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Boeing workers consider buying Wichita operation

By Molly McMillin
The Wichita (Kan.) Eagle

JOHN LOK / THE SEATTLE TIMES Workers guide a 737 nose-wheel-well assembly to its next location at the Boeing plant in Wichita, Kan., that workers have expressed interest in purchasing. The plant employs about 12,300 workers and is the state's largest private employer.

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Boeing workers and Society of Professional Engineering Employees in Aerospace leaders Shane Michael and John Hood hope to gain enough support to form an employee stock-ownership program (ESOP) and submit a bid to Boeing for the Wichita operation.

Boeing officials have been seeking a buyer for the Wichita site. Boeing CEO Harry Stonecipher said last month that he expects a decision on whether to sell will be made by year's end.

The benefits of an ESOP would be many, advocates say.

"The first thing is to keep jobs [and] keep the tax base for Kansas," Michael said.

Studies show that with ESOP ownership, productivity rises significantly, he said.

Boeing Wichita at a glance Employees Boeing is the largest private employer in Kansas. The Wichita plant, including both commercial and military operations, is Boeing's second-largest and employs about 12,300 workers. (For comparison, Everett employs about 17,000.) About 7,000 employees work in Wichita's commercial-airplane facility. Another 1,600 work in a support-services unit. The rest work in a military-airplane facility that would not be affected by a sale. Indirect jobs: 42,000 ancillary jobs are dependent on Boeing Wichita. Employment accounts for 15 percent of Wichita's jobs and 17 percent of the city's earnings. 2002 payroll: About $1 billion. 2002 business with suppliers in Kansas: $193 million. Key commercial- airplane products • 737 and 757 fuselages. • 737, 747, 757, 767, 777 and (proposed) 7E7 nose-and-cockpit sections. • 737, 747, 767, 777 struts, which fasten the engines to the wings. • 737, 747, 757, 767, 777 engine casings. All these subassemblies go by rail to Renton or Everett. Source: Boeing

The workers group has passed out fliers and plans to hold a public information meeting Aug. 13.

Workers also have enlisted the help of an Idaho lawyer, Richard Phenneger, who has ESOP experience.

Many things would have to work together for the ESOP and a Boeing Wichita buyout to become reality.

For one, the coalition must gain enough support from workers, the unions, politicians and the community to persuade Boeing to accept a bid for its operation, Phenneger said.

Boeing Wichita spokesman Dick Ziegler said he was unaware of the ESOP proposal and could not comment. A call to Boeing's Chicago headquarters Wednesday was not returned.

Phenneger said his understanding is that Boeing isn't interested in an employee bid. But, he said, if enough people support the idea, they might be able to persuade the company to change its stance.

If enough support can be found, Phenneger would work to raise enough money from investors to buy the Wichita commercial airplane operation.

"Can we raise the funds to do it?" he asked. "The answer is yes."

Creating an ESOP is a complicated matter, and there are numerous details to work out.

First, the coalition must grow large enough to lobby Boeing to accept a bid from the group, Phenneger said. It needs the support of Boeing's unions — especially its two largest, SPEEA and the Machinists.

It also will take about $200,000 or more in contributions to get a plan to the point where a bid can be made, said Phenneger, who said he is not taking any compensation for his time unless the plan progresses.

Without widespread support, there is no chance for the ESOP to become reality, Phenneger said. With it, the chances are 50-50, he figures.

If Boeing accepted the bid, money from investors would be used to create a new corporation.

Simply put, the new corporation would loan the money to an ESOP trust fund. The trust fund would buy the Boeing business and become a major owner, Phenneger said.

Future profits from the operation would be used to retire the debt from the investors, he said.

An ESOP provides tax advantages that other independent buyers would not receive in a purchase of this sort, Phenneger said.

Aerospace merger and acquisition specialist William Alderman, president of Alderman & Co. in New York City, questions whether the plan would work.

The ESOP may be able to find investors willing to support them and convince Boeing that it would pay a fair price, Alderman said.

But Boeing's goal in selling the operation is to dramatically cut costs. Cutting costs also means cutting the number of employees, Alderman said.

And that could create a conflict between interests of the new owners and Boeing, he said.

"What do employees want before anything else? Job security," he said.

If the ESOP acts in the same fashion as an outside investor would and lays off workers, increases productivity and makes supplies cheaper, "I think Boeing would be very happy to have ESOP buy the company," Alderman said. "But in the history of the United States, it's not the common experience."

But Phenneger said quality parts and lower prices don't necessarily require a reduction in the work force.

Instead, it could be possible to hold employment steady and not add workers, he said.

Copyright © 2004 The Seattle Times Company

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