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As Boeing considers closing a Dreamliner plant, SC factory is seen as likely survivor

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boeing CEO Dave Calhoun.JPG

Boeing CEO Dave Calhoun during a press conference as three Dreamlifter cargo planes landed at Boeing’s North Charleston campus delivering personal protective equipment for MUSC workers on Monday, May 11, 2020. File/Andrew J. Whitaker/Staff

Leaders in Washington state's Snohomish County launched a marketing campaign last week touting how it's "Better With Boeing."

It includes a website, a hashtag and custom logos for every city in the county. On the homepage, which is decorated in Boeing's signature blue, the county declares itself "the best place for continued growth in aerospace and aviation in America." 

Below that statement is a reference to a "major decision" about the way Boeing will produce its 787 jet in the future.

Dreamliner production is now split between the company's North Charleston campus and its widebody factory in Everett, Wash., but that division of work could be changing. 

Because of the steep drop in demand for commercial aircraft triggered by the COVID-19 pandemic, the planemaker plans to build just six of the jets per month next year — too few, some analysts say, to afford to maintain two sites — and it's studying where, how and if it can consolidate the program in one spot. 

It's that decision that prompted "Better With Boeing" and sparked speculation that the aerospace giant would shut down its 787 operations in Everett, taking many of the 30,000 jobs at the plant with it.

Better With Boeing

Logos for Snohomish's "Better With Boeing" campaign were created with the names of every city in the county, including Everett, where a Boeing Dreamliner production line is currently located. Snohomish County/Provided

The same level of angst and anxiety hasn't been playing out in South Carolina.

Richard Aboulafia, an aerospace analyst and vice president with The Teal Group in Fairfax, Va., summed up the conventional wisdom.

"I don't think there's any risk of Charleston being closed," he said. 

Multiple other analysts and industry watchers share that opinion, pointing to the money Boeing would save by concentrating the line in South Carolina.

Logistical considerations also work in North Charleston's favor. For instance, the 787-10, the largest of the three Dreamliner models, can only be built at the local plant under the current setup because of its size.

Seattle-area aerospace analyst and veteran Boeing watcher Scott Hamilton isn't so sure. He wrote on his Leeham News website last week that production quality issues at the South Carolina plant have made the case for keeping both factories around, even if it costs the company more in the short-run. 

In the past two weeks, the company has acknowledged identifying several issues with the Dreamliner, including manufacturing errors in the aft-body sections of some planes that prompted the company to pull eight of its Dreamliners from service. The production problems that led to the groundings were traced to the North Charleston plant. 

Quality concerns about the factory off International Boulevard aren't new. Reports about shoddy production put scrutiny on the plant more than a year ago, and, with the option on the table to consolidate, Boeing leaders may have to answer to those concerns if North Charleston becomes the sole 787 plant.

The study

During an earnings call in July, Boeing CEO David Calhoun said he wouldn't "jump to the conclusion" that the 787 would be leaving Everett when asked about the future of that site. The question was posed with the assumption that Dreamliner manufacturing would be consolidated in North Charleston, leaving Everett with a two per-month combined rate for the 777/777X, the 767 freighter and a 747 line that's closing in 2022.

That would leave massive overhead expenses at the Seattle-area site — by volume it's the largest building in the world — and very few aircraft being made. 

Calhoun pointed out that the company's review isn't based on the configuration that's best for turning out six Dreamliner jets a month. If six was the number they were solving for, he said, that would "be an easy one, probably." 

Instead, Calhoun said he's hopeful demand will recover, bringing the 787 to a monthly rate of 10 or more. If production is shifted to one site, that factory would eventually have to support a substantially higher output than when two plants were building a combined 14 a month. 

That's assuming demand for the jet recovers to the extent that Boeing hopes. New purchases for widebodies like the Dreamliner are not expected to bounce back quickly because airlines typically deploy them on long-haul international flights, which have been particularly depressed during the pandemic.

