In an effort to meet increasing demand for its new 787 Dreamliner, Boeing needs to expand its production capacity. In 2009 the company concluded that they needed to ramp up production in the face of stiff competition from Airbus (380) for the jumbo jet market. So Boeing went to the largest employee union to negotiate terms for the additional manufacturing capacity, even though it was not required to do so. After losing $1.8B to a 2008 strike, Boeing wanted some assurances that the unions wouldn’t cause problems for the new production lines. The union balked on the no strike terms, demanded a seat on Boeing’s board of directors and a guaranty that all future aircraft production remain in the Seattle area. Since the union refused to bargain in good faith, Boeing decided to move the new production lines to South Carolina – a Right To Work state. They bought a Vought production facility and began constructing the plant.
This story should have ended right there. Boeing tried to negotiate with the union for the new production lines and the union wouldn’t budge so the company decided to go elsewhere. Boeing announced their decision 18 months ago. The new production facility is scheduled to start running in July and there are currently 1000 new employees in South Carolina. Last week the story took a new and dangerous turn as the NRLB, part of the regime, decided to sue Boeing in an effort to block the new facility. Their reason for the suit? That Boeing did this in retaliation against the union (stories here, here, and here).
This week, the National Labor Relations Board filed a complaint over Boeing’s plans to open a plant in South Carolina. Boeing is not seeking to outsource work to a foreign country. Boeing has chosen a manufacturing location in the U.S. based on cost and risk factors. It plans to open a second production line of its 787 Dreamliner plane there. The plant has been built.
Boeing executives have acknowledged that they were reluctant to expand in Washington state because of the risk of a labor strike. Boeing’s workers in Washington belong to the International Association of Machinists and Aerospace Workers. Its plant in South Carolina would be nonunion.
Seizing on the words of Boeing executives, the NLRB inferred that the decision to choose South Carolina was retaliation against the union. The labor board demands that Boeing open the second production line in Washington.
Retaliation? Sounds more like the U.S. government — the NLRB — is retaliating against Boeing for seeking a better business climate in South Carolina. Appointments by President Barack Obama have given the five-member NLRB a pro-labor tilt.
Boeing tried to negotiate with the union – two years ago. The company is not moving all Dreamliner production, just the new capacity. No union jobs in Seattle are affected. If Boeing really wanted to stick it to the union, they could have moved the whole shebang to South Carolina.
The question here is this: Does the federal government have the authority to prevent a company from opening a plant wherever they choose? Apparently they believe they do. And, according to this piece (from the Washington Examiner), Boeing might be facing an uphill battle.
Boeing is not free to make its jets at the factory of its choosing, according to the National Labor Relations Board — it must make them in Washington state, using union labor.
This extraordinary abridgement of economic freedom might suggest an anti-Boeing vendetta from President Obama, except that this administration’s Export-Import Bank has subsidized Boeing with nearly $15 billion in loan guarantees in the past two years — roughly three-quarters of all of Ex-Im’s guarantees during that time.
This puts Boeing in an awkward position. The NLRB is surely overreaching in trying to block Boeing from making some of its 787s in South Carolina, a right-to-work state (NLRB calls this illegal retaliation against the machinists and aerospace workers union for its 2005 and 2008 strikes). In its effort to fight back, Boeing could be defanged by its reliance on big government. It’s a cautionary tale for Obama’s other corporate allies — from the drug industry that benefits so much from Obamacare to the tech, agrichem, coal, and other industries that have benefitted from the president’s corporatism.
Boeing and Obama, both based in Chicago, have a real political friendship. In 2008, Obama was by far the biggest recipient of campaign contributions from Boeing employees and executives, hauling in $197,000 — five times as much as John McCain, and more than the top eight Republicans combined.
So Boeing could be talking out of both sides of its mouth here. If you suck up to the government and politicians for benefits, don’t complain when they call in their chips.
In Boeing’s situation, it’s not only Uncle Sam who has leverage purchased with corporate welfare.
Washington state, Illinois and Chicago have given Boeing billions in favors. Do you think these Democratic governors wouldn’t squeeze Boeing, too? Does anyone doubt the new mayor of Chicago, Rahm Emanuel, would play politics with Boeing’s subsidies in order to help his old boss, Obama? (Of course, the disputed Boeing factory in South Carolina got hundreds of millions in state subsidies, too.)
Forever, business has been seduced by the promise of free money from government, along with regulation to clear out competition. Boeing has been the foremost among businesses partnering with Uncle Sam.
This is what our system of “Crony Capitalism” is all about…