Published October 06, 2014 in the St. Louis Post-Dispatch
By Jim Gallagher
St. Louis got a toehold in the commercial jet manufacturing business Monday as Boeing announced that it would make parts for the new 777X airliner at its defense works in north St. Louis County.
The move will mean new jobs, reaching 700 when production is in full swing in 2021 to 2023. It will bring construction jobs sooner, perhaps by year end, as Boeing expands its North County composite materials facility.
The North County operation will build parts of the wing and tail of the 777X, Boeing’s 400-passenger, long-haul addition to its 777 line. Boeing has 300 orders for the plane and is hunting more for a project that should continue through the next decade.
Boeing, which employs about 15,000 locally, chose St. Louis “to leverage the skill of our employees,” said Christopher Chadwick, president of Boeing’s Defense, Space & Security division that is based here.
Boeing considered other sites, but St. Louis “became a real natural” for the work, he said.
The state and St. Louis County promised tax breaks and other incentives, although officials said the final amount will depend on what Boeing actually builds and how many it hires.
Engineering work on the 777X is already underway in St. Louis, Chadwick said. “Design will really kick into full force in the next few months,” he said.
Ground may be broken for the plant expansion by year end, a Boeing spokesman said. Boeing hasn’t released size or cost details project.
“This is the first time Boeing has brought commercial manufacturing here,” Gov. Jay Nixon noted at a news conference.
Getting more commercial work could be key to preserving Boeing jobs in St. Louis. Boeing’s biggest local projects, the F/A-18 and F-15 jet fighters, are likely to wind down in the next three to five years, unless Boeing can find more orders.
Boeing already has been using engineers and others from its St. Louis defense works on some commercial projects, noted Christian Mayes, defense analyst at the Edward Jones investment firm in Des Peres.
Boeing sees its St. Louis operation as underutilized, he said.
“This is positive for this area,” he said. “They’ve been dribbling jobs back to St. Louis.”
Boeing last week said it would move up to 500 jobs related to the F-22 fighter from Washington state to St. Louis. Last December, Boeing announced plans to add 300 to 400 jobs in the St. Louis area over the next two years in a reshuffling of its research and development operations. That followed an announcement early last year that 400 information technology jobs would shift here from Puget Sound.
Together, those amount to about 2,000 jobs, which would trigger some provisions of a giant incentive package passed last winter, state officials said.
Last year, Nixon made an aggressive pitch for a giant new plant to assemble the 777X. Boeing had threatened to move the project out of the Puget Sound area due to a labor impasse with the International Association of Machinists there.
Nixon called a special session of the Legislature, which passed a $1.7 billion package of tax breaks, and St. Louis County officials approved $1.8 billion more.
In January, however, Boeing decided to build the plane in Everett, Wash., after Machinists there agreed to a new labor contract.
It is unclear how much in incentives Boeing will reap from the county and state.
“While the amount of the incentive package has yet to be finalized, these incentive programs are performance-based, which means that the amount of incentives Boeing may ultimately receive is based on the actual number of jobs, capital investment, and wages paid workers, subject to a net positive return for taxpayers,” said Nixon spokesman Scott Holstee.
The bill passed in December removes the caps on incentive programs for aerospace projects as large as Boeing’s, he said.
The county’s incentives are based on the size of the plant and value of the equipment. Boeing hasn’t yet specified those, said Denny Coleman, CEO of the St. Louis Economic Development Partnership, the city-county business recruiting agency.
“We know it will be a significant number, but we don’t know what it will be yet,” he said.
Boeing is moving in-house wing and tail work that had been done mainly by subcontractors in the U.S. and abroad. Boeing may be seeking more control over parts, after problems with subcontractors contributed to a three-and-a-half year delay in production of its new 787 Dreamliner aircraft, analyst Mayes said. Moving work in-house can also boost profits, he said.
“Supplier performance did not drive this decision,” said Boeing spokesman Wilson Chow. “This work placement takes advantage of key capabilities at our St. Louis site, headquarters of our defense business, positioning it to be competitive for future Boeing work.”
St. Louis workers will make the rudder, elevator, folding wing tip and fixed leading and trailing edge panels. The wing will be assembled in Washington state.
The 777X will have a range of up to 9,300 nautical miles and uses 12 percent less fuel than its competition, Boeing says. The planes cost $360 million to $389 million and the first delivery is expected in 2020.
The jobs created here will be new ones, not workers transferred from other Boeing projects here, Nixon said at the press conference.