It wasn’t much of a surprise when The Boeing Co. announced 10 days ago that it would build a second production line for the 787 Dreamliner in South Carolina. But it was a shock nonetheless to the Northwest’s collective psyche.

Here, after all, was a place that was accustomed to being ranked at the top of desirable places to live and work. Its crime rate was among the lowest in the country. The scenery, when you could see it through the overcast, was nonpareil. And even Forbes Magazine had just put Washington in second place among the 50 states for its attractive business climate. The magazine ranked South Carolina 25th.

Washington’s residents were better educated, its overall corporate taxes were lower (at least according to the governor) and there were even fewer mosquitoes per capita than in South Carolina.

So how could Boeing, as familiar a part of the Northwest scene as fir trees, a company that was founded here more than 90 years ago, succumb to the lure of South Carolina? To hear Northwestern business and government leaders tell it, it made more sense for the pope to change religion than for Boeing to build a plant outside its (commercial airplane) home state.

As for the surprise part, Boeing had been openly carrying on an affair with South Carolina for months. It bought a plant that built fuselage sections for the 787 from Vought Aircraft Industries earlier this year. And it acquired Vought’s 50 percent of another 787 subassembly plant nearby the year before.

Boeing had even applied for permits to clear forested land adjacent to those two plants and to begin construction before it made its formal announcement. And the company had been negotiating with South Carolina’s Gov. Mark Sanford for months on inducements. The South Carolina Legislature was meeting to create a suitable dowry for the hoped-for nuptials between the state and the big B. That incentive package, according to South Carolina, will ultimately amount to $450 million in tax savings and credits.

Now that Boeing’s decision has been made official, talk show hosts and politicians are wondering very much out loud what the Northwest, what the state, what the business and labor community could do differently the next time. And that next time could come as soon as 2012 when Boeing and its two major unions again talk about new contracts.

Boeing now says it would have recommended to its board that the second line stay in Everett if the Machinists union had accepted its proposal for a long-term agreement. The Machinists have struck the company multiple times in the past two decades, a fact that the union says was Boeing’s fault for proposing takeaways to its existing contracts.

The union and the company each blame the other for the failure to reach agreement.

The union says the company was foggy about its requirements, noncommittal about whether agreeing to a deal would engender a recommendation to the company’s board in Everett’s favor, and unresponsive when the union made specific proposals.

When the union proposed a deal through 2020, union local president Tom Wroblewski said, company negotiators seemed stunned that the union would offer a long-term deal.

But Boeing spokesman Tim Healy said the company made clear its needs in any extended contract, and the union’s final proposals failed to meet those standards. Had the union agreed, Boeing would have recommended Everett, he said.

According to Doug Kite and Ray Conner, Boeing’s high-level negotiators, here’s what Boeing wanted and what the union offered.

Wage increases: Boeing, 2 percent per year; union, 3 percent per year plus cost-of-living increases.

Pension increases: Boeing, 2 percent per year; union, $2.50 per month per year of service annual increase.

Union organizing: Boeing, wants to be able to campaign against the union in certification elections; union, company neutrality.

Future airplane programs: Boeing, unable to commit to putting them in Puget Sound; union, guarantees they’ll happen here.

Medical costs: Boeing wanted union members to help pick up the tab; union, will share beginning in 2018.

Signing bonuses: Boeing, no signing bonuses, but yearly incentive pay based on productivity; union, lump sum payments of $5,000 or 10 percent of earnings, whichever is greater, in 2009, 2013 and 2016.

Wroblewski said the company never explained its position at the bargaining table as it did in public after the decision was rendered.

Both Wroblewski and Ray Goforth, director of Boeing’s second-largest union, the Society of Engineering Employees in Aerospace, claim the company had made a decision long before beginning the talks. The company never even approached SPEEA about negotiating for a longer contract or strike-avoiding arbitration, said Goforth. Boeing’s Healy said SPEEA wasn’t the issue, the Machinists were.

Now, as Northwest business and government leaders wonder how to keep new versions of Boeing’s planes from being built elsewhere in the future, some observers are wondering out loud whether other factors – over which neither the union nor Washington government has much control – will throw the decision to the South in future location negotiations.

Wage rates, cost of living, unionization: Most of the workers at Boeing’s new plant will be making about $14 an hour. The average wage here for Machinists is $26 an hour.

Those relatively low South Carolina rates reflect not only the nonunion work force, but its relative lack of experience. Most workers will be new to aerospace and thus will come aboard the Boeing payroll at the low end of the scale. Starting union workers here make about $1 an hour more.

A study for the Economic Development Council of Snohomish County by Deloitte Consulting says the wage differential is less than it might appear, but still substantial. That study said Machinists’ mean salaries in Charleston are $45,500. In Everett, they’re $53,500. Multiply that difference by the 1,000 workers on the new assembly line there and you get an annual difference of $8 million, not an inconsiderable sum. But compared with the estimated $5 billion Boeing might have to pay in penalties to airlines who are getting airplanes late because of screw-ups in the present outsourced production system, that figure seems small.

The cost of living in Charleston also is lower than in Puget Sound.

Goforth, the engineering union head, predicts that whatever wage and cost-of-living advantage Charleston has now will erode rapidly as workers gain seniority and as higher-paid engineering workers begin buying homes and raising demand.

