Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.
December 6, 2013 at 10:35 AM
One of the most interesting things I learned in Dominic Gates’ story today in the Seattle Times is that the most number of jobs Boeing is promising prospective 777X sites is about 8,500 direct jobs.
Also, the factories for the new airliner and its advanced wing will require an investment of $10 billion (assuming, I assume, they don’t use Everett, where many facilities and much infrastructure already exists). And from the states that want this prize, Boeing wants…a lot to lower its costs.
Machinists here refused the company’s hurry-up-and-say-yes proposal. Yet Washington has approved $8.7 billion in tax breaks. Would Boeing come back with another offer for the union, or is it done — even though the Puget Sound region offers the best place to build the plane?
My question for you: Based on the information we have now…
Read on for some of the best business stories of the week and the Econ Haiku.
November 25, 2013 at 10:11 AM
Why did they do it? Many in the Puget Sound are still asking this question after the Machinists decisively rejected Boeing’s offer to build the 777X here. I’ve written about the miscalculations and misunderstandings on both sides.
But I received an email from source containing a letter that a union member sent to Boeing Commercial Airplanes chief Ray Conner in response to his open letter, which ran in newspapers, urging acceptance of the deal.
You can disagree or not, but here it is:
Dear Mr. Conner,
I am Boeing employee working under the current IAM 751 contract. I am also a third generation Boeing Employee. Growing up my (now 86 year old) grandma had a saying that has stuck with me until now. She always said, “Boeing has been good to this family.” A statement I have always believed to be true until this last contract proposal.
After World War 2, my grandfather retired from duty in the Air Force and began his career at the Boeing Company. In the 1970′s two of his sons hired on in Tooling, joining their father at Boeing until his retirement. Both sons continued on to have long careers with the company. The oldest retired a few years back and the youngest, my father, is still an active employee with 35 years at Boeing. Currently, all three of his daughters are financially supported by Boeing incomes. Along with me, my two brothers-in-law are also employed at Boeing. Two of us are IAM members and the third is an Engineer who is in fear that his job may be eliminated or moved out of state. One of my brothers-in -law has a father who is also a 30+ year IAM member. Apart from my immediate family we also have many extended family members who are current, long time Boeing employees.
November 14, 2013 at 10:23 AM
A cynic might say that Boeing has the International Association of Machinists right where it wants them. The company came to Washington first to build the new 777X. Workers voted down the requested contract extension. So if the new airplane is built elsewhere, it is the union’s fault.
But last night’s vote and the circumstances surrounding it are filled with shades of gray.
Boeing is operating as a multinational company in a “shareholder value” environment created since the 1980s and in a competitive world. Thus, record profits and high executive compensation are not at odds with trying to drive down costs, including — especially — for labor. They go hand-in-hand. While Boeing benefits from government subsidies and other “rents,” it worries about rivals that will emerge from China and Brazil in future years.
Executives are not unmindful of the value of the Puget Sound aerospace cluster and the high-skilled workers that saved it from the outsourced disasters of the Dreamliner. That’s why the company would rather built the 777X here, but not at any price.
They also operate in a quick-step world. Everybody knew a decision on where to make the new airplane was coming. State officials and union leaders seemed to understand the need for a speedy process.
November 8, 2013 at 10:15 AM
There’s only one big question in the Puget Sound region today: Will the Machinists accept Boeing’s hard-ball offer to build the 777X and its composite wing here? I’ll be writing about this more on Sunday. At the moment, the deal is far from a sure thing.
At the end of a Thursday meeting with members, District 751 President Tom Wroblewski tore up a copy of Boeing’s contract, calling it “a piece of crap.”
It’s easy to sympathize with union members who are angry with being asked to give back gains it took years of collective bargaining to achieve. Boeing is booking record profits and not asking top executives to hold back on taking high compensation. There may be a division between older workers that can ride out the backlog of orders here and retire fine, and younger ones that hope to have a place to work for the next 25 years.
To restate the obvious, Boeing does not have its old loyalty to the region. It has other places to build the airplane, however much that may cost, however destructive it might seem to throw over Washington’s high skills and experience. Non-union South Carolina would do anything to land this project and future ones. And a “no” vote could begin a slow death spiral for the company’s employment here.
What do you think will happen?
Read on for the best economy and business stories of the week…and the haiku.
November 5, 2013 at 10:22 AM
Factory orders rose 1.7 percent in September powered by demand for commercial aircraft (n.b.). Their value, $490.8 billion, now stands at a record, surpassing the previous top reached before the recession.
What missing are the jobs, which historically have paid much better than most service positions. Factory jobs were little changed in the September employment report. As the chart below shows, manufacturing employment entered a deep slump after 2000 (when China entered the World Trade Organization) that was only worsened by the Great Recession.
On average, 17 manufacturing operations closed every day between 2000 and 2011, according to the Information Technology and Innovation Foundation. Employment has not made a meaningful rebound.
This data seems at odds with the many stories we read over the past year about manufacturing coming back to the United States.
November 1, 2013 at 10:22 AM
It’s been a bad news, good news week. We learned that much of the detailed design work on the 777X will be done in North Charleston, Long Beach, Philidelphia, Moscow(!) and Huntsville, Ala. Then came word that 737 work will be significantly ramped up in Renton.
Decisions about the final design, manufacturing of the wing and assembly of the 777X will provide much more information about Boeing’s future here. But in other areas, the company has been drawing down its Puget Sound workforce and moving assets elsewhere, relatively small but unsettling. We have one of the last concentrations of major manufacturing by a single company left in America and it represents a giant portion of good jobs and export trade.
