Some selected thoughts about two really big companies (or one that used to be really big and one that still is around here, at least for the moment):
• The somewhat surprising element of the tentative agreement between Boeing and the Machinists union over production of the 777X is not that there was a competition between sites for building the plane – that pattern has been in place since the first go-round on the 787 10 years ago – but that the company’s Puget Sound plants were in that competition, given the current CEO’s perceived antipathy toward this region.
In retrospect the decision seems obvious. Adding a production line of a different model while still trying to iron wrinkles out of production at the 787 assembly plant in South Carolina posed some daunting prospects for a company whose credibility at managing a complex and far-flung supply chain has taken some hits. That there was a much less complicated approach – building the new derivative at the site where the base model is already assembled – made the decision all the more obvious.
But Boeing’s willingness to move work once seen as the exclusive province of the Puget Sound region – including design work on the 777X and that aforementioned South Carolina plant, which Boeing has expressed an interest in expanding – made the decision less obvious. It also gave the company some leverage in extracting concessions from both the union and the state of Washington before going ahead with a plan that common sense suggested was the logical call anyway.
Lost in the speculation and furor over the 777X program was another huge announcement for the company and the region’s economy: Boeing is adding yet another production-rate increase to the Renton plant, this one scheduled for 2017. Renton is at 38 planes a month and is scheduled to go to 42 next year. Not so coincidentally, Boeing plans to introduce a new version of the 737, the Max, in 2017. There hasn’t been a whiff of rumor associated with the latest rate hike that the 737 might be added to the South Carolina plant’s portfolio, thanks to a contract extension agreed upon two years ago by the company and the IAM.
Corporate managements can change their minds and alter their strategies, so perhaps these two developments can be read as a shift in Chicago’s thinking, from “when’s the next plane out of Seattle?” to “maybe we don’t hate you so much after all – or at least we need to cool our jets a while on sending production and assembly work hither and yon.”
Not that this means a shift in the company’s decade-old philosophy of putting new plane models up for competition. Boeing may be still learning if the global-supply chain model works, but when it comes to winning deals from labor and government, that model is performing just fine.
Speaking of which...
• The other party to this proposed deal is state government, in the form of legislative extension of tax credits and incentives as well as a “transportation package” (i.e., some big-ticket highway projects and the taxes to fund them).
Gov. Platitude must be doing dances of joy not only that the region was even considered for the 777X but that the price tag for playing and potentially winning was so light.
Extending a tax credit that’s already in place is far more politically palatable than creating a new one.
The union, on the other hand, has a much tougher call to make, being asked to give up something it already has. The vociferous reaction expressed at Thursday’s meeting would suggest the deal could be scuttled before it even gets to a vote. But it’s dangerous to read too little or too much into the proceedings. It’s the most motivated and incensed who show up at events like that.
Those who are resigned to voting for the least awful of a set of unattractive outcomes — and at this point we don’t have a good sense of whether that’s a sizable enough contingent to carry the vote — typically don’t show up to express raging ambivalence.
As for the “transportation package,” that was not nearly as controversial as the last session’s gyrations suggested.
And there won’t be much temptation to revisit the Columbia River Crossing issue as part of a larger package, with Clark County voters on Tuesday emphatically saying no (again) to light rail, which bridge backers have insisted is a crucial component to the bridge.
• So now Weyerhaeuser is out of the home-building business, having spun off (or out) its real estate subsidiary, including its local operation Quadrant Homes.
It’s a business the company has been in since 1969, but of late the company has been divesting itself of everything from fine papers to paperboard and packaging to shipping lines to short-line railroads, to focus on a few segments such as timberlands, cellulose fibers and wood-products manufacturing.
Which is what it will be until it thinks of something else. In the 23 years your columnist has covered Weyerhaeuser, this is the third or fourth, or maybe it’s the fifth, permutation of the company, its phases including an agglomeration of stuff, a cleaning out of the company closet of unrelated pieces, international investments, some big acquisitions, some unwinding of those deals, the recession-forced trims, etc. And there are likely to be more.
Few companies stay the same and survive; change is driven by competition, new market opportunities, technology, management fads and Wall Street whims. Weyerhaeuser could trim itself even more, it could deploy some of the cash from the real-estate deal to beef up its presence in businesses it’s already in or it could find some new line of commerce to engage in.
It could even decide to get back into some businesses it had unloaded. No? It could happen.
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at firstname.lastname@example.org.