Sweeney Consulting (www.mccallumsweeney.com) to conduct the search, Bair explained.
Boeing's incentives bidding, however, won't be one of those sometimes unseemly public battle royals. Bidding areas won't be disclosed, the company vows, with the site decision privately made and announced before year's end.
Boeing's close-to-the-vest style, though, hasn't stopped rampant open speculation about the first 7E7 plant's landing pad. Nor has it stanched some states' overtures from going public. The 7E7 site selection picture, though, has sharpened somewhat with Boeing's mid-May moves: The company announced that it's limiting 7E7 sites to U.S. locations, and it released 7E7 site criteria (see accompanying chart).
That combination suggests that California, Texas and Washington are the early-on favorites. And it further suggests that the project may be Washington's to lose.
"This is a battle we can win, and we should win," said U.S. Sen. Maria Cantwell (D), part of the flood of state officials fronting Washington's eager drive to land the first 7E7 plant.
7E7 Represents Sea Change - as
That scenario speaks to one of the state's greatest strengths: Boeing has always assembled almost all of its passenger planes in the Seattle area, with 777s now built in Everett and 737s built in Renton.
The 7E7, however, represents an operational sea change. The aircraft takes a smaller-is-beautiful page from Southwest, the only consistently profitable U.S. airline since 9/11/01. The 7E7 is being developed as a 200- to 250-seat airplane that will fly between 7,000 and 8,000 nautical miles (12,894 and 14,739 kilometers) at speeds similar to today's fastest twin-aisle commercial airplanes, the 777 and 747. For Boeing, that's "a radically different airplane," Bair said.
Added to the Washington mix are the still-reverberating shock waves from Boeing's March 2001 announcement: That was when the air power said that it was moving its headquarters out of Seattle, its home since its 1916 birth.
Less than two months later, Boeing announced its relocation to Chicago. The move, CEO Phil Condit explained, was designed to free Boeing's base from the operating divisions, sharpening its focus on new business lines and long-term growth. And Chicago fit the bill to propel Boeing's diversification: a major financial market with a central location and a pro-business environment. (For full details, see Site Selection's September 2001 cover story.)
Washington Constitution Bans GrantsSo what now, Washington?
A recruiting blitz approaching supersonic force, for openers. Much of that force is focused on the state capital in Olympia. The legislature must "take bold and dramatic action that demonstrates Washington will do what it takes to win the competition to assemble the 7E7 here," urged the Regional Partnership, a newly launched Puget Sound coalition of government, business and labor leaders.
"We will do everything in our power to win the Boeing 7E7 final assembly so we can keep and grow Boeing jobs," Gov. Gary Locke (D) vowed.
Washington's incentives, however, will differ markedly from other states. The difference lies in the Washington constitution's equal protection requirements, which prohibit grants to private-sector firms unless the funds promote a public purpose. Forty-six U.S. states have no such restrictions.
But Boeing, some Washingtonians might argue, does serve a public purpose, generating a US$16-billion annual impact on the state's economy. That dog, though, won't legally hunt. Meaning that Washington must buttress its Boeing case by employing existing programs - particularly in areas the aircraft manufacturer says are vital.
Pumping Up the Port and EducationOne of those areas is 7E7 plant's need for what Boeing called "proximity to a port capable of around-the-clock operations."
The Port of Everett already handles heavy action from Boeing's Seattle-area plants. Moreover, the port and Boeing have since fall been discussing a new $10-million, 600-foot (182-meter) pier. Boeing, though, hasn't yet told the port to proceed.
But that pier could loom large for the 7E7 plant, allowing rail barges to carry components much larger than those currently passing through the port. And the 7E7's components will be larger. Suppliers, Boeing says, will be responsible for building wings and fuselage sections so large that container lengths will likely exceed 100 feet (30.3 meters).
The 7E7 has propelled the pier atop Olympia's agenda. Locke has promised to seek $16 million to build Boeing's new berth. The governor in late May also signed legislation allowing local jurisdictions to revise shoreline-protection guidelines. That law, which includes implementation funding, clears Everett to build the rail-barge terminal.
In addition, Cantwell has introduced legislation that would create the fifth Federal Aviation Administration Center of Excellence. Part of the legislative package to reauthorize the FAA, the bill would create a research center at the University of Washington's Seattle campus. And that federally funded center would focus on the composites and new aluminum alloys that would be used in next-wave craft like the 7E7.
"To build the next generation of Boeing airplanes here in the Northwest, we need to have the next generation of aviation manufacturing technologies," Cantwell said.
Boeing's criteria, however, don't specifically mention higher education.
Boeing Has Blasted State TaxesWashington, on the other hand, could possibly face problems in one Boeing-specified area: "total cost of doing business." For years, the company has openly criticized the state's business and occupation taxes and its workers' compensation costs.
Deborah Hopkins, then Boeing's CFO, went so far as to say in a 1999 speech, "Compared to everywhere else we do business, Washington is below average. To remain a global leader for aerospace - and a global leader for other industries - Washington has to rank a whole lot higher than that.
"We want to grow our operations here in Washington," Hopkins told the Greater Seattle Chamber of Commerce (www.seattlechamber.com), "but we're simply not in the most beneficial place in which to do business."
Such sentiments have pricked up ears in U.S. areas where Boeing also has a major presence, including El Paso ,Texas; Long Beach, Calif. (home to Boeing's only non-Seattle aircraft plant); Mesa, Ariz.; San Antonio, Texas; Salt Lake City; St. Louis; and Wichita, Kan.
Kansas OKs $500 Million in Boeing BondsKansas has already passed legislation that would allow the state to issue as much as $500 million in bonds for a Boeing expansion. Boeing's since-stated desire for a port, though, would seem to bump the Sunflower State from the 7E7 race.
Instead, California and Texas are the two areas most likely to challenge Seattle, many analysts feel.
The Washington area, though, still holds a possibly huge edge in one factor on Boeing's site selection shopping list: its desire for "available land, buildings and related infrastructure to accommodate 7E7 final assembly and the collocation of suppliers." Boeing already has that package firmly in place in Seattle. That, in turns, likely means significantly higher costs if it goes elsewhere.
In the end, that fact could outweigh the tons of under-the-radar incentives that are now piling up.
Could, however, remains the operative word in the 7E7's flight plan.
©2003 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.