Boeing to place much of 777X design work outside Seattle

By Alwyn Scott

NEW YORK (Reuters) - Boeing Co has decided to place a significant amount of design work for its coming 777X jetliner in cities outside the Seattle area, where the current 777 was designed and is being built, according to an internal memo reviewed by Reuters and confirmed by Boeing on Wednesday.

"It has been decided that much of the detailed design will be carried out by Boeing engineering teams in Charleston (South Carolina), Huntsville (Alabama), Long Beach (California), Philadelphia and St. Louis," the memo said. The Boeing Design Center in Moscow will also support the design activity.

"However, at this time, no decisions have been made about 777X design or build in Puget Sound," the memo said.

The news was seen as a blow to engineering workers in Washington state and a sign that the jobs building the more efficient version of Boeing's best-selling wide-body plane could migrate to lower-cost, nonunion states, especially Boeing's production facility in South Carolina.

"This is another step in Boeing's war against SPEEA, the engineers' union in Seattle," said Scott Hamilton at aviation consultancy Leeham Co in Seattle. "Boeing has been systematically moving engineering jobs out of Washington all year."

The move also comes as Washington state Governor Jay Inslee is considering proposing a package of tax incentives to persuade Boeing to put 777X design and assembly work at its giant factory in Everett, Washington, where the current 777 is made, and keep work in the Puget Sound region, which encompasses Everett, Seattle and Renton, where Boeing has facilities.

Washington state officials and congressional members did not immediately respond to requests for comment.

Union officials said they expected some 777X work will be sourced from the Puget Sound region.

Shifting entirely away from the Everett factory, they said, likely would bring problems similar to those experienced with Boeing's 787 Dreamliner, which has suffered a series of glitches, including unstable, overheating batteries and repeated mechanical failures. Design and parts for the 787 were sourced from suppliers around the globe.

"Puget Sound is Boeing's center of experience in commercial aircraft design," said Ray Goforth, executive director of the Society of Professional Engineering Employees in Aerospace (SPEEA), the union representing Boeing engineers and technicians.

"As engineering tasks are shared with other talented engineering groups, we fully expect Puget Sound to play the key integrating role needed to avoid a replication of the problems experienced by the 787 program."

Boeing has been considering whether to build the 777X at its factory in North Charleston, South Carolina, and is acquiring land adjacent to that factory. But the company reiterated on Wednesday that it has not yet decided where to build the jet.

"We are studying our options on build work for the 777X, but no decisions have been made at this point," Boeing spokesman Doug Alder said.

Hamilton, the industry analyst, said the decision to move 777X engineering work was a blow to Washington state's effort to keep all things 777X in Washington and "may well be the harbinger that final assembly will wind up elsewhere, presumably Charleston," he said.

The 777X is undergoing numerous sales campaigns in the Middle East and Asia that are expected to yield more than $50 billion in orders in coming weeks. The biggest order is expected to come at the Dubai Airshow on November 17, when Emirates Airways is expected to place a landmark order for 100 or more 777X jets, worth some $30 billion, according to industry sources.

The memo released on Wednesday was signed by Michael Delaney, vice president of engineering at Boeing's commercial airplanes division, and Scott Fancher, vice president airplane development.

It said Boeing's goal is to bring engineering skill from across the company to tackle a project as large as the 777X. The company also said it would apply "lessons learned" from the 787 and 747-8 programs. The new structure of design, "will allow for an efficient use of resources and enable Boeing to resolve design issues effectively the first time," the memo said.

(Reporting by Alwyn Scott; Editing by Gerald E. McCormick and Tim Dobbyn)

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