What surprises me most about the 787 outsourcing is that Boeing let a company in Japan build the wings. Ten years ago I remember Boeing say they might outsource a lot of airplane parts, but they'll never outsource the wings. They had always built those in-house on other aircraft.

Boeing gave up the wings primarily to curry favor with the Japanese. Japan is a critical airline market and flies almost exclusively Boeing aircraft. By outsourcing the wings to Mitsu Heavy, Boeing guarantees aircrafts sales and has one additional notch to help keep Airbus out of Japan.

The wings for the 787 are an entirely new design and are composite which is not something Boeing has done before to that extent, so they would have had to start over engineering and setting up manufacturing anyway. This way they basically get to wash their hands of it, while guaranteeing aircraft sales.

Unfortunately, this is short term thinking.

Japan, like China and Brazil, Canada and others, just to name a few, has intentions of getting in on the airline aircraft market and like those countries just mentioned, is already designing its own future airliners that will directly compete with Boeing and Airbus. No doubt, the technology and expertise gained from the outsourcing of wings to Mitsu Heavy will play a roll in Japanese aircraft development that will ultimately help to devastate Boeing and Airbus aircraft sales in the future.

To make matters worse, the world's largest airline market is China and like Japan, China tends to be nationalistic and would much sooner purchase their own aircraft than anything made by Boeing or Airbus. Boeing often sells to investors that China will eventually need to purchase thousands of aircraft, but if anyone thinks China will be purchasing aircraft made in the U.S. or Europe when it has a struggling airliner industry to prop up and promote, theyÆre crazy.

The bottom line is that Boeing and Airbus have a few good years left and are currently doing pretty well. But those days are seriously numbered and when real competitors start to enter the market, at the absolutely very least, Boeing will no longer be able to sustain its current business model and that means the remains of the large very well paid work force in the U.S. will likely end up going away.

In my opinion only.

For now, it would appear that the only place Boeing is going is to SC.... to get away from the Pac NW machinists unions - at least for the 787:

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Boeing SC Workers Reject Union

Frank

Ya, IÆm sure $900 million dollars in south carolina tax payer funded subsidies to Boeing had nothing to do with the decision to build the new plant there.

I'm sure it did....... AND the prospect of no union mess, which amounts to a benefit on both ends of the Boeing income statement.

There's only so much blood in a turnip. Sooner or later the turnip gets ticked off at unreasonable, irresponsible, greedy folks and finds another dinner plate to rest on.

Frank

If you want to talk about unreasonable, irresponsible and greedà

SC is facing almost a billion in budget shortfalls, is looking at closing prisons, doesn't have the greatest school system and is ranked in the top 10 of states with major budget issues. SCÆs budget shortfall is 20%.

Boeing isnÆt going to save them, because Boeing is getting huge tax breaks for the next 30 years. In fact, what little taxes Boeing will pay, will likely be rebated as part of the deals that last for the next 15 years.

Boeing will gladly take almost a billion dollars in direct payouts and tax breaks from SC citizens and tax payers, despite the fact, that they are a multi-billion dollar, multi-national company, and does not actually need it. That's equivilent to 25% of SC's ENTIRE annual tax revenue, in benefits to Boeing. Is that really anything to be proud of? If Boeing moved and paid for everything on their own, there wouldn't be a word I could say against them. But they didn't. The tax payers did.

Also if this move turns out to the be the next great Boeing management disaster, like the 787 outsourcing was, the disaster will largely fall on the backs of SC and its tax paying citizens. Of course, that said, if Boeing ever decides to relocate ALL of it's production to SC, it could end up being a boon for them as well.

I actually disagree with the union on many issue and I didnÆt agree with the recent strikes, including the one in 2008.. I'm also not a Boeing IAM union member. In a way, I think the union is responsible for giving Boeing the political out they wanted to leave and chase states, like SC, that are embracing the "china model". It was pretty clear to anyone paying attention at the time that the company was bluffing when it reached out for concessions, prior to announcing the SC move. The union actually figured this out, but it was too late.

However, for all the faults of the unions, at least because of their high wages, they contributed significantly to both the local and federal tax base, as well the local and national economy with their high purchasing power.

I am an IAM member, so anything I would say would be considered biased. So I'd rather not bother.
Unions start out for every good reason in the world, but can outgrow their original intent.

No argument with that, but SC isn't alone in budget shortfalls. The entire US infrastructure has been over-feeding on the available tax generators for far too long and borrowing far too much money in trying to buy now, pay later.

There's nothing new in the SC school system ranking, either. Much of that is due to the caliber of students and the available pool of those who want to be teachers. Most parents who can afford it send their children to private schools.... yet continue to be forced to pay their tax share toward the public school fiasco.

One of the biggest problems is the lack of jobs - particularly decent paying ones. A lack of jobs adds people to the state expense rolls, so sometimes it makes sense to provide incentives to industry, who hire people - takes them off the welfare rolls, saving the taxpayers money. The money thos workers make is usually an increased amount spread through the system, which helps other businesses hire more people. The local businesses that benefit from Boeing will further improve the local cash flow. Will it be a net gain? Dunno, but you'd be hard pressed to find someone that says that BMW was not good for SC economy:

BMW is a 4.3x Economic Multiplier

Boeing is projected to have a slightly smaller, yet significant positive impact with benefits exceeding incentive costs:

web page

How is it that once incomes reach a certain level through bargaining, luck or supply/demand, folks expect that there is no downturn or adjustment coming.... and that if another state or person can provide the same function for a lower delivered price, they are jumping on the China model? Good grief...... that's the foundation of capitalism. Unfortunately, we've come very close to socialism.

Frank

I don't disagree with your first sentence in this paragraph, but...

When I used the term china model, I was referring to the LACK of capitalism, not the use of it. China is a nation, where the government dictates which corporations survive and which do not, where the government hands out billions of dollars to firms and where the government builds factories and then entices other corporations from other countries to leave their homeland and move there.

This is exactly what SC did. This is not capitalism, it is corporate socialism. It is the new form of communism in which China has developed and that many countries (and states) have embraced and what is quickly replacing capitalism as the new basis for the future global economy.

True capitalism is where corporations rise and fall and profit and fail entirely of their own regard. Not where some are propped up and allowed to flourish and others are allowed to fail by dictate of the government, through either decree or financial benefit.

As I said before, if Boeing simply left the PNW and moved to SC and paid for it all themselves with no government involvement, even if it was just the cheaper labor and anti-union laws, I could not fault them. Nor could I fault SC for having laws, whether I agree with them or not, that apply to all businesses within the state, equally.

I think you're confusing capitalism with government and starting from the position that the prevailing tax rates and worker compensation are fixed or reasonable fares and anything less is a discount from that rate. Yes, there is a correlation between government and capitalism so long as states are free to compete with each other (supply and demand) and yes, government does get involved with capitalism where it makes sense.... no different than one business cutting overhead and delivering a product profitably at a lower cost than another business that is bloated. Excessive taxation and worker greed offer opportunities for others to benefit by offering enticements that benefit the offerers. If we didn't have the ability to compete among states, we truly would be under a national socialistic society.

The idea that taxes are reduced for some does not mean that in the balance of the economy, taxes aren't excessive. SC is no different in that regard. Many of our local businesses are taxed too much, so perhaps we should look at the Boeing eventual tax rate as proper. If a state/local government reduced all taxes to a lower level, perhaps the Boeing deal wouldn't look so favorable. But then, services would have to be reduced - perhaps not such a bad idea.

What you see depends entirely on where you sit..... and the complainant is usually the one whose ox is gored.

Frank