State losing out on 500 7E7 jobs: Boeing partner looks for lower costs

FARNBOROUGH, England — One of Boeing's major 7E7 partners is close to picking the site of a 500-employee manufacturing plant for the new jet.

But it won't be in Washington state.

Washington has lost out to aggressive incentive offers from other states, lower wage rates elsewhere and considerations of congressional delegation influence on defense spending.

"I don't think Washington state is in the running," said Tom Risley, president and chief executive of Dallas-based Vought, who will choose the site.

Some more bad news: About 100 Vought engineers working in Seattle on the 7E7 will be moved to the new location once the preliminary design phase is finished, Risley said.

The hope that major suppliers would establish factories near the 7E7 plant was a key piece of the rationale for Washington state's $3.2 billion incentive package to Boeing to choose the state for final-assembly work.

Risley, who said he will make his selection within six weeks, was first reluctant to reveal his thinking. In an interview at the Farnborough Air Show, he finally said he was making the disclosure to avoid creating "false hope."

"I'd never say never until the decision is made," Risley said, "but right now, I wouldn't put [Washington] in the top three."

State officials were dismayed at the news.

"It's extremely disappointing," said Robin Pollard, who coordinates the 7E7 project for the state. "We had hoped there was still an opportunity to lure them here."

Earlier this week, an executive with Vought had said the Puget Sound region still had a chance to win work. Yesterday, his boss extinguished that hope.

Vought wants a site for two plants that will build more than half the 7E7's fuselage and install all systems and insulation.

It needs a fabrication plant to build two 7E7 fuselage sections and an adjacent "integration" plant run jointly with another 7E7 airframe supplier, Alenia of Italy.

In the integration center, the two Vought pieces will be joined and stuffed with hydraulic systems, tubing and insulation.

Then two more fuselage sections made in Italy by Alenia; the center wing box made by Fuji in Japan; and a small part of the fuselage forward from the wing, made by Kawaski in Japan, will be joined and stuffed.

Boeing plans to fly these two large finished fuselage sections — extending from just in front of the wing to the tail — to Everett for final assembly. These sections will be transported in specially designed air cargo freighters — converted 747 jets with large bulging tops.

7E7 program head Mike Bair said last week Boeing would let the suppliers pick the site.

Giorgio Zappa, Alenia's chairman and CEO, interviewed in Farnborough, said the selection would in the end be "an American choice."

So Risley gets the final decision.

"Just like Boeing did when they went out looking throughout the United States for an assembly plant," Risley said, "I'm looking for what state assistance we can get."

The 7E7 timetable requires Vought to deliver its first fuselage sections to the integration facility in just over two years, so Risley is in a hurry.

"It has to be somewhere that the funding is in place," he said. "I don't want to wait for legislation to be passed."

Asked why Washington hadn't made the cut, Risley said: "It has to do with the aggressiveness of other states; the competitive labor market."

But, he insisted, "It's not all about money."

He said it's important to locate the work in a state with the skills to execute the 7E7 plan and also "where we think we can get assistance on the Hill for our military programs."

Risley also said that his home state of Texas will "more than likely not" be chosen.

Vought's plant in Dallas will be essentially at capacity after work is consolidated from elsewhere and its military work grows, he said.

"It's a very competitive market in Texas," Risley said, mentioning the rivalry for defense deals with Lockheed Martin and Bell Helicopter. "So it might behoove us to be located somewhere else."

While he wouldn't disclose the finalists, he said Boeing had made available site-selection data gathered in its final-assembly site search last year.

"We came off Boeing's list," he said. "You'd see some similarity."

In that case, Risley's list most likely includes Kinston, N.C.; Charleston, S.C.; and Mobile, Ala.

Boeing's final site-selection analysis showed those three cities had lower overall cost of operations than Everett, according to internal company documents.

Everett was chosen anyway, because of its other Boeing programs and because the state's tax-incentive package sufficiently narrowed the cost gap.

This time, Washington didn't have the incumbency advantage.

"I'm surprised because we did not have any discussions with (Vought)," said the state's Pollard. "I don't think we were given an opportunity to put a proposal."

Risley has recently made other sweeping decisions affecting employment elsewhere.

In February, he announced that Vought would close its plants in Florida and Tennessee to consolidate operations in Dallas.

"It's never a personal decision. It's a business decision," Risley said. "It's the cold side of the business."

Show orders put

Airbus way ahead

FARNBOROUGH, England — Airbus won commitments from Turkish Airlines and UB Group of India, bringing its new business at the Farnborough Air Show to 84 aircraft and options worth as much as $10.7 billion, more than double the Boeing total.

Boeing also got a preliminary order from Turkish Airlines, bringing its tally for the air show to 28 planes and options worth $4 billion, including a $3 billion order from Emirates, the biggest Arab airline, for four 777 aircraft with nine options.

UB Group is launching a low-fare carrier called Kingfisher, which plans to start operating domestic services in India early next year.

The company yesterday ordered four single-aisle A320 models and took options for eight more worth as much as $720 million.

Turk Hava Yollari, Turkey's national carrier, known as Turkish Airlines, will buy 12 Airbus A321-200 aircraft, 19 A320-200 airliners and five A330-200s. The order is worth $3 billion based on list prices.

The airline will also take 15 737-800 planes worth as much as $968 million from Boeing.

Boeing also said it received firm orders for two 747 freighters from Air China Cargo.

Boeing didn't specify the price, but said Air China would make an official announcement in the next few days.

Bloomberg News and The Associated Press