Benign explanations are available: The company wants to spread its risks. It has excess capacity elsewhere. The Puget Sound retains a world-class aerospace cluster and Boeing has huge sunk costs here.
Darker theories also abound: CEO Jim McNerney hates Seattle and the unions. There is no more loyalty to Seattle with the headquarters in Chicago. The old Seattle-centric engineering culture has been trumped by the bean counters and “shareholder value.”
Care to make a forecast for 10 years out?
Read on for some of the best business and economy stories of the week…and the haiku.
July 2, 2013 at 10:28 AM
• John Boyd of the location consulting firm The Boyd Co. gave a presentation here last month. It listed Seattle 10th among 29 cities in the western United States and Canada for operating costs of distribution warehouses. The cost in Seattle totaled nearly $19 million annually. In Tacoma, the total was $16.3 million; Spokane came in at $16 million; Portland, $15.6 million. At $23.6 million, Vancouver, B.C. led the list and the lowest operating cost was Quincy, Wash., at $14 million. After the recession, the report stated, “communities are actively courting logistics industries because the economic benefits are clear and compelling.”
• The American Waterways Operators annual report was released, examining the impact of the tugboat, towboat and barge industry. The trade association offers an encyclopedic look at the performance, challenges and issues of this industry that remains a foundation of the Puget Sound Economy.
• The property and construction consultants Rider Levett Bucknall reported that construction costs in the first quarter of the year in Seattle were less than 1 percent. It was among the lowest in the 12 cities surveyed.
June 10, 2013 at 10:42 AM
The Trade Development Alliance of Greater Seattle held its annual dinner last Thursday. Gov. Jay Inslee was the keynote speaker. I was on a panel with Len Jordan of Madrona Venture Group and Jeff Frazier of Microsoft, moderated by Bill McSherry of Boeing. Major sponsors were Boeing, Microsoft and Highline Community College. Among those buying tables were the Port of Tacoma, the Port of Seattle, the Port of Everett, Seattle Metropolitan Chamber of Commerce and Washington State Department of Commerce. In addition to public officials and business people, attendees included consular officials of other countries.
It was an evening that attested to the power of trade here, and to this community’s interest in the wider world. Both are big advantages. Gov. Inslee promised the state would do what it could to win the 777X, said Washington would “feast at the table of technology” and touted the increase in cherry exports under the new Korean-U.S. trade agreement as well as the 100,000th Chrysler exported from the Port of Gray’s Harbor. Our panel was put through the paces in predicting such things as China’s growth and Middle East air traffic in 2013. I’ve worked in cities and states that only gazed at their navels, measured economic success in the number of new tract houses built. This is far better.
On the other hand, we live in our own bubble. Washington is a net winner from the trade status quo. The same is not true everywhere. For example, a year after the free-trade agreement with South Korea was signed, the U.S. trade deficit was larger and the promised increase in American jobs hasn’t happened. South Korea is a currency manipulator, too.
May 29, 2013 at 10:29 AM
Laying down some markers to watch now that Memorial Day has passed and summer is almost upon us:
Will the recovery hold and expand? Housing prices are finally making a solid move upward. Consumer confidence is at a five-year high. They’re also taking on more debt again. This morning’s correction notwithstanding, stock prices are surging. Banks recorded their best profits on record. Some of the worst outcomes haven’t happened — a double-dip, eurozone contagion and war on the Korean peninsula. All this translates into a widening of the very slow recovery. On July 31st, the government will release its second-quarter gross domestic product report. Unfortunately this will contain revisions that make the economy seem to be growing faster than it is. The best metric of the strength of the recovery will continue to be unemployment. Eleven million Americans are still without jobs and although corporate profits are at a record, hiring has been fairly weak.
Will the stock market keep rocking? Stocks have been a good investment, especially in companies that came through the recession with healthy balance sheets. And where else could investors put their money with the pitiful returns from fixed-income? The big question is how long the run can last. You’ll find predictions across the spectrum. Average investors are just bystanders in this drama. With high-speed trading and huge institutions driving the action, even small macro warnings might trigger at least a modest correction. The big enchilada will be…
What does the Federal Reserve do? The Fed’s QE-eternity bond purchases and expansion of the money base have been a huge factor in the bull run. How Fed Chairman Ben Bernanke would respond to a real recovery has been for years a hypothetical question. Now it’s becoming smash-mouth real, as in the way today’s rise in Treasury yields has tanked the market. Even though he coined the metaphor, Alan Greenspan was never willing to take away the punch bowl as the party was getting going. Will Bernanke? And if so, how will the Fed’s pivot be handled — and received by the markets. Like much since 2007, this is unknown territory.
May 17, 2013 at 10:28 AM
The Dow is over 15,000, corporations are sitting on record amounts of cash, M&A activity is picking up, the deficit problem is on track to being solved, inflation is nearly non-existent and the U.S. economy is performing better than that of almost all other industrialized nations. Metropolitan Seattle, with 5.5 percent unemployment, is getting close to what economists would consider full employment. On the other hand, millions remain unemployed, wages are stagnant and inequality is the highest we’ve seen since the 1920s and perhaps even at a historic record. It’s a recovery, but one very different from those seen in the post World War II era.
Consider that a recession comes along around every seven years or so. Also, the banking industry is as dangerous as ever, and so politically powerful that it was most recently able to push back meaningful regulation of derivatives. Federal austerity is holding back a more robust recovery. Recession in the eurozone, a slowdown in China and political tensions in east Asia are among many concerns. What has you most worried?
Read on for the best links of the week and the haiku: