Seattle Bleeds Boeing Blue as 787 Grounding Dismays Home

Scratch people in Seattle, the line goes, and they bleed Boeing (BA) blue, the corporate color of the world’s largest planemaker. Sons have followed fathers to the Puget Sound plants that built the 707, the first commercially successful jetliner, and the 747, the first wide-body. Not for nothing does Seattle call itself the Jet City.

The grounding Jan. 16 of Boeing Co.’s newest model, the 787 Dreamliner, by U.S. regulators sent chills through a place where aerospace is part of the lore, as well as an employer ranking with the software industry, anchored by Microsoft Corp. (MSFT)

Governor Jay Inslee used the first minutes of his inaugural press conference to declare solidarity with the manufacturer, after pointing to uncles who build airplanes there as evidence of his family’s roots in the state.

“We are all on this airplane in the state of Washington,” Inslee said.

Seattle’s fortunes have been tied to aerospace since lumberman Bill Boeing built his first wooden floatplane on Lake Union in 1916. During a Boeing slump in 1971, job cuts so soured the economy that real-estate agents put up a billboard that read, “Will the last person leaving Seattle -- turn out the lights,” according to HistoryLink.org, a website on Washington’s history.

Aerospace will generate $10 billion in statewide wages this year, about as much as the software industry, according to Bret Bertolin, a senior economist for the state.

‘Bright Spot’

“It’s been a bright spot,” he said. With Boeing planning to double output of the 787, state aerospace employment is projected to rise to 96,000 this year, from a low of 61,500 in 2004, he said.

The industry’s growth helped the state jobless rate decline to 7.8 percent in November from more than 10 percent in 2010. Including suppliers, aerospace may support 200,000 jobs and generate $36 billion a year, according to a study prepared for Snohomish County, north of Seattle. In addition, thousands of retirees depend on Boeing for pensions.

“Between Boeing and Social Security, that’s all there is,” said Wayne Lemieux, 72, a retired machinist in Woodinville, Washington, who worked at the company for 40 years.

The Dreamliner is Boeing’s first commercial airliner since 1995, and the first made extensively from composite plastics.

The global fleet has been grounded indefinitely since an order from the U.S. Federal Aviation Administration, which cited fire risk from lithium-ion batteries after a blaze on a parked Japan Airlines Co. (9201) 787 and an in-flight incident on an All Nippon Airways Co. (9202) plane. The batteries were made by a unit of Kyoto, Japan-based GS Yuasa Corp. (6674)

Seeking Flaw

Boeing stock rallied yesterday after Bloomberg News reported that the company and U.S. officials are investigating whether batteries from the same batch caused the incidents, which if confirmed could eliminate a systemic flaw and speed the resumption of flights.

“Time is going to show that it’s not Boeing’s fault,” said former toolmaker Jim Gepford, another Boeing retiree. “They’re going to get this thing fixed.”

The grounding is the first for a U.S. airplane model since 1979. Hours before it was announced this week, Boeing Commercial Airplanes President Ray Conner opened the company’s planned full-day annual retreat at the state convention center in Seattle and then promptly sent hundreds of Boeing executives back to work to focus on the 787.

Boeing also confronts a dispute with 23,000 unionized engineers and technical workers, whose contract expired in October. The union’s leadership rejected Boeing’s sweetened offer yesterday for a 5 percent annual boost in salary over four years, saying the company put retirement benefits at risk with plans to end pensions for new employees.

Negotiations Contentious

Negotiations had turned contentious, with engineers marching in red shirts through Boeing factories at rallies and union leaders urging their members to “work to rule,” to slow production. A vote will be scheduled in coming weeks, and the union said it may ask workers for the authority to call a strike.

Local pride in Boeing is tinged with suspicion as its center of gravity has shifted in the past decade. The company moved a few hundred executives and its headquarters from Seattle to Chicago in 2001, then chose South Carolina, a so-called right-to-work state, for a second 787 assembly line in 2009, the first new commercial plant it has built outside the Puget Sound region.

Design and production of the 787 was extensively outsourced to suppliers, a decision some engineers and machinists said the company would come to regret.

“I think the Boeing company built the best airplanes in the world, bar none,” said retiree Lemieux. “But I also believe they can screw up.”

To contact the reporters on this story: Peter Robison in Seattle at robison@bloomberg.net; Susanna Ray in Seattle at sray7@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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