What a difference a decade makes in the geography of the US aerospace industry. It was only 2004 when the US southeast region was known in aerospace circles primarily as a base for NASA in Florida and Alabama and a manufacturing hub for Gulfstream business jets and Lockheed Martin fighters and airlifters in Georgia.
Assembling commercial airliners in the southeast region – a multistate area shaped by the Mississippi River in the West, Atlantic Ocean in the east, the Ohio River in the north and the Gulf of Mexico in the south – was not only non-existent. It was not even seriously contemplated by anyone anywhere in the industry.
Boeing vice-president and general manager Jack Jones now oversees a sprawling factory complex in North Charleston, South Carolina, with 7,500 employees on the payroll and still hundreds of acres of empty land under the company’s control. As late as the end of 2003, however, such a scenario would have seemed inconceivable to a veteran of Boeing’s commercial base in the Pacific Northwest.
“Twelve years ago it wasn’t even a gleam in some Boeing leader’s eye,” says Jack Jones, who retires in April. “There was no need to consider building outside Puget Sound.”
In 2004, Boeing’s vision for the region changed irrevocably, but not in the way it originally intended. That was the year two key Boeing suppliers for the 787 programme – Global Aeronautica, a joint venture of Alenia Aeronautica and Vought and Vought by itself – announced plans to assemble the aft and centre fuselage sections in North Charleston.
The announcement established Boeing’s first connection to South Carolina, but only tangentially. It would take another five years and a series of traumatic events, including an industrial breakdown by Global Aeronautica and a union strike in Puget Sound to finally push Boeing to build aircraft in South Carolina.
The same unlikely series of events drew Airbus to the region. In 2005, the European manufacturer teamed with Northrop Grumman to build a military tanker version of the A330 in Mobile, Alabama. Airbus also expected to build the commercial freighter version of the A330 in the same complex. Although the Airbus bid for the US Air Force tanker contract was ultimately defeated in 2011, the company decided a year later that Mobile would make a good location to build A320s. The final assembly line is scheduled to begin operations in July, deliver the first aircraft in April 2016 and ramp up to four deliveries per month by 2018.
“I think we’ll beat 2018 on the four-a-month target,” says Allan McArtor, chairman and chief executive of Airbus Group, Inc, the US-based subsidiary.
Boeing began delivering 787s from North Charleston in May 2012. As Airbus ramps up to building four A320neo family aircraft per month in Mobile by 2018, Boeing plans to ramp up 787 production to seven per month before 2020. Within less than a decade, the US southeast will become a major commercial aircraft manufacturing hub, rivalling only Puget Sound and Airbus’s assembly hubs in France and Germany.
Airbus and Boeing are actually among the last aerospace manufacturers to recognise the appeal of the US southeast. In the past decade, Airbus has opened a design centre in Alabama and a military and civil helicopter factory in Mississippi; Spirit AeroSystems has opened a factory supporting A350 production in North Carolina; Embraer has started assembling Phenom business jets and will soon begin assembling Legacy 450/500 jets in Florida and Honda Aircraft has erected a factory in North Carolina to begin ramping up production after the HondaJet obtains an airworthiness certificate.
Meanwhile, existing aerospace manufacturers in the southeast have bolstered their presence in the past two years. Lockheed offset the closure of the F-22 assembly line in Marietta, Georgia, by shifting assembly of the F-35 centre wing box assembly from Fort Worth, Texas. Gulfstream announced in October that it will expand in Savannah by launching production of the G500/600 jet family. Gulfstream had selected Triumph Aerostructures (formerly Vought) to build the wings for the G450 and G550 in Texas, then picked Spirit AeroSystems to do the same work on the G280 and G650 in Oklahoma. For the G500 and G600 jets, however, Gulfstream decided to keep the work inhouse by expanding in Savannah.
The growth in the US southeast is not limited to assembly and manufacturing work. The region is also attracting engineering talent. Northrop Grumman, for example, selected Melbourne, Florida, in 2014 for Project Magellan, a highly sought-after aerospace design centre. A year earlier, Boeing decided to expand in Huntsville, Alabama, choosing its missile defence business hub for Project Bright Minds, an engineering and design centre for Boeing Research and Technology.
If an aerospace company has opened a new site anywhere in the USA over the next five years, it has almost exclusively been somewhere in the US southeast.
The appeal of the region is often linked to the absence of organised labour. With the exception of Lockheed’s factory in Marietta, the aerospace industry’s expansion in the region has so far evaded the efforts of union organisers. But labour’s absence does not fully account for the region’s appeal.
Ringed by coastlines, the southeast boasts multiple deepwater ports and close access to overwater airspace that is ideal for flight tests of new aircraft prior to delivery. A large supply of active and shuttered military bases, meanwhile, offer a ready supply of trained mechanics and long runways.
