Boeing's Global Push - Part 1
Boeing's Global Push - Part 1
Date: Tuesday, March 04, 2003 2:10 AM
H-1B and JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
Tom Pickering, Boeing's senior vice president for international
relations tries to calm the fears of Boeing employees by saying that
globalization benefits some American workers. Of course he doesn't
explain who "some" is. Since Pickering is shipping Boeing jobs to other
countries, the few workers that benefit in the U.S. must be the fat-cat
executives and CEOs that get bonuses for cutting labor costs by firing
Americans.
Boeing claims that as protectionist barriers fall, they are being
forced to leave the United States to seek the cheapest labor possible.
Perhaps the rules need to be changed to force Boeing and other
corporations to keep the jobs in the United States. Stiff tariffs and
trade barriers need to be erected in order to protect our jobs.
Multi-national corporations will never do what's good for America
unless they are forced to.
http://www.kansas.com/mld/kansas/business/companies/5295213.htm
Posted on Sun, Mar. 02, 2003
Boeing's Global Push: World assembly required?
BY MOLLY MCMILLIN
The Wichita Eagle
Debbie Cowell has seen 10,000 jobs disappear from Boeing Wichita in the
past five years, so the sheetmetal worker didn't volunteer when company
officials asked members of her work group if they would teach South
Africans to do their jobs.
"If they're going to take my job somewhere else," Cowell said, "let
them figure out how to do it."
With a downturn in the economy and declining demand for airplanes
driving huge job cuts, Boeing's workers worry increasingly about their
company's use of subcontracting and partnerships. And no trend angers
them more than Boeing's growing reliance on overseas operations.
But a months-long reporting project by The Wichita Eagle finds Boeing
firmly positioned to expand its presence overseas -- at times to the
detriment of U.S. workers -- to cut costs, win new orders for aircraft,
and remain competitive in its fierce rivalry with Europe's Airbus.
The Machinists union asserts that Boeing shed about 1,100 jobs in
Wichita in the past two years by subcontracting work, and that some of
that work ended up in other countries. The union predicts that more
jobs will disappear before the current three-year labor contract
expires.
Boeing confirms that some work once done here is now handled overseas
but maintains that any lost jobs have been more than offset by new work
brought to Wichita.
A drop in demand for aircraft caused the job cutbacks in Wichita,
Boeing says. The company readily agrees that most of those jobs won't
come back when the market returns but says that's because it is
learning how to be more efficient.
"It's not about moving stuff to somewhere outside the United States,"
said Alan Mulally, head of Boeing's commercial airplane unit. "There's
going to be little change in that.... What we need to do is redesign
the process and redesign the product so it's easier and faster (to
produce) and uses less resources."
Few who closely watch Boeing's growing operations overseas believe that
it will ever move a majority of its manufacturing operations to other
countries, as have companies in textiles and other sectors.
But there is no question about the growing significance of foreign
workers on Boeing products.
Today, about 14 percent of a plane is made overseas. But that figure is
higher -- about 30 percent -- for its newest model, the Boeing 777,
which "is the example of how we're going to do business for new
airplanes," said Boeing spokeswoman Yvonne Leach.
Why globalize?
With thousands of Boeing workers here and across the country out of
work, why create any jobs overseas?
The Eagle spent several months exploring this question. A reporter and
photographer visited a Boeing facility in Russia and a major
subcontractor in Italy. The newspaper also conducted scores of
interviews with union officials and experts in international trade, the
aerospace industry and manufacturing.
Hiring foreign workers, The Eagle found, potentially helps Boeing:
Open new markets to sell airplanes and military and space products.
Get access to raw materials it needs to make planes and other products.
Cut production costs by using cheaper labor and, in places, gain access
to skilled labor.
Benefit from favorable tax rates in other countries.
Pick up partners willing to share in the risks of research and
development.
Boeing gets 70 percent of its revenue from airplanes sold overseas.
Sharing work in those countries through partnerships, subcontracting
relationships and other deals makes sense, executives say. And selling
planes outside of this country keeps Boeing employees at home working,
they say.
