Potential Boeing suppliers waiting in the wings

The only major Boeing 787 supplier to land in the region so far is a factory that Boeing itself is building in Palmetto Commerce Park. The plant, shown here earlier this year, will make interior components for the Dreamliner. It is expected to open in December.

Warren Wise

Provided/Boeing Co.

Boeing took delivery of its first set of 787 wings in North Charleston in July, when the assembly of the first South Carolina-made airplane began. Experts believe suppliers may look harder at the region once the local plant ramps up production.

Steve Dykes, Charleston County's economic development director, was well into a PowerPoint presentation putting this year's local successes in the context of the national doldrums when it came time to heap praise on everyone's favorite aircraft manufacturer.

"Obviously, I've got to spend a slide or two just to tout the progress over at Boeing," Dykes said earlier this month to a crowd of business people, which included Boeing's top two South Carolina executives.

But true to his profession, and not wanting to slight the rest of the group, Dykes then turned his focus to the broader, brighter future.

"And as we all know, the downstream benefit from Boeing being here continues to play out. I always tread lightly on this subject because I know the first order of business is to turn planes out here," Dykes said, laughingly acknowledging Jack Jones and Marco Cavazzoni at the Boeing table in the audience. "But we continue to be very excited about what we can do as a community to lay all the infrastructure that will support this success here."

Dykes, though striking a more cautious tone than some other public officials, was referring to the widely held expectation that Boeing's North Charleston plant will draw suppliers and ancillary businesses, forming an aerospace cluster with thousands of jobs for a region where one in every 10 people is out of work.

But that has not happened, at least not yet.

Labor pains?

It's tough to know each potential corporate immigrant's rationale for staying put so far. But the main theories floated by those following the situation closely include the uncertainty associated with the National Labor Relations Board's lawsuit against Boeing and the very early stage of production the company has reached in South Carolina.

Among those who believe in the "chilling effect" of the NLRB case is Republican presidential candidate Mitt Romney, whose top labor adviser is Boeing's lead defense attorney.

When Romney visited the Boeing plant two weeks ago, he said company officials told him that suppliers are "holding off" building around North Charleston because of the pending NLRB action, which alleges Boeing built the South Carolina plant to punish a West Coast union.

Last week, members of the South Carolina Congressional Delegation, when asked about the supplier issue a few hours after they visited Boeing, eagerly picked up that line of reasoning.

U.S. Rep. Jeff Duncan of the 3rd District along the northwestern edge of the state said the NLRB complaint has prompted the suppliers' "slow-walking."

"The NLRB suit is affecting more than just Boeing," Duncan said Monday. "You've got the support industries that are looking to locate here, buy real estate, build manufacturing plants, move equipment in. They're taking a big risk that they can't afford to take if NLRB is successful suing Boeing.

"These companies ... would already be locating here, ramping up, getting ready to supply the harnesses and the windshields and the seat covers, everything that goes into the aircraft," Duncan continued. "They'd be ready to start supplying that to Boeing. But it's the uncertainty that's being created with this lawsuit, which I think's wrong."

Mark Vitner, managing director and senior economist at Wells Fargo in Charlotte, said, "It just makes perfect sense that that would be the case."

He said some suppliers might be concerned that they could find themselves in the NLRB's cross-hairs next. "If they have a union shop somewhere else in the country, they could come after them," he said. And if it came to mounting a legal defense, "Boeing suppliers probably aren't as cash-rich as Boeing is."

Timing

But that view is disputed by, among others, state Commerce Secretary Bobby Hitt, who thinks it's more a question of economics and timing. Hitt points to the fact that Boeing has not yet produced a single plane in South Carolina.

"So it's kind of early to expect a lot of people to rush in and spend money to support an operation that's still a startup," he said last week.

Hitt promised the suppliers will come, but the process will unfold "over the next several years, not over the next several months."

Dykes, Charleston County's top industry hunter, said it won't be until the young plant is closer to its planned three planes a month that suppliers will join Boeing in North Charleston. Wait until a year after the first plane is produced, expected mid-2012, he said.

"Starting then and beyond is when we'll start to see significant supplier interest," Dykes said.

But the recruitment effort has been on for a while and continues this week. The state sent a large delegation to the Paris Air Show in June, and on Sunday, another large delegation was to fly to the Seattle area to meet with companies there and in Portland.