Workers in Charleston late this summer voted to decertify the union, ensuring, at least in the short term, that Boeing won’t have to worry about strikes, clearly an issue that aggravates the company and its CEO, Jim McNerney. Union organizing is tougher in South Carolina because it’s a right-to-work state where all workers represented by the union don’t have to join.

Geographic diversity: As long as all of Boeing’s airliner production remains in the Puget Sound area, it’s susceptible to disruptions from catastrophic events such as earthquakes, flu epidemics or volcanic eruptions. During the Nisqually earthquake several years ago, part of Boeing’s Renton plant was damaged and had to be evacuated.

Puget Sound supporters point out that major earthquakes and volcanic eruptions are relatively rare events, especially compared with the hurricanes that have swept Charleston. Both, however, are infrequent, and the possibility of both sites being disabled by natural disasters simultaneously is infinitesimally small.

Leverage: Now that Boeing has pulled the lever and agreed to put a plant outside the Puget Sound area, the threat of the company defecting is real. State Republican Leader Mike Hewitt said the company has served notice that it won’t hesitate to locate elsewhere unless Washington sharpens it focus on business.

The Machinists’ Wroblewski said the failure of the negotiations with Boeing on the second line has angered union members, at least temporarily. He can’t predict whether they are more or less likely to strike in two years because of Boeing’s decision.

But union workers’ task now is to show Boeing just how able they are by producing 787s efficiently and quickly, something that Wroblewski thinks the inexperienced workers in Charleston will fail to do. Boeing is setting up a second 787 production line in Everett until the Charleston factory is built, and workers there are accustomed to building the plane.

The relatively minimal financial risk: With the help of the South Carolina government, Boeing’s costs for the Charleston assembly line will be significantly less than if it paid for it without government aid. If the line doesn’t work as planned, Boeing can quietly shift some work back to Everett and use the building to produce more fuselage sections. The present plant in Charleston isn’t big enough to produce all of the composite fuselages that the company will consume once production in both locales is running at full steam.

Transportation costs: Boeing will see the transport costs for major sections of the 787 diminish at Charleston compared with Everett because the partially completed fuselages built in Charleston can simply be trundled across the tarmac to the final assembly building instead of being flown across the country in the cargo bay of an enlarged 747. Having both fuselage fabrication and final assembly at one site will eliminate that costly cross-country journey for the 3 out of every 10 787s that will be built in Charleston.

Congressional support: Boeing gains the support of South Carolina’s congressional delegation on other measures, such as the Air Force aerial tanker project, because of its enlarged presence there. That eight-member delegation is largely Republican. Already, U.S. Rep Henry Brown of South Carolina joined 36 other Congress members in asking the Air Force to consider the subsidies that Airbus received to build the A330, the basis for Northrop Grumman’s entry in the tanker derby.

“I can’t say it was a significant factor,” said Boeing’s Healy, but the company is happy to have more Congressional support.

Washington’s aid: In any future contest, expect Washington government to be the target for criticism if it doesn’t sweeten the pot for Boeing with new tax breaks or aid. But the state’s ability to do so is limited. Compared with most Southern states, Washington can’t offer direct aid to private companies. It can cut taxes, but it can’t buy land or build factories. And the state already created a $3 billion package of tax breaks and technical training to attract the first 787 assembly line in 2003. That package, according to the Deloitte study, has put Washington on par with or below South Carolina in the tax category.

Two areas, unemployment and workers’ compensation fees, still remain above par here, said Hewitt.

“I went to a meeting with Boeing two years ago where they very specifically asked that we lower those rates,” Hewitt, the senator from Walla Walla, said. “They’re not asking for us to be at the bottom, just somewhere in the middle.”

Gov. Chris Gregoire’s report to Boeing on the state’s competitive position notes that Washington state’s unemployment fund, unlike South Carolina’s, remains well-funded. South Carolina’s fund is essentially bankrupt, requiring that it borrow from the federal government to make unemployment payments. That state will have to raise rates soon to refresh that fund and pay back the feds.

SPEEA’s Goforth thinks that in the end Boeing will discover that building a remote assembly line won’t make sense.

Boeing is taking another big and expensive gamble on a plane that already is suffering from an ill-planned production scheme, he said. The 787, beset by production glitches at its suppliers, engineering miscalculations and a two-month Machinists strike last year, is more than two years late in taking to the skies.

Boeing can ill afford, he said, to stretch its engineering and managerial ranks more tautly to build an assembly line on the other side of the United States.

John Gillie: 253-597-8663

john.gillie@thenewstribune.com

Labor among top reasons

Boeing couldn’t reach an agreement with the Machinists union over a labor peace treaty for the Puget Sound region, but the lack of that agreement might not have been the only consideration in Boeing’s decision in starting a Dreamliner assembly line in South Carolina.

Other reasons to pick South Carolina:

1. Lower initial labor costs in South Carolina.

2. Geographic diversity for Boeing’s production plants.

3. Leverage for Boeing in future labor talks and plant selections.

4. Letting someone else finance another production experiment.

5. Transport cost decreases for 787 parts.

6. New congressional support.

7. A fresh source of government incentives.