Boeing Addresses Concerns Over China Plant

By Jon Ostrower 

Boeing Co. sought to assuage employee concerns over its plans for a new plant in China that was expected to be announced as part of the visit by Chinese President Xi Jinping to a company factory on Wednesday.

The new plant would be Boeing's first big manufacturing facility overseas, and would mark a milestone for its presence in China, which is fast becoming its most important market.

The facility is expected to handle only final steps in completing work on 737 single-aisle jets ordered by Chinese customers, according to a person familiar with discussions on the venture.

China accounted for roughly a quarter of Boeing's single-aisle jet deliveries this year and is expected to claim a large share of future orders, but the company has lost ground in recent years to Airbus Group SE, which delivered the first of its rival A320 jets from an assembly plant in Tianjin in 2009 and now claims around half of the Chinese market.

The prospect of Boeing moving some work to China such as painting jets and completing their flight tests has riled Boeing's unions.

Boeing hasn't yet announced the planned facility, but Ray Conner, chief executive of its commercial airplanes unit, alluded to it Tuesday in an internal memo viewed by The Wall Street Journal.

"We are in important discussions with Chinese partners about our strategic partnership in China and also possible sales agreements," Mr. Conner said. "I want to assure you that agreements we may reach with our Chinese partners will not result in layoffs or reduce employment for the 737 program in Washington state."

A location for the planned facility has yet to be selected, but it would install seats, in-flight entertainment systems, and some galleys and lavatories, as well as the custom paint job for each airline, said the person familiar with the plans. Each jet will then be flown on production flight trials before delivery. Because it will take several years to establish, The facility will mostly handle Boeing's new 737 Max jets, which begin delivery in 2017.

Airbus has assembled more than 200 jets in Tianjin near Beijing and is also building a completion center in China for its larger A330 planes--work it promised as part of a deal for up to 75 aircraft.

While China has become its single-largest growth market, Boeing has resisted siting an assembly plant there to retain the efficiencies of its existing plant in Renton, Wash., and to avoid disturbing its often strained labor relations.

"Any shift of aerospace jobs from our bargaining unit or Washington state causes grave concern," the bargaining unit for the International Association of Machinists and Aerospace Workers in Seattle said in a statement last week.

The lure of the China market has already led other large U.S. capital goods makers such as Caterpillar Inc. and Joy Global Inc. to assemble equipment there. General Electric Co., which makes engines for Boeing jets, last week said it would move final assembly of some power turbines to China from the U.S., citing the loss of financial sales support from the Export-Import Bank. Boeing and GE have led the battle to reauthorize Ex-Im, which has been closed to new business for almost three months.

While Chinese firms are already big suppliers for Boeing and Airbus planes, previous efforts to deepen ties with its aerospace sector have floundered. McDonnell Douglas opened a facility near Shanghai to assemble its MD-80 jets in the mid-1980s, but Boeing curtailed the effort following its 1997 merger with McDonnell.

China is now investing heavily to develop its own passenger jet industry, and though the state-backed Comac C919 plane includes engines from a joint venture between GE and France's Safran SA and parts from other Western suppliers, it is years behind schedule.

Write to Jon Ostrower at [e-mail]

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September 22, 2015 19:55 ET (23:55 GMT)

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