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7E7 site winner will get bonus: a second plant

By Dominic Gates
Seattle Times aerospace reporter

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Boeing wants the second plant to assemble about three-quarters of the 7E7's fuselage in two complete pieces for delivery to the adjacent Boeing final assembly line.

Assuming the 7E7 project goes forward, and Boeing and its suppliers can agree on terms, the satellite factory will be operated jointly by Alenia of Italy and Vought of Texas.

It will likely employ fewer than 500 workers, according to a manager with one of the supplier partners, and it will do assembly work that on existing Boeing models is done by Boeing workers as part of final assembly.

Boeing earlier had assigned to Alenia and Vought the fabrication of the fuselage sections behind the wing. Now, according to a Boeing insider familiar with the decision, the company has assigned these two partners an extra section that had been left open — the top of the fuselage between the wings, and with it the assembly of both the mid-fuselage and rear fuselage.

It's unclear how plans for a second plant will affect the nationwide contest for the 7E7, which Boeing says will be decided by the end of the year. There are various sites available near the Everett factory that could be suitable for this purpose.

The decision to go for a second plant raises the 7E7 site-selection stakes and could have significant consequences for Boeing's unions.

Taken together, the two factories may well employ more workers than the 800 to 1,200 Boeing has estimated would work in 7E7 final assembly. However, the outsourcing of more of the assembly work to Alenia / Vought could mean the number of Boeing employees ends up near the lower end of that range.

Employees in the second factory probably would not be covered by the same labor agreements as Boeing workers.

Vought has some 6,000 employees scattered at eight plants across the country, of which two are unionized. A small Vought subsidiary in Everett, Contour Aerospace, is not unionized.

Boeing would not detail its intentions.

"We're working through our process," said Boeing spokeswoman Yvonne Leach. "We'll announce when we are ready."

Mark Blondin, District 751 president of the International Association of Machinists, declined to comment on the prospect of a non-Boeing plant before hearing more from company officials.

"We have said from the start we need a good commitment from Boeing in the state of Washington," said Blondin. "Landing the 7E7 is imperative. It's going to signal whether or not we have a future."

Charles Bofferding, executive director of union representing engineers and technical workers, expressed concern. "It looks like union avoidance," he said.

For Boeing, other important factors are also in play, analysts say.

Howard Rubel, an analyst with SoundView Technology Group, cited a reduction in inventory costs as a primary Boeing concern.

By having work done right outside its assembly plant, Boeing postpones delivery of hugely expensive completed components until three days before the finished plane rolls out the door ready for delivery.

Until just before the plane is ready, those components remain off Boeing's books, reducing the amount of money tied up in inventory.

Adam Pilarski, an analyst with aviation-consulting firm Avitas, pointed out that putting the second plant beside final assembly would not only save transportation costs on large pieces but also reduce cycle time and allow flexibility as Boeing manufactures several 7E7 variants.

Having the fuselage pieces put together close by means Boeing could more easily adjust an order, Pilarski said. Final-assembly managers could, for example, call for the quick substitution of a short-range 7E7 fuselage piece in place of one for the long-range variant.

"(Boeing's airline) customers are pushing out the time when they have to make a decision on the configuration," said Pilarski.

One more factor in the decision, analysts said, would be a desire to increase the percentage of the 7E7 assigned to Europe.

In the face of enormous pressure from competitor Airbus, Boeing sees Alenia as its wedge into the European Union.

Allocating a significant portion of work to Italy, the reasoning goes, might help maintain sales across Europe by deflating the notion that the 7E7 is an American / Japanese aircraft.

Two weeks ago, Alenia Chairman Giorgio Zappa, in an interview with an Italian newspaper cited in trade magazine Aviation Week, spoke of his company's interest in setting up a satellite plant near the final-assembly line.

The Italian government is expected to provide Alenia with funding of up to one-third of its development costs, which Zappa estimated at roughly $500 million.

Having others pay for development costs has been a Boeing goal since the 7E7 program began.

Boeing officials insist that while they will rely on suppliers to an unprecedented degree to build the 7E7, Boeing will retain overall control of the plane's design.

Partners will do the detail design on their parts of the jet. But Boeing will set the design requirements and determine how the major pieces fit together.

Martha Choe, director of the state's Department of Community, Trade and Economic Development — and the official leading the state's bid for the 7E7 — said the state's analysis projects many direct and indirect jobs linked with 7E7 final assembly and that a second plant might bring "a lot more jobs and a lot more investment."

The 7E7 site-selection announcement is expected Dec. 16.

That's one day before the 100th anniversary of the first flight by the Wright brothers.

Dominic Gates: 206-464-2963 or href="mailto:dgates@seattletimes.com">dgates@seattletimes.com

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