Boeing (NYSE: BA) is obviously anticipating its 787 Dreamliner getting aloft again as it is making plans to expand its South Carolina facilities with a $1 billion investment that will add another 2,000 workers.
It's finer in Carolina
It was its plan to open a second manufacturing plant there in 2011 that riled up the machinists union in Puget Sound, Wash., because South Carolina is a right-to-work state. The union got the National Labor Relations Board to tip its hand on its biases as it opposed the move by saying Boeing was being punitive. The union had gone on strike four times in 10 years, costing the plane maker billions and the move was viewed as retaliation despite no jobs in Washington being affected.
The NLRB subsequently withdrew its complaint after the union was able to extract higher wages and unusual job security agreements in its contract negotiations with Boeing. Of course, that doesn't mean it will ever expand in Washington again, particularly since the Carolinas offer a much more attractive, lower-cost proposition.
Boeing employs 6,700 workers at the North Charleston facility already and anticipates adding 1,000 engineers and 1,000 IT specialists by 2020. It will receive $120 million in incentives from the state for up-front expansion costs such as utilities and site preparation. South Carolina provided some $900 million in incentives last time to encourage Boeing to expand there.
Yet the Dreamliner fleet is still grounded, awaiting FAA approval for the technologically advanced plane to fly again after its lithium-ion batteries overheated and caught fire in January, causing regulatory overseers worldwide to order the planes grounded. While none of the problem batteries came out of its South Carolina facilities, Boeing has completed its final tests with FAA officials and now just needs their OK to taxi back onto the runway.
Customers have largely held firm with their orders, waiting to see the result of the tests. Yet rival Airbus is making headway in grabbing those who need planes without delay. It recorded orders for 431 planes in the first three months of 2013, well beyond the 193 orders Boeing notched. Of course, if Ryanair comes through with its expected 175 plane orders for Boeing, that would make the race much closer.
Boeing's expansion announcement came a day after Airbus broke ground on a new commercial plane assembly facility in Alabama, suggesting that it wants to compete head-to-head with its rival for defense business, too. Boeing has its missile and defense systems headquarters in that state.
Despite its woes with the 787, Boeing stock now stands 17% higher than where it began the year and more than a third higher than its 52-week lows. As it appears, it's more a question of when the FAA will sign off on the jumbo jet taking flight again as opposed to if Boeing's stock might just gain even greater altitude.
Hanging around the hangar