"We're gonna do the best we can," Calhoun said of the study during the second quarter earnings call on July 29. "I'm not even sure we can pull it off, but, at any rate, we are gonna evaluate it."

The company declined to comment further on the consolidation study, and it has not said when it will make a decision. 

'Dollars-and-cents standpoint'

The primary argument for keeping the South Carolina line running is cost, experts say. "From a pure dollars-and-cents standpoint," consolidating production in North Charleston just makes sense, per Hamilton's analysis. 

There are also logistical considerations, particularly with the 787-10, commonly referred to as the "Dash 10."

The longest and newest version of the 787 is built only in North Charleston, and that's not likely to change: the Dash 10 fuselage sections are too large to fit inside the Dreamlifter, a modified 747 cargo plane that transports parts from a global network of suppliers to the two final assembly plants. 

Moving the 787-10 production to Everett would take money, Aboulafia of the Teal Group said, and Boeing is "just not going to spend money right now."

Boeing PPE02.jpg (copy)

The fuselage parts built in North Charleston for the 787-10 model are too big to fit inside the Dreamlifter cargo plane it uses to transport parts. Because of that, North Charleston is the only place that can build the "Dash 10" under the current alignment. File/Andrew J. Whitaker/Staff

Also, all 787 rear fuselage sections are fabricated and assembled in North Charleston, even those installed on the Everett-made planes.

Completed rear and midbody sections for the aircraft are either delivered for final assembly in Everett or moved across the campus for assembly in North Charleston.

Hamilton has pointed out in his analysis that moving those sections from one part of the Boeing South Carolina campus to the other is "a lot cheaper and logistically simpler" than airlifting the parts to the West Coast. 

And Boeing's South Carolina workforce isn't unionized, despite several unsuccessful attempts by the International Association of Machinists, making its labor costs cheaper.

In the Puget Sound region where Boeing employees have been represented by a union for decades, labor leaders are gearing up for a showdown over the fate of the Everett factory. Jon Holden, president of IAM District 751, told members recently that there have been no discussions between Boeing and the IAM about the consolidation study, aside from notification.

"In typical Boeing fashion, Boeing is talking to everyone else but the Union," Holden wrote in his September report to members.  

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Holden referred to the consolidation review as a "charade" that could be "masking a decision that is already made." Boeing may be waiting for the union to approach them with concessions, he wrote, adding that the IAM has "no intentions" of doing so. 

The case for Everett 

When it comes to building up a robust aerospace sector, Washington has decades of experience over South Carolina. Boeing is the Evergreen State's largest employer, and the company's presence in Everett goes back more than 50 years. 

Washington ranks first in the U.S. for competitiveness in the aerospace sector, according to a 2019 analysis by The Teal Group. The Palmetto State, by contrast, came in at No. 27, down five spots from the previous year. 

Even so, Aboulafia of the Teal Group said he doubts the Palmetto State's place in the lower half of the pack will work against it in the consolidation study.

But the competitiveness gap between Washington and South Carolina could work in Everett's favor, potentially prompting the company to keep both lines: Maintaining a Dreamliner presence on the West Coast could put Boeing in a better position if it wants to design an updated 787 or launch an entirely new jet program, Aboulafia said. 

That's a long-term consideration that would be most relevant post-pandemic, as air travel recovers and sales of widebody jets turn up. But Boeing has "turned into a very short-term-focused company," Aboulafia said.

For the moment, cost is the primary factor, as Boeing faces widespread layoffs, canceled orders and depressed delivery totals. Already about 10 percent of the workforce has been cut during the pandemic, and Calhoun, the chief executive, said last month that job reductions would go beyond that point.

Still, Hamilton of Leeham News, who previously described a consolidation in North Charleston as "virtually certain," believes that keeping both sites open will be best for the "long-term health of the program." 

Boeing South Carolina has "proved over and over and over again that it’s not up to the task of having full responsibility for the 787 program," he wrote on his website this week. 

Last year, a report by The Post and Courier found that a program that accelerated production by allowing mechanics to inspect their own work was leading to repeated mistakes on the 787 line in North Charleston. 

