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Boeing: New engineering sites to compete with Wash.

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By Michelle Dunlop
Herald Writer
Published:
The Boeing Co. is establishing centers in South Carolina and California that will compete with Washington for new jetliner engineering work, the company said Friday.
"When we talk about future work, these centers will compete," said Doug Alder, a Boeing spokesman. "Everything is on the table."
The company, which has a large engineering presence in the Puget Sound region, will establish a propulsion center in South Carolina for the design and assembly of the 737 MAX engine nacelle.
Boeing also is consolidating all work on out-of-production aircraft in Southern California. That move will take place over the next six to nine months and mean the loss of 300 jobs in Washington, Alder said.
The centers in South Carolina and California will work "independently but cooperatively" with Boeing's engineering center here in Washington as well as Boeing's design center in Moscow, Russia, the company said.
The move allows Boeing to better geographically diversify its workforce, which helps protect the company from work stoppages, natural disasters or acts of terrorism, the company said.
It also creates an internal competition between work sites, a strategy Jim McNerney, CEO of the Chicago-based company, alluded to during the company's investor conference last week. McNerney was addressing the potential of doing manufacturing for the new 777X in North Charleston, S.C., where Boeing has a 787 final-assembly line and does 787 subassembly work.
"Now that we have internal competition ... we're going to get much better deals," McNerney said.
Mike Delaney, vice president of engineering for Renton-based Boeing Commercial Airplanes, told employees in an email that Boeing has been planning this level of geographical diversification for three years. Opening the South Carolina site, expanding the company's presence in Utah and acquiring operations in Montana all were part of the strategy.
Designating the new engineering centers was the latest in the plan to "ensure continuity for our business and customers as we scale up to meet growing market demand," Delaney wrote.
Boeing expects the South Carolina and Long Beach, Calif., engineering centers to grow over time, Delaney wrote.
"We are presently studying other potential work packages for all the centers," he wrote.
Boeing has made it clear that Puget Sound-area engineers can't take for granted any new work on programs like the planned 777X.
"Assessments of current and future work statement for every center will be based on capability, capacity, competitiveness and optimization of the Boeing enterprise," Delaney wrote.
Delaney warned Boeing's Puget Sound-area engineers about future competition during recent negotiations with the Society of Professional Engineering Employees in Aerospace. The union represents more than 22,000 engineers and technical workers in the region. Delaney had said the company could move out of the Puget Sound region if they couldn't keep costs in check here.
SPEEA engineers and technical workers agreed to contracts that locked in pay raises and medical costs from their 2008 contract. However, the new contracts eliminate pension plans for new union workers, who will be enrolled instead in 401(k) plans. Boeing has identified pension costs as a key concern.
Analyst Scott Hamilton of Leeham Co. seemed unsurprised by Boeing's announcement.
"It's part of a pattern that emerged with the establishment of (the second 787 line) in Charleston and the continued acquisition of land" in North Charleston, he wrote in an email. "It's clear for all to see that Boeing is going to make Charleston a major aerospace cluster."
SPEEA didn't have an immediate reaction to Boeing's announcement Friday. However, union leaders previously have pointed out that Boeing has been moving engineering work out of the region for years.
The company's Moscow, Russia, design center has been a source of contention between the union and Boeing. The company said Friday that it is considering opening a design center in Kiev, Ukraine, since many of the engineers at the Moscow center are from Kiev.
Boeing's announcement of the engineering reorganization was made early Friday, while the world's aviation writers were flying home after two days of briefings in Everett and Renton. The company holds the background briefings every year in anticipation of air shows in Paris or London.

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