Boeing 787 production ends at Seattle, shifts to South Carolina

Boeing is uprooting the 787 Dreamliner program from a storied manufacturing hub north of Seattle and shifting the work to a non-union plant in South Carolina amid slumping sales of wide-body jetliners.

Production of the marquee twin-aisle jetliner will be consolidated in North Charleston in mid-2021 by the company’s best estimate, Boeing said in a statement Thursday.

The planemaker didn’t disclose how many jobs it intended to cut, saying it is still assessing the potential impact on its factory complex in Everett, Washington, where it employs about 30,000 people.

The move bolsters Boeing’s decade-long expansion in South Carolina, which hosts the company’s only final jetliner assembly line outside its century-old base in Washington state.

As the company braces for years of weak orders, the consolidation also raises doubts about the future of Boeing’s mammoth wide-body factory in Everett, a plant that was carved out of marsh and forest in the 1960s to house production of the 747 jumbo jet.

Boeing's Everett factory, north of Seattle, is the world's largest building when measured by volume.

The shift to South Carolina had been widely expected, given Boeing’s investment in a brand-new campus, after executives revealed in July that they were studying consolidation of Dreamliner production in a single site.

Boeing CEO Dave Calhoun and CFO Greg Smith said in July that the company was reviewing its operations, overhead and facilities and focusing spending on critical areas as it faces a market that’s likely to remain depressed for years.

Drop in demand

Boeing is restarting its 787 operations at the plant for the first time since April 8, including all operations that were suspended because of the Covid-19 pandemic, ABC News reported.

“It became clear that consolidating to a single 787 production location in South Carolina will make us more competitive and efficient, better positioning Boeing to weather these challenging times and win new business,” Stan Deal, head of Boeing’s commercial airplane division, said in a message to employees.

In making the decision, Boeing weighed logistics, efficiency and the “long-term health of our production system,” among other considerations, Deal said.

The coronavirus pandemic has devastated the company’s sales outlook by sapping demand for flights, especially on the international routes plied by wide-body jets such as the Dreamliner.

The shift to South Carolina had been widely expected, given Boeing’s investment in a brand-new campus, after executives revealed in July that they were studying consolidation of Dreamliner production in a single site.

“We have made long-term strategic and sometimes difficult decisions to ensure we bridge to a recovery, and build a stronger, more sustainable future for all of us,” Deal said.

Controversial plant

Boeing’s 787-only factory in North Charleston has been controversial since inception more than a decade ago, when senior leaders including then-Chief Executive Officer Jim McNerney were chafing at a lengthy Machinists union strike that hobbled manufacturing around Seattle.

The Boeing 787-10 has always been exclusively made at the South Carolina plant.

Quality issues at the plant drew the attention of U.S. regulators, and came to the fore again in recent weeks as Boeing was forced to ground eight Dreamliners because of potentially dangerous structural weakness.

About 1,000 mechanics and electricians assemble Dreamliners in Everett. Boeing also employs manufacturing and industrial engineers who provide daily support on the factory floor, and design engineers who configure airplanes to each customer’s specifications.

Boeing said it will keep building 787s in Washington until it lowers output to a six-airplane monthly rate sometime next year. But by spreading Everett’s costs over a smaller production base by mid-2021, the company risks creating a financial drag that lowers the profits of the remaining wide-body programs and its mainstay commercial business.

Costly overhead

Longer term, Boeing could look to put its next new jetliner into Everett, whether that’s a narrow-body or mid-sized wide-body, said Robert Spingarn, an analyst at Credit Suisse Group.

He said the 787 is unlikely to return to its original home in Everett, even though the North Charleston facility only has the capacity to manufacture seven jets a month – half of Boeing’s total Dreamliner output at the start of the year.

If demand for wide-body jets ever rebounds enough to near pre-pandemic levels, the company would probably build a second assembly line in South Carolina, Spingarn said.

“I don’t think this relocation is an optimal outcome. This is not something they would’ve done otherwise,” Spingarn said. “This is reactive. It’s necessary. They fortunately have the benefit of multiple locations to do this, but they’re looking at excess capacity.”