It's easier for Boeing to sell airplanes internationally if other
countries perceive it is a local company investing in the local
aerospace industry and providing local jobs, said Tom Pickering,
Boeing's senior vice president for international relations since 2000
and former U.S. undersecretary of state for political affairs.
And although the U.S. commercial airplane market is still the biggest,
comprising about 30 percent of the world's sales, China's is going to
grow faster, Boeing predicts.
Placing work in potential markets also makes it easier to sell military
products, buy raw materials, and influence political decisions in those
markets. For example, the Boeing Design Center in Moscow has helped
Boeing open polar airline routes suited for the 777 and has provided
access to Russia's titanium, an essential material for a variety of
parts.
Moscow also offers highly experienced and skilled engineers.
"It's not about the cost savings," said Alex Yermonsky, who travels
from the Boeing Design Center in Moscow to Boeing Wichita as a liaison.
"More important, we have this talent."
Even the Society of Professional Engineering Employees in Aerospace,
the union that represents Boeing's U.S. engineers, agrees that the
Russian engineers are well-trained and that some have specialized
skills difficult to find in the United States.
Talent aside, however, Boeing can reap substantial labor savings
overseas. At Alenia Aeronautica, the Italian manufacturer that recently
gained some of the commercial 757 work once done in Wichita, workers
take home less than $15,000 a year.
Those who do similar work at Boeing Wichita gross an average of $54,000
a year, not including overtime, according to Machinist union figures.
Comparisons of that sort deeply disturb workers in Wichita. Cowell, the
Boeing Wichita sheetmetal worker, wonders whether she'll have a job in
six months. None of her work ended up going to South Africa, but some
moved outside to another Wichita company. And some other work in her
department may move to Turkey.
"They're in a mode to pay people cheaper wages to get the job done,"
Cowell said. "They want to do more with less and less of us."
But many experts say Boeing has little choice when it comes to cost.
"If Boeing wants to be a thriving enterprise 20 years from now, it has
to go to the cheapest suppliers in order to survive," said Loren
Thompson, chief operating officer of the Lexington Institute, which
supports nongovernmental solutions to public policy.
Another benefit in overseas partnerships is spreading research and
development costs. The development of the 777 in the mid-1990s cost
roughly $6 billion. Foreign partners, particularly Japanese companies,
contributed part of that.
Boeing had several partners besides Boeing Wichita in developing the
futuristic Sonic Cruiser commercial airliner: companies in Japan,
Italy, the United Kingdom and the Netherlands as well as Boeing sites
in Australia and Canada. Although the high-speed concept has been
tabled in favor of a more traditional but highly fuel-efficient
airliner, much of the Sonic Cruiser's technology will be used in the
new plane.
"You've got a whole new paradigm there; you just start with a clean
sheet and look at how can this be done," said Paul Nisbet, an aerospace
analyst with JSA Research.
Changing climate
Two factors loom large in Boeing's push to globalize:
Doing business overseas is increasingly easier, as protectionist
barriers fall, workers in some developing countries grow more skilled,
and shipping and telecommunication costs drop.
Boeing wants to make the most of its opportunities in other countries
as it fights a multifront battle with Airbus and European Aeronautic
Defense and Space Co., which owns 80 percent of Airbus.
The removal of protectionist barriers began at the end of World War II.
Globalization's pace increased in the 1990s with creation of the World
Trade Organization to settle trade disputes, and with the opening of
borders through the North America Free Trade Agreement.
The Bush administration has set an aggressive course to develop more
trade pacts.
"I don't believe it's going to go backwards," said Clyde Prestowitz,
president of the Economic Strategy Institute. "It's firmly established
in thousands of agreements, trillions of dollars in cross-border
investments and trade."
In the changing world economy, many industries -- such as textiles and
electronics -- have moved much of their work overseas. Large capital
equipment producers, such as Boeing, however, have tended to produce
more of their work in the United States.
Now, Boeing is building "country teams" in 20 or so of its largest
world markets, such as Japan, Turkey, Korea, Russia, Spain and Italy.
Each team is charged with adding to Boeing's business edge in that
country. It includes finding suppliers and joint venture opportunities,
forging ties with government, and adding muscle to marketing campaigns.
