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Boeing Looks to Move Dreamliner Production Away From Puget Sound

By Lou Whiteman – Sep 21, 2020 at 9:57AM

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The company's cost-cutting move to South Carolina would be a symbolic blow to its home region and could cause trouble with unions.

Boeing (BA 2.01%) is close to moving all 787 Dreamliner production out of Washington state, a cost-cutting decision that would have symbolic ramifications in the Puget Sound and could create new tension between the company and its unions.

Boeing established a second 787 production line in North Charleston, S.C., in 2012, seeking to diversify its manufacturing footprint. At the time, the Dreamliner was a strong seller for Boeing and could support two production lines. But with the COVID-19 pandemic eating into travel demand, airlines are not expected to return to growth for years.

A Boeing Dreamliner in flight.

Image source: Boeing.

The company in July said it intends to cut 787 production to six airframes a month in 2021, down from a peak of 14. As part of that reduction, Boeing is "all but certain" to cease production at its Everett, Washington, factory and shift the entire line to South Carolina, according to Reuters.

The announcement could come when Boeing releases third-quarter earnings next month, Reuters reported.

Boeing's initial decision to open a factory in South Carolina, a so-called "right to work" state (where workers cannot be compelled to join a union), was met with criticism from union leaders in Washington. The company has had difficult relations with many of its unions in recent years, and moving the Dreamliner out of Washington would likely be met with significant pushback from state officials and labor leaders.

The move would not be without risks. Boeing still has a major manufacturing footprint in the Seattle area, and needs the support of lawmakers there.

Boeing also must consider whether concentrating production in South Carolina, and likely transferring many workers to that plant, could make it easier for union leaders to organize at the plant. And the South Carolina factory is too small to handle higher-volume production, meaning Boeing would have to either invest significantly in the plant or eventually restore production in Everett if and when demand returns.

But after bleeding through nearly $10 billion in cash in the first half of 2020, Boeing is eager to cut costs. And with some concerns that even the projection of building six planes per month will need to come down, the company can ill-afford the expense of operating two factories at low production rates.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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