The group will include the leadership of the Charleston Regional Development Alliance, Dykes and his counterparts from Dorchester and Berkeley counties, and a group from the state Commerce Department. "It is a part of our industry cluster strategy for aerospace," said CRDA spokeswoman Claire Gibbons.

She would not reveal which companies the group is scheduled to meet with for competitive reasons. Generally speaking, though, on the other side of the table will be "suppliers that could possibly at some point be supplying Boeing but for others as well."

"There's no manual written on it anywhere," Dykes said. "We just network, network, network."

On the private side, real estate agents are busy marketing properties near Boeing, including in Palmetto Commerce Park, where Boeing's Interiors Responsibility Center is almost finished construction. Michael White of CB Richard Ellis/Carmody LLC said he has had regular visits from potential suppliers who are scoping out sites.

"These trips are occurring every week," White said, adding he gets daily hits from interested companies on his website, CharlestonIndustrial.com. "They're in the wings and they're coming."

Waiting

In the meantime, some deals are near done, just waiting to be announced.

Charleston County Council Chairman Teddie E. Pryor Sr. said economic development is one of those "spy secret things," but he promised "a couple more announcements in October that's going to be coming down the pike."

"When the rubber meets the road," Pryor said, "people are going to come here."

Hitt said it's about the "crossover point" when a supplier's shipping costs approach the cost of building a new facility near Boeing's plant in North Charleston. "Companies want to come to a place where they can make money," Hitt said. And that involves a lot of factors, like volume, time and distance. Make no doubt about it. They're coming and we're going to do our best that they come into South Carolina."

Just a couple of hours before Dykes spoke, the mother-son team that leads The InterTech Group announced its aerospace unit, TigHitco, which supplies parts for the Dreamliner, was on its way to opening a shop a few miles north of the Boeing plant. The facility, the first third of which is expected to be built by next fall, eventually will be 300,000 square feet and employ 350 people.

But while InterTech CEO Anita Zucker called Boeing a "catalyst" for growth in the area, InterTech President Jonathan Zucker repeatedly denied that TigHitco was somehow following Boeing.

He said the largest American exporter by value was merely one of TigHitco's customers in the Southeast. "They had no involvement in our decision to build a facility here, though," he said.

Cluster hopes

Unlike what Romney said he was told during his tour, Boeing officials have offered a more hands-off approach to suppliers. The company's main South Carolina spokesman, Candy Eslinger, deferred to InterTech on its move and said it's up to suppliers if and when they move.

"I imagine that decision is based on a solid business case on their part," she said. "We can certainly anticipate as we grow and as we start in full production and as we ramp to rate that certain suppliers may make that decision to locate a business here or to locate an operation here, but that's pure speculation right now on my part."

Perhaps a reasonable point to speculate from is Boeing's Everett, Wash., aircraft nerve center, where not just the Dreamliner is being pieced together but several other planes are being built and have been built for years.

There, a whole aerospace cluster has formed: 650 companies from 29 counties are spread throughout the state, according to a spokesman for the Greater Seattle Chamber of Commerce. Many supply Boeing.

"When Boeing started the 747 plant in 1968, there was not a lot of suppliers around here," said Larry Wilson, a company spokesman who was addressing questions of suppliers in Washington.

"As the business grew, there was more economic reason to make that investment. The same thing is going to happen, is likely to happen in South Carolina. We're just getting started there."

Wilson discounted the NLRB theory.

"We've not heard that from any supplier," he said. "We can't speak to that because we don't know what they're thinking, but it's been our experience that economics is what drives the decision of where to locate."

More likely factors, he said, are the parts being made, the volume of business and lead times. He said a supplier also could choose a range of presences, from an office to a warehouse and a full-on manufacturing facility.

For instance, Turner Construction Co., which worked on the 787 plant, opened an office earlier this year near North Charleston City Hall.

Wilson thinks the supplier question goes beyond politics or policy.

"It's pretty simple: It all comes down to economics," he said.

A more local example of how a big manufacturer can create a cluster is BMW in Spartanburg County. Opened in 1994, suppliers have formed around the Greer plant, which makes the German luxury brand's X3 and X6 SUVs.

Vitner, the Wells Fargo economist, thinks Boeing ought to become an anchor for other businesses eventually.

"BMW didn't happen overnight either," he said.

Reach Brendan Kearney at 937-5906 and follow him at twitter.com/kearney_ brendan.