STOCK QUOTES     More market data...

7E7 forecast is rosy, but some aren't so sure

By Dominic Gates
Seattle Times aerospace reporter

E-mail this article Print this article Search archive Most read articles Most e-mailed articles

Other links State of Washington Employment and Income Analysis of the Boeing 7E7 Project (PDF)

The state's economic-development agency yesterday released a rosy forecast of the jobs and regional economic benefit that would flow from the state's $3.2 billion commitment to Boeing's 7E7 project.

The report predicts a big employment boost — 8,000 to 24,000 direct and indirect jobs when 7E7 production ramps up toward the end of this decade.

"We will see the 7E7 be the anchor for the future of the aerospace industry in the state of Washington," said Robin Pollard, the state's coordinator of the 7E7 project.

But about one-third of the projected long-term jobs are at supplier companies that some officials worry may not be persuaded to locate new plants near the Everett site.

Earlier this month, for example, one supplier planning a 200-employee facility decided to limit its search to Texas and North Carolina, dropping the Puget Sound region from consideration, confirmed Deborah Knutson, president of the Snohomish County Economic Development Council (EDC).

To win the 7E7 assembly plant for Everett, the state last year agreed to provide $3.2 billion in tax incentives and other inducements over 20 years.

The analysis released yesterday by the state's Community, Trade and Economic Development Department also projects that the 7E7 program would produce, when in full swing:

• $20 billion to $40 billion of economic activity in the state over 20 years.

• A half-billion dollars to $2 billion of wages, salaries and benefits in the state per year.

"I would call that a deal that any state would take," said Mark Klender, a managing partner at Deloitte Consulting, which prepared the analysis.
 
Pollard said the employment analysis shows the 7E7 would mean much more than the "often-used 800-1,200 jobs" figure.

Based on Boeing figures, the report estimates that by 2008, the 7E7 would employ 1,000 to 2,500 production workers, including assembly mechanics, dispatch clerks, facilities staff and support engineers. An additional 600 to 1,800 administrative jobs would support production.

Engineering jobs are projected to peak in 2006, with 3,000-4,000 engineers working on design, manufacturing and tooling.

Boeing spokeswoman Mary Hanson said it is too soon to tell how many of those 7E7 positions would be new.

"We don't know if it'll be new jobs or employees shifting from other areas of the company," Hanson said.

Whether jobs are old or new could be academic. Without the 7E7 final assembly site, Boeing jobs would have faded in Puget Sound as current programs slowly wound down.

"If it were not for the 7E7, these jobs would not exist," said Deloitte's Klender.

Suppliers

The rosiest expectations for the 7E7's impact depend on attracting 7E7 suppliers to relocate to Washington or to expand operations here.

The state report projects from 800 to 2,000 local jobs at major 7E7 suppliers.

However, the state's incentive package may not be enough to attract those employers.

John Monroe, a 7E7 consultant for the Snohomish County EDC and a former Boeing executive, said Washington recently lost out to Texas and North Carolina in bidding to land a major 7E7 supplier that would have brought 200 jobs to Everett.

Monroe, who had agreed not to name the company until it makes its final decision, described it as a big supplier that plans to consolidate its worldwide manufacturing operations in the United States.

Both Monroe and Knutson of the EDC said the state lost the bid primarily because of wage rates.

Monroe cited mechanics wages in Texas of $15.80 an hour, compared with $22.88 in this state. That $7-an-hour difference adds up to $2.8 million for 200 workers over a year and more than $50 million in the 20 years typically allotted an aircraft program.

"We are trying to get out of this labor-rate hole by putting other things on the table," said Monroe, listing tax credits and other perks to aerospace companies. "But there's no way we could compete."

"[Attracting] any large supplier here in the aerospace business is really going to be tough," Monroe said. "Even with this $3.2 billion aerospace package, it's just not enough."

Monroe and Knutson also cited incentives offered by Texas and North Carolina that Washington couldn't match.

Biggest prize

Potentially, the biggest 7E7 supplier prize is the manufacturing plant, where Alenia of Italy and Dallas-based Vought may attach the rear fuselage of the airplane to the tail.

Low-wage Texas is making a big play to win that plant. In February, Texas Gov. Rick Perry granted Vought $35 million to consolidate operations in Dallas.

"If I were a betting man, I don't think the cards are there for (Alenia/Vought) to put a significant facility up here," Monroe said.

Pollard, the state's 7E7 project coordinator, said the difficulty in competing with other states in attracting suppliers "speaks to the broader debate about the tools we have in economic development to attract companies."

Because there are constitutional constraints on the incentives Washington can offer private companies, "there are things other states are going to offer we probably simply won't," Pollard said.

She said the state's economic-development agency is developing an "aggressive marketing approach" to woo suppliers.

The report was prepared by Deloitte using Boeing and state Office of Financial Management projections. Pollard defended the report as independent, although Deloitte had advised the state when it made its bid for the 7E7 and had recommended the $3.2 billion incentive package.

Pollard said that several outside economists had reviewed and approved the methods and economic models used.

She said the state had a limited amount, $30,000, to spend on the analysis and Deloitte offered "the most efficient" option because the firm already had a detailed understanding of the Washington economy.

Had another firm been engaged, Pollard said, "the result would have come out the same."

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