A review of more than a dozen surveys from airlines last year that had recently picked up their South Carolina-built Dreamliners revealed dissatisfaction among some customers with quality control at the plant.

Uresh Sheth, an analyst who tracks Dreamliner production, pointed out that some Boeing customers "may not be too happy if the 787 is consolidated at South Carolina given their past experience."

And new concerns about the Dreamliner program have recently come to light. 

Less than a week after the consolidation study was announced, the Federal Aviation Administration proposed $1.25 million in fines against Boeing and alleged that its safety representatives were "harassed" and "berated" by deadline-driven managers at the Charleston-area factory. 

The FAA is also now probing several production issues that Boeing disclosed in the past couple of weeks, including manufacturing mistakes on the aft-body sections that are made only in North Charleston. Production problems were also found with a wing-like flight-control component called the horizontal stabilizer and with shims in a section of the 787's vertical fin. 

In all instances, Boeing said it notified the FAA and will be working closely with aviation regulators as they look into the issues. 

"Safety and quality are Boeing’s highest priorities," the company said in its statement about the aft-body issues that grounded eight Dreamliners last month. "We are taking the appropriate steps to resolve these issues and prevent them from happening again."

Future of Boeing in S.C.

While there has been widespread speculation about Boeing shutting down 787 production in Everett, observers in South Carolina seem confident the North Charleston plant will remain open.

"I’d be hard-pressed to find an economist or industry expert that doesn’t think that," said Adrianne Beasley, a spokeswoman for the S.C. Council on Competitiveness, an umbrella organization that includes multiple pro-business groups that focus on specific industries, including aerospace.

Beasley pointed to the Dreamliner work that the North Charleston site does beyond final assembly and what she described as an "enormous amount of potential for growth." 

"I think every piece of evidence points to South Carolina being poised for success," Beasley said. 

While the Puget Sound area has had a lot more time to develop its aerospace sector and establish a pipeline for skilled workers, Beasley pointed to the changes that took place in the decade after Boeing announced it was building a final assembly plant in North Charleston. 

Boeing South Carolina (copy) (copy)

Boeing Co. announced plans to build a second 787 Dreamliner assembly campus in North Charleston in 2010, joining an existing plant making the wide-body jets in Everett, Wash. Now, the company is considering consolidating 787 production to one of the sites. File/Boeing Co./Provided

Employment in aerospace grew 13 percent in South Carolina from 2010 to 2017, while workforce growth in the state overall was about 2.1 percent. 

Late last year, the $80 million, 218,000-square-foot Aeronautical Training Center opened at Trident Technical College. Mary Thornley, the college's president, said plans for the facility had been germinating since Nov. 20, 2009, the day Boeing broke ground on its assembly plant next to Charleston International Airport. 

The company has also had strong support, including financial assistance, from politicians in the Palmetto State. An incentive package promised the company about $900 million in various tax breaks when it chose to build the second Dreamliner production line in Charleston County. 

When three Boeing Dreamlifters flew to the campus earlier this year for a delivery of personal protective equipment for South Carolina health care workers, Gov. Henry McMaster addressed the company as "a great family member." 

Calhoun, who was making his first-ever public appearance at the site as CEO, called South Carolina "a state Boeing loves." 

McMaster spokesman Brian Symmes said he could not comment on anything "specifically related to the speculation around Boeing’s internal deliberations," but said the company's presence "has had a tremendously positive impact on our state’s economy and on South Carolina families."

The Charleston Regional Development Alliance declined to comment on Boeing's consolidation considerations. 

North Charleston Mayor Keith Summey affirmed the city is "fully committed to the future success of Boeing and its industrious team members.”

As of now, it's unclear how many are still part of the team. At the beginning of the year, Boeing employed about 7,000 South Carolinians. It has not disclosed how many have lost their jobs during the pandemic. A new headcount is expected in early 2021.

Reach Emily Williams at 843-607-0894. Follow her on Twitter @emilye_williams.

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