What happens if part of Boeing 777X deal goes sideways?

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by GLENN FARLEY / KING5 News Aviation Specialist

Bio | Email | Follow: @GlennFarley

KING5.com

Posted on November 7, 2013 at 7:17 PM

Updated Thursday, Nov 7 at 8:33 PM

SEATTLE - Governor Jay Inslee has been given the job as chief spokesman for the efforts to land the 777X and some 20,000 direct and indirect jobs in Western Washington.  Beyond standing behind the governor at a Tuesday news conference announcing the tentative deal, neither company executives nor union leaders have said much.

 Landing the 777X depends on two pieces.  First, the state Legislature must approve a multi-billion tax incentive package for the aerospace industry that would save Boeing and its Washington-based suppliers money.  The second is that the 33,000 members of the International Association of Machinists must approve an eight-year contract extension that would tack onto the current contract's end in 2016 and run into September of 2024.

 What if one of those elements failed?

On Wednesday night, Boeing Commercial Airplanes chief Ray Conner sent a one paragraph letter to the governor saying the company is "committed to placing 777X final assembly and wing fabrication in the Puget Sound Region.  This commitment, however, will be solidified" if the contract proposal is ratified and the state's tax package is implemented.

The word "solidified" seems to suggest that the company might be willing to settle for something less.  KING 5 News has learned that is not the case, as the letter was quickly drafted. 

On Thursday, the company's chief lobbyist Tim Keating presented the governor with another letter attempting to clarify the issue. 

"I want to confirm that in proposing your package of incentives for legislative consideration, you have correctly interpreted our previous conversations about the elements needed for us to be competitive long in the future in Washington State, and the need for timely action to show partnership with our workforce," he said.

The betting in the Legislature is that the tax incentives would likely be a done deal by this Saturday, minus the politically controversial transportation package that the company seems willing to live without in the meantime.  That puts the pressure on machinists, many whom regard the company's contract extension offer that among other things freezes the long running pension plan and starts a second 401k-type replacement as a "take away" deal.

"Certainly, the IAM piece is a do-or-die piece," said Scott Hamilton, analyst with Leeham and Co.  He says if the deal fails locally, that throws the ultimate decision to Boeing's corporate headquarters in Chicago.

"It's absolutely Chicago's call. My information is that Boeing Commercial Airplanes does want to build the airplane here, but that Chicago does want to build it in South Carolina," said Hamilton.
 

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