“Logistically, [Mobile] is ideal for us,” McArtor says. “A deepwater port is right next door to the airport. It’s got a good runway and Gulf airspace for flight test.”
On top of the logistical advantages, the US southeast is perhaps unusually welcoming to hosting big manufacturers, especially if they make aircraft.
Southern states have offered generous subsidies to aerospace companies. Alabama promised to give $158 million to Airbus, including building a $52 million centre for on-site worker training, for hosting the A320neo final assembly building in Mobile. North Carolina offered $250 million in subsidies, including workforce training worth $136 million, to Spirit AeroSystems to open the major component assembly factory for the A350 in Kinston.
South Carolina topped all the other statues by giving $900 million in tax breaks, plus $33 million for free worker training.
The US southeast, of course, is not unique in this respect. Washington state officials extended to Boeing tax breaks and new subsidies over the next decades worth $7.8 billion in return for keeping 777X assembly and establishing the widebody programme’s composite wing fabrication facility exclusively in Puget Sound.
While such largesse has not become available in the American south, state and local officials can offer other benefits to highly prized manufacturers.
In 2011, Boeing opened the 787 final assembly and delivery facility on the North Charleston site. The assembly building occupies 102,000m2 (1.2 million ft2) of usable space. The volume below the roof is enough to hold water in 450 Olympic-sized swimming pools.
“You think about this huge building and how bureaucractic permitting can be,” Jones says. “In other states you have to go through a lot of bureaucracy. I’m not saying we didn’t, but here’s what the state was committing to do: we don’t have to wait until first shift, which is in a lot of states the only time when employees are available to come and do inspections. They were available 24h every day of the week. We were never held up for permitting.”
With certain advantages come some key differences. Boeing has an established workplace culture in the famously caffeinated Pacific Northwest. The American south has a culture that is distinctly slower and more relaxed.
“We made sure we adapted to the south,” Jones says. “Sundays are for church and family and we respected that. We didn’t tell people they had to come in on Sundays. There were some Sundays they obviously had to, but we’re very conscious of those kinds of things.”
In return, a new workforce in South Carolina must adapt to the unforgiving culture of aerospace manufacturing. Global Aeronautica failed to adapt quickly enough. Boeing acquired the share of the 787 supply chain claimed by the former Vought in 2008. It then bought out Alenia Aeronautica’s share of the joint venture in 2009. Boeing hired hundreds of contractors to stabilise the production system, then launch assembly of the 787-8 in 2011.
Despite nearly a decade of experience at the North Charleston site, the system appeared to break down again in early 2014. Boeing’s top executives acknowledged a production breakdown at the midbody join position in North Charleston during the first quarter of last year.
The midbody join, roughly the size of an entire 737 fuselage, represents one of the most challenging work packages in the 787 assembly process. Workers must assemble fuselage sections fabricated in Japan, Italy and South Carolina. Complicating their efforts early last year was the introduction of the 787-9. The stretched variant integrated several design changes compared with the 787-8, and most were concentrated at the midbody join position in North Charleston.
At the depth of the production crisis, Wall Street analysts expressed concerns about the bottleneck. Boeing had promised to deliver at least 110 787s in 2014, and the disruptions in Charleston could prevent the company from meeting that goal.
A year later, the record is clear: Boeing delivered 114 787s in 2014, beating the low end of the company’s target. Along the way, programme officials dealt with greater challenges than in North Charleston. A manufacturing flaw in Japan last March forced Boeing to inspect the wings of 43 787s still on the assembly line for cracks. A shortage of premium cabin seats by the end of the year also threatened to stall deliveries.
The supplier issue in North Charleston, however, was quietly resolved months ago, Jones says.
“I can tell you right now this site has never been in a better… condition than any other time we’ve been here,” Jones says.
The recovery forced Boeing to hire more workers less than a year after laying off hundreds of contractors in North Charleston. Boeing also established a productivity payout award to incentivise the South Carolina workforce.
“Our deliveries are now on time,” Jones says. “It’s just short of a – I won’t say a miracle, because this is a great team – but the recovery has been swift.”
A key reason for the recovery in North Charleston, according to Jones, is a function of Boeing’s non-unionised shop floor.
A machine is used to drill holes for fasteners in the crown of the 787 fuselage. Boeing engineers programme the software for the machine, but machinists monitor the automated system on the assembly line.
In Seattle, union contract rules mean that the engineers must rely on the machinists to explain any problems with the coding. In North Charleston, however, the engineers are able to operate the machine themselves.
“We actually took the engineers, trained them for about three months, put them on these machines inside the airplane working alongside the mechanic,” Jones says. “They learned an incredible amount: how the top of the head was impacted, how deep to drill them, all the things that could affect the efficiency of the machine. They took all that, [they] did a lot of reprogramming and they made significant improvements. Quite frankly, that was one of the reasons why we recovered so quickly.”
