Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.
March 26, 2013 at 10:22 AM
Boeing news: Chicago, do we have a problem?
The announcements add up. Boeing will move its Seattle-area flight training operations to Miami. Boeing will lay off 800 machinists. Boeing will cut hundreds of white-collar jobs here, too, moving some airline engineering support to Long Beach, Calif., and some IT work to St. Louis and Charleston, S.C. Officials of both the company and the machinists union downplayed the big job announcement, saying it was not the sign of a down cycle. On the other hand, Intel’s Andy Grove famously said only the paranoid survive. And sometimes even the paranoid don’t make it. Chicago, do we have a problem?
Some of these moves may have an innocent logic. And, as I wrote recently, another headwind for workers will be the rise of a new class of sophisticated robots and automation. Still, when I was talking to Leeham Co. aviation consultant Scott Hamilton recently about another matter, he said the biggest threat to the Washington state aerospace cluster is Boeing gradually shifting work to Southern states. Boeing has bought more land adjacent to its new 787 assembly in North Charleston, S.C. And South Carolina doesn’t have those pesky unions.
We are, after all, only a branch office. It matters where the chief executive lives. What also continues to live, despite repeated and costly blunders, is a culture combining the imperial CEO, beancounters-trump-engineers, and the ghosts of McDonnell Douglas and Jack Welch. The board of directors has repeatedly failed to assert itself, capping its shameful performance by giving CEO Jim McNerney a hefty raise last year. No consequences. No accountability. Not even a sense of embarrassment. Meanwhile, this “anti-business” state has given Boeing billions in incentives/payoffs to keep work here. Unions have caved to preserve “labor peace.” It may not matter. The highest-quality aerospace cluster in the world simply may not “pencil out.” That’s the Chicago way.
So we’ll wait and see. There’s plenty of work yet to be done, plenty of sunk costs here. But I suspect more shoes will drop. If one thing has been made clear by the Dreamliner fiasco, it’s that Boeing’s head shed thinks it can get away with pretty much anything — and any consequences can be pushed down to the average workers. Extra points for blaming unions! This is the attitude one should expect from a company that not only suffers appallingly weak corporate governance, but is also a welfare queen, sucking public incentives and the U.S. government’s peddling of its wares around the world, and a perfectly-legal tax dodger. No wonder it has such a sense of entitlement, so little loyalty — and worst of all, so little ability to assess its long-term viability and best interests. As is the case in too much of highly consolidated corporate America, these bosses are like Lindsay Lohan with PowerPoint.
You get what you pay for. It’s time for Washington to plan for a post-Boeing world. It may not arrive for a decade or more. But despite all our kowtowing, and all our obvious advantages and skills, it may well be coming. We have a problem, and it’s Chicago.
And Don’t Miss: Fed official says job gains dominated by lower-paying work | LA Times
Today’s Econ Haiku:
Why create a job
When you can short a country?
O transaction tax!