After a couple months of speculation about the move, Boeing Co. confirmed Thursday it will consolidate production of its 787 Dreamliner jet in South Carolina, marking a major shift for the company and dealing a serious blow to Washington state's aerospace sector.
The changes will close the 787 production line in Everett, Wash., which has been splitting final assembly with Boeing's plant in North Charleston.
The consolidation will begin in mid-2021, the company said.
"As our customers manage through the unprecedented global pandemic, to ensure the long-term success of the 787 program, we are consolidating 787 production in South Carolina," Stan Deal, president and chief executive officer of Boeing Commercial Airplanes, said in a statement.
News of the likely announcement was broken Tuesday night by the Wall Street Journal, and predictions about the move have been made since late July when CEO David Calhoun disclosed that the company was considering moving assembly of the Dreamliner to one location.
Due to the depressed demand for new aircraft during the coronavirus pandemic, just six of the wide-body jets will be built per month next year — too few to keep both lines going. Pivoting to the Palmetto State offered serious cost savings, a prospect difficult to overlook as the aerospace giant looks to offset financial losses.
In a message to employees Thursday morning, Deal said that moving all 787 assembly to South Carolina would make them "more competitive and efficient" and better able to "weather these challenging times and win new business."
Deal credited employees in Everett for helping to "give birth to an airplane that changed how airlines and passengers want to fly."
There are about 900 employees right now in the Puget Sound region who work on the 787 program. It wasn't clear Thursday how many will be impacted by the consolidation.
Decisions about staffing changes "will be developed and evaluated in the next few months in conjunction with the overall transition plan," Boeing said, and the company will "work to minimize the impacts" on workers.
Its Seattle-area employees will focus on continuing to build the remaining aircraft programs there, Boeing said: the still-grounded 737 Max, the 767 freighter, the 777/777X and the 747, which is being retired in 2022.
Since the consolidation study was announced, Washington state officials have tried to convince the planemaker to keep the Dreamliner program — and the hundreds of jobs associated with it — in Everett.
In South Carolina, the consolidation is likely to be met with open arms. Since the Palmetto State first courted the company to open its second 787 factory in North Charleston in 2009, Boeing has been a crown jewel in the state's economic development crown.
Gov. Henry McMaster called it a "very welcome announcement," citing the possibility of new jobs.
U.S. Rep. Joe Cunningham, D-S.C., who represents Charleston in the 1st Congressional District, said Thursday he would "wholeheartedly welcome" Boeing's plan to bring all 787 assembly to the Lowcountry.
While Boeing's decision in 2009 to build its second 787 final assembly plant in North Charleston came with major financial benefits — an initial incentive package promised about $900 million in various tax breaks — McMaster said that wasn't the case for the consolidation decision.
"If they have problems, we try to help, we try to eliminate obstacles," McMaster said. "But there were no incentives with this.”
Boeing South Carolina spokeswoman Libba Holland confirmed the company has not received any new incentives to consolidate in the Palmetto State.
"This decision was driven by an objective review of market realities, production scenarios and logistical considerations," the company said in a statement. "We value our relationships across South Carolina and constantly work with those partners to ensure a long-term, competitive business environment."
On the West Coast, state officials criticized the planemaker for its decision.
Washington state Gov. Jay Inslee wrote in a statement Wednesday that the announcement was "an insult to the hardworking aerospace employees who build 787s" in his state.
"I understand the serious market forces Boeing faces today," Inslee said in his statement. "What I don't understand is why the company can't commit to restoring production here when the market for this plane improves."
When Calhoun explained the consolidation study during the company's second quarter earnings call, he said they would only consolidate if they felt that the site selected could continue to handle production on its own once the demand for the wide-body returns, boosting the monthly production rate back into double digits.
That would mean Boeing's North Charleston campus could eventually build a few more jets per month than it was making at the program's peak rate of 14 planes per month with the work split between the two lines.
Inslee's statement suggested there could be repercussions for closing Puget Sound's 787 operations for good, saying that the decision "necessitates a review" of Boeing's "favorable tax treatment."
Boeing is Washington state's largest employer. At the beginning of the year, about 30,000 people were working at the factory in Everett, and 71,800 people total in Washington state were employed by Boeing, more than 10 times the number in South Carolina.
Almost 7,000 South Carolinians were working for Boeing in January, making it the county's largest private employer.
Company-wide cuts that reduced Boeing's workforce by a tenth during the pandemic affected the North Charleston factory, but the company has not disclosed how many jobs there were lost. An updated employee headcount is expected in early 2021.
Boeing's decision to move all Dreamliner assembly to South Carolina will "definitely have a long-term impact" on the state's aerospace sector, said Stephen Astemborski, the director of SC Aerospace, a pro-business group that's part of the S.C. Council of Competitiveness.
Astemborski pointed to the growth that's happened since the Dreamliner final assembly facility was added in South Carolina: Employment in the sector increased by more than 11 percent in an about decade-long span.
Everett has been building 787-8 and 787-9 airplanes since 2007. The North Charleston plant was brought online in 2010.
In its statement about the consolidation, Boeing noted that the 787-10, or "Dash 10," the longest version of the Dreamliner, can only be built in South Carolina. Aft- and mid-body fuselage parts for the jet that are fabricated at the campus next to Charleston International Airport are too big to fit inside the cargo plane it uses to transport parts.
And since all aft- and mid-fuselage sections are made in North Charleston, all of those section will be moved from one part of the campus to another, rather than some being flown to Everett, once the program is consolidated.
Another consideration not noted by Boeing in its statements but referenced often by industry watchers and aerospace experts who predicted the move, is South Carolina's status as a right-to-work state.
The workforce at the North Charleston campus is not unionized while unions have represented workers in the Puget Sound region for decades.
Jon Holden, president of their local chapter of the International Association of Machinists union, argued in his response to the consolidation that moving all 787 work to a non-union site was "about control of the workforce."
Deal said in his message to employees that all stakeholders, including unions, were "engaged' in the consolidation study and cited the fact that so many of Boeing's employees would be affected by the decision as the reason why they "took the time to run a rigorous and thoughtful evaluation."
The email referenced "months" spent on the study, but did not provide a specific timeframe for when the work started. Calhoun's first public statement about consolidation was on July 29.
Boeing's decision to bring all 787 work to South Carolina comes during a tumultuous year for the company as it faces two simultaneous crises: the COVID-19 pandemic and the grounding of its 737 Max, which the Federal Aviation Administration is getting closer to allowing to fly again.
The Max was pulled from service worldwide more than 18 months ago after two deadly crashes.
More recently, the FAA has said that it's investigating several production mistakes with the Dreamliner program, including manufacturing errors made at the North Charleston plant that led to the grounding of eight jets.