Boeing’s expansion in North Charleston has drawn a strong response from the International Association of Machinists and Aerospace Workers (IAM). The IAM estimates that only 3.7% of the overall eligible workforce in South Carolina is organised, so establishing a union at the Boeing factory is a key prize. The IAM set up an office in North Charleston in March 2014 to begin organising. If 30% of Boeing’s eligible workforce sign pro-organising cards, the IAM can petition the National Labor Relations Board to call an election.
If the IAM campaign has fallen on deaf ears, it does not seem so to Boeing and state government officials. Both have launched public campaigns against the IAM’s efforts. South Carolina’s strongly anti-union governor, Nikki Haley, has publicly called on Boeing’s workers to reject the IAM’s “meddling” in South Carolina.
For Jones, keeping the IAM out of North Charleston is a top priority for Boeing management.
“We’re 100% focused in the near term to make sure we don’t have [a union],” he says, “which we don’t feel we need. It’s in the best interest of our site here not to have them.”
If the IAM is successful, Jones would not say whether Boeing would reconsider its current industrial footprint in North Charleston or keep additional work from moving to the site in the future.
“We are just really truly focused on making sure that people understand what the pitfalls are to bringing in a represented workforce,” Jones says.
Whether or not the site is organised, however, Boeing is expected to grow its operations significantly in South Carolina.
The 787 final assembly line is scheduled to grow from delivering three aircraft per month today to five in 2016 and seven in 2018. By then, the North Charleston site will be the exclusive final assembly location for the 787-10, the only variant of the composite-skinned widebody that will not be delivered from Everett, Washington.
Meanwhile, the South Carolina site has begun construction of two new paint hangars. When those paint booths are complete, they will give the North Charleston site the capacity to deliver up to eight 787s per month.
Since late-2013, speculation has also swirled about a 466 acre (189ha) tract of land acquired by Boeing that lies adjacent to its current operations. A re-zoning request filed by Boeing with the local government in June 2014 seeks to grant the company the flexibility to develop the land as an “aircraft manufacturer” in the future. Despite the intense interest in the property, Boeing officials say the plan at the moment is to build a parking lot.
“I get more questions on that one [land] acquisition,” Jones says. “You can imagine when you take on that much additional land there’s these conspiracy theories about bringing programmes and all that. I will absolutely tell you there is no plan right now beyond the parking lot. What Boeing typically does on a site like this is protect [itself] for the future for anything [it] wants.”
In Mobile, Airbus faces many of the same questions about expansion plans. As the A320 production system ramps up to building four aircraft per month, there is already pressure to double output at the site to eight per month.
“We’d have to do a little more construction, but it’s really pretty minor,” says McArtor. “It’s also designed sort of modularly, so while we ramp it up to four a month we could have the additional infrastructure in place to keep right on going up.”
In the long term, McArtor has also not given up on the original vision for Airbus in Mobile, which was focused on building A330s for military and commercial customers.
“It’s something I push personally, but we don’t have any current plans to do that,” McArtor says. “But I keep reminding everybody that we have a great deal of capability in the US.”
By the end of this decade, the US southeast could be producing as many as eight Airbus narrowbodies and seven Boeing widebodies per month, plus dozens of business jets designed by Embraer, Gulfstream and Honda. That concentration of aerospace manufacturing has already drawn interest from suppliers. Notably, Toray, a supplier of composite material for the 787, has opened a new factory in Spartanburg, South Carolina. More aerospace subcontractors are likely to establish hubs in the region.
“The industrial capability or industry facility of a final assembly line is basically a commerce magnet. Suppliers can create a halo effect around these sites. It’s just easier for them and it’s good business as well,” McArtor says.
Airbus’s European subcontractors have been asking McArtor for information about locating in the southeast.
“They say: ‘What do we want to do?,’” McArtor says. “‘Do we want to make [capital investments] in euros and staff it with European labour, or do we want to go to the US for the same reason Airbus is there?’”
For Boeing, the company’s policy has no requirement for suppliers to set up shop near final assembly hubs.
“Now, if they decide to elect on their own to do that, we think that’s great,” Jones says. “And it really does put them closer to us.”
Although suppliers have been slow to follow the OEMs into the region, the logistics of serving multiple final assembly lines in the same area may create its own logic.
“There was a lot of people waiting to see if we can even do this,” Jones says. “Now, with the success we’ve had, we’re sure there are more companies that will look to Boeing, and say: ‘If they can do it and they are remaining in the region, then maybe we should take a harder look.’”
[Updated to clarify background of Gulfstream's decision to assemble G500 and G600 wings in Savannah, Georgia.]
Source: Cirium Dashboard