Charleston Best Place for Boeing 777X by 2020, Says Analyst

By Steve Wilhelm, October 22, 2013, Puget Sound Business Journal

Everett might be the best place to build the 777X now, but that could change by 2020, when the first of Boeing’s newest aircraft are expected to be rolling off the assembly line.

This was the analysis by Michel Merluzeau, aerospace analyst and partner at Kirkland-based G2 Solutions, speaking Tuesday at the British-American Chamber of Commerce aerospace conference at the Museum of Flight in Seattle.

“If you asked me for 2020, what is the best place for this aircraft, that place is Charleston,” he said, adding that growing worker skills and automation there are becoming an increasing advantage, versus the rising labor costs and other costs in the Puget Sound area.

Merluzeau said he is analyzing what will be the best long-term decision for The Boeing Co. (NYSE: BA) in the increasingly cost-driven global aircraft market.

“Both Everett and Charleston can build the airplane, no question,” he said. “It’s a strategic decision about where they can build the company, and how they want the company to compete in a more fragmented, more competitive environment.”

He made his comments within a wider discussion of the growth of aerospace activity in the South. Comparing the world’s aerospace centers in 1983 to now, he pointed out that activity in the Northeast is substantially diminished, while there’s significant growth in Asia and in the South.

“The center of gravity has shifted to the Southeast. The entry of new participants in North America has shifted there,” he said.

Merluzeau was quick to add he has no inside information on Boeing’s decision-making process about where it will assembly the 777X, but was expressing his own analysis of the comparative advantage between North Charleston and Everett.

The 777X is expected to be a re-engined and re-winged version of Boeing’s 777, developed to compete against, and be larger than, Airbus’ upcoming A350-1000. Persuading Boeing to build the 777X and its new wing in Washington has become a primary goal for Washington Gov. Jay Inslee. His administration has launched a series of initiatives to keep the aircraft in Everett, even though Boeing has said little about what it needs to make that decision.

“I’m not calling it,” Merluzeau said about the competition. He added that he’s looking at the level of aerospace skills and infrastructure that will exist in North Charleston by 2020.

“The conditions will be ready to accept 777X by 2020,” he said. “They will be in place.”

Key areas of South Carolina readiness are infrastructure and work force, he said. The work force is an important factor since worker skills at Boeing’s North Charleston plant are still less developed than those of workers in Everett. But Merluzeau said that is changing.

“The No. 1 challenge in the Southeast will be work force, but they’re addressing the problem, they’re addressing it very successfully,” he said. “There are difficulties ahead, they’ve been addressing it. By 2020, they’ll be in better shape than we’re assuming they are.”

Asked what the Northwest can do to win 777X production, Merluzeau said this:

“I don’t think we can. I think the transition has already taken place. Production jobs, we’re not going to compete,” he said. “We have to transform the clusters, and focus on what we’re good at.”

He suggested a future in which the Northwest should be less focused on manufacturing and more focused on engineering.

“If the future of Northwest is innovative engineering clusters, I think that what success will come from,” he said. “If we try to compete against low-cost centers of the world, we will have difficulties.”

Merluzeau was followed by Inslee. In an aerospace-boosting stump speech, the governor painted quite a different picture of the region’s future. This future, in Inslee’s view, most definitely will include aircraft assembly.

“We’re going to see airplanes take off, designed by young minds at (Raisbeck) Aviation High, by graduates from Lake Washington (Institute of Technology), powered by biofuel, engineered by University of Washington Huskies,” Inslee said. “This is a great vision for my state.”