No big baubles for Boeing

Washington will have to compete to build Boeing's next jetliner after the 787, key business-friendly politicians acknowledged Thursday in response to remarks the previous day by a top Boeing executive.

But they said the state can win without another frenzied push for giant tax breaks like the one in 2003 that secured Dreamliner final assembly here.

"I don't think it's as likely it would be successful to try to do another heroic effort like that," said state Rep. Fred Jarrett, R-Mercer Island, a Boeing project manager. "We have to, in baseball terms, play little ball. We've got to find all the little things we need to reform — whether it's the education system or business regulation — and find ways to make sure this region is competitive."

And state political leaders don't want a race to the bottom of the wage ladder against states like Alabama or South Carolina.

"Do we have to have a responsible tax policy? ... Yeah," said state Rep. Ross Hunter, D-Bellevue, chair of the House Finance Committee, which oversees corporate-tax policy.

"Do we have to have a competition about where's the cheapest place to do business? I don't think so."

Tom Wroblewski, District 751 president of the Machinists union at Boeing, said the company's problems with the Dreamliner's global supply chain help make the case for Washington and its skilled aerospace work force.

"I'm a bit jazzed over the fact that we have to sit here and prove ourselves again," Wroblewski said. "We've told [Boeing] forever: When you offload work to all these places around the world, you lose control of the build process. That's where they are at right now. They've lost control."

Wednesday in Everett, Boeing Vice President Mike Bair — who until two weeks ago headed the Dreamliner project and is now in charge of business strategy — provided food for thought at a breakfast hosted by the Snohomish County Economic Development Council.

Bair said Boeing may consider building its next jet in a different way: with the major airframe-supplier factories located alongside Boeing's final assembly line.

But he warned that this aircraft-manufacturing supersite "doesn't necessarily have to be here."

So Washington does indeed face a competition, likely around 2010, to allow for a replacement 737 jet in about 2015. It may or may not be a formal contest pitting states against one another with competitive bids, as it was in 2003.

"I don't want to go through that again," said Hunter.

Yet, Jarrett said, we shouldn't look at it as having to compete all over again. "I wouldn't say again. I'd say still," he said.

"The world has changed. ... You can move things wherever the economics works the best," Jarrett said. "Any region has a responsibility to find ways to compete in the world markets. That is what we are going to have to do, and Boeing is just stating the obvious."

Both legislators said they'll work for steady incremental improvements to the business environment rather than any blowout tax or cash handout to Boeing.

"It's about having an education system that produces a skilled work force. It's about having a transportation infrastructure that allows you to get your stuff from one place to another," said Hunter.

"Boeing has been pretty abrupt with the state about the lack of those things. And we're working on it."

Hunter, a former Microsoft executive, pointed to the much lower taxes in a state like Arkansas, but said it's unlikely Microsoft would relocate there because engineers wouldn't want to live there.

"If all your employees are telling you they have to put their kids in private school and they need an extra $20,000 a year to be able to afford that, that's a pretty big tax," Hunter said. "We want to make sure we have an education system where the employees of companies that want to locate here don't have to pay that tax."

Jarrett agreed that improving education in the state to provide Boeing with skilled workers is the top priority.

He also mentioned changes to the way environmental regulations are processed, to workers' compensation — and even to the state estate tax, which he said could discourage the rich, including top Boeing executives, from living here.

Speaking as a Boeing manager, Jarrett said Bair's suggestion that Boeing will look at siting suppliers and final assembly together for future jets shows the company's struggle to balance financial risks against manufacturing risks.

The financial risks provide a reason to outsource work, perhaps to Japan or Italy, to get investment from those countries. But the stretched-out supply chain introduces more manufacturing risk.

When things don't go exactly as planned, Jarrett said, the company needs a way to recover close to home. He said that's why Boeing retains, at its Auburn parts facility, the capability to respond to a manufacturing emergency by producing anything a supplier can't produce.

For the Machinist union's Wroblewski, the kind of expertise in Auburn should be decisive.

He said Boeing is hiring 100 to 150 new employees every week, and many are third- and fourth-generation Boeing workers.

"We've been building airplanes for many, many years, through many different models and several generations of very skilled aerospace workers," he said. "We've earned the right to build this airplane."

Dominic Gates: 206-464-2963 or dgates@seattletimes.com