Boeing plans to add 1,200 jobs at its Renton plant over the next couple of years. Credit: Yasuhiko Obara Yasobara, Wikimedia Commons
When Boeingâs Machinists went on strike this fall, the hand-wringing resumed: Boeing is going to leave town, unless we do something! Like rain in winter, this is a regular feature of the Puget Sound emotional landscape. The imminent departure of Boeing provides the unreflective pro-business elite with the opportunity to point out everything thatâs wrong with this region and this state, as though Boeingâs business fortunes are entirely our fault.
It wonât entirely surprise me to see Boeing build its next jet somewhere else. After the fiasco of the 777 expansion in the late 1980s, I predicted in my 2001 book Wings of Power that Boeing would move something out of the Seattle area. Three weeks after the book came out, they moved the company headquarters to Chicago (which I didnât predict). In fact, Boeing has been threatening to leave Seattle since the 1920s, regularly repeating such dire warnings thereafter, apparently whenever life ainât perfect along the banks of the Duwamish.
So far, aside from the relatively unimportant headquarters decision, they havenât decamped, and itâs worth thinking about why. Among the factors: A lot of people still donât want to leave here. Every time Boeing has looked at going, the company has concluded that too many important employees were simply not going to march off to wherever. When the company moved the headquarters, for example, half of the 500 people they expected to follow didnât. Thatâs a lot of talent out the door, an even more important consideration when youâre talking about actually building the planes.
But this is a new Boeing, modeled less after the old Boeing, which played for the long term and thus outlasted most of its rivals, than on the GE model, where you can build anything anywhere — and everything but short-term profit be damned. Production is mobile; workers are irrelevant.
The problem with this model is that it is not truly very efficient. Workers are not interchangeable parts; they have knowledge and skills that can create new products, solve problems, and go to the wall for you when you need it. Itâs no accident that most of GEâs actual profit comes from its credit operations, not its manufacturing work. But the GE model prevails at Boeing, which means that worrying over short-term costs trumps building for long-term survival.
Had previous CEO Harry Stonecipher been able to follow his own ethics rules, Boeing would now be a dying company. He once bragged to me that he had made McDonnell-Douglas profitable without selling any airplanes. Not actually selling any of your product isnât a strategy, unless your goal is to go out of business. Stonecipher has been replaced by another GE disciple, James McNerney, who does at least seem to realize that you have to sell the product to stay in business. He may not value his current employees any more than Boeing ever has, however. Boeing argues that it has to outsource work in order to sell planes, which doesnât actually explain sending work to South Carolina. At the same time, the company effectively doesnât let its own workers bid on those jobs, and then often spends a lot of money paying its workers to fix othersâ mistakes. This isnât a new phenomena, and Boeing engineersâ mistakes on 787 fasteners show its persistence.
Machinistsâ strikes routinely cost the company more money than simply meeting the Machinistsâ demands would have cost. But unions force companies to actually manage, and too many executives dislike having to treat their employees like something more than automatons. The same is true with layoffs. The production write-downs in the mid-1990s cost the company far more than laying off fewer workers in the early 1990s would have cost them, since having more experienced workers on hand likely would have negated the production problems.
And what if Boeing were to move south? Aside from the unions, Boeing pretty much gets everything it asks for in Washington state where the tax system was pretty much built to Boeingâs specifications. After the 777 misadventure, few state or local officials are going to be so dumb as to not do whatever they can to keep Boeing happy. As for the South, these low-tax, non-union, pro-business states also are the states with the lowest quality of life scores, poorer school systems, and wide disparity of wealth. In the end, that formula doesnât make for a truly good climate in which to do business.
None of this may matter at the new Boeing, and the next jet may take its first flight from somewhere other than Boeing Field. But that doesnât mean Boeing will be a stronger or more profitable company because of that decision. In the long run, it will probably be less so.