"It's taking the overseas activities up another notch," said Pickering,
the former diplomat who is leading Boeing's effort to become more
effective globally.
Boeing will use strategies identified by the teams to develop tactics
to become a better partner, said Hank Queen, head of engineering for
Boeing Commercial Airplanes.
If suppliers can provide the parts at a lower cost, Boeing is better
off buying the part or assembly rather than making it, Pickering said.
As threatening as that must sound to Boeing employees, experts point
out that globalization benefits some American workers.
One of every seven U.S. manufacturing jobs is with a foreign-owned
company, said Frank Vargo, vice president for international economic
affairs at the National Association of Manufacturers. Airbus says it
makes up to 40 percent of its planes, depending on the model and
equipment, in the United States. It has opened a wing-design facility
in Wichita that expects to employ 200 by the end of the year.
And lower tariffs on products sold into foreign countries help keep
manufacturing jobs in the United States, Vargo said. Rather than having
to put work in a country to avoid paying high tariffs, manufacturers
can keep the work at home.
The U.S. government must take a balanced view on trade, looking hard at
both gains and losses, said Charles Wessner, director of programs on
technology and innovation at the National Research Council.
Still, not everyone is helped by international trade. Pockets of
workers will lose their jobs, and it's up to the government, the
employers and others to see what can be done to help, many say.
If government officials don't pay attention to the effect of open trade
on U.S. workers, Wessner said, "I think they will lose societal
consensus that supports relatively open markets."
When textile companies in North Carolina put work in other countries,
for example, people lost their jobs, he said.
"What are the single mothers going to do in North Carolina?" Wessner
asked.
And when workers, such as Cowell, are asked to train workers overseas
to do their own jobs, Wessner said, "that's pretty hard."
How much is enough?
Even some of the most outspoken critics of Boeing's globalization
philosophy quietly agree the company must do some of its production
work overseas to gain market share and cut costs.
The question is, how much?
>From many workers' perspective, Boeing already has crossed the line.
Boeing's Machinists union listed job security as its top issue in labor
negotiations that nearly ended in a strike late last year.
"We're giving away everything -- every bit of technology and work that
we had here," said Steve Rooney, president of Machinists' District 70
in Wichita.
Boeing says it makes 36 percent of an average aircraft and buys 64
percent of it from suppliers both in and out of the United States. The
union, Rooney said, is fighting to keep that small portion.
Boeing's engineering union, the Society of Professional Engineering
Employees in Aerospace, plans to create forums that focus on Boeing's
globalization this year.
"Globalization is a big deal," SPEEA executive director Charles
Bofferding told members in a newsletter this month. "Our members are
losing jobs."
>From the company's perspective, said Boeing's Queen: "It's not, 'Pick
everything up and throw it out the window.' It's, 'What strategically
makes sense?' "
Many international trade and aerospace industry experts say Boeing is
on the right track.
"If I was sitting in Boeing's shoes, I'd be doing what Boeing's doing,"
said Todd Watkins, director of Lehigh University's Kalmbach Institute
for the Study of Regional Political Economy. "If they didn't do it,
they would be at a competitive disadvantage."
But Robert Scott, an international economist with the Washington-based
Economic Policy Institute whose research focuses on international trade
and its effect on U.S. industries, thinks Boeing has "gone way
overboard."
"I think their strategy is short-sighted and has been for some time,"
said Scott, who acknowledges that his is a minority view. "Boeing has
been shipping jobs overseas... at horrific rates."
A better strategy would have been to invest in its U.S. work force,
keep its technology here, and work with the U.S. government to help
stem the need to place jobs in countries buying airplanes, said Scott.
He co-wrote "Jobs on the Wing: Trading Away the Future of the U.S.
Aerospace Industry" in 1995.
That view is unrealistic, said Joel Johnson, international vice
president for the Aerospace Industries Association. Without placing
work overseas, Boeing would be smaller, he said, and have fewer jobs.
The question isn't whether Boeing is right or wrong in creating jobs
overseas, said Prestowitz of the Economic Strategy Institute. "I think
it's rather they are in a no-win situation."
Reach Molly McMillin at 269-6708 or mmcmillin@wichitaeagle.com.
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