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Boeing Is Cutting Jobs, but Washington State Is Still on the Hook for $9 Billion in Tax Breaks

Washington lawmakers who guaranteed tax breaks for Boeing if it promised to build its new jets in the state and keep thousands employed are unhappy with news that 4,000 or more jobs could be cut.

by Colleen Curry
Mar 30 2016, 9:30pm

Michael Reynolds/EPA

Aircraft manufacturing workers in Washington state and the lawmakers representing them were distressed Wednesday after Boeing confirmed plans to cut 4,000 jobs in the state, with more cuts possible in the future as it tries to compete with increasing pressure from Airbus, the biggest airline manufacturer in Europe.

The unions and legislators came together just three years ago to support $8.7 billion in tax breaks for the airplane manufacturing giant to keep its plants and production in the state. And just a month ago, state lawmakers debated tying those tax breaks directly to Boeing's employee numbers, warning that if they fell below a certain point, the tax cuts would be in jeopardy.

State Representative June Robinson, who represents the district where Boeing's largest factory is located and sponsored the legislation that would have required the company to maintain a certain number of jobs, said she was "incredibly disappointed to hear that once gain jobs are going to be leaving our state."

"It's a loss for those 4,000 people, many of whom I'm sure live in-district in the Everett area," she told the Seattle Times. "It's a loss for all of us who pay taxes to the state of Washington."

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The company stressed that under the current plan no employees would be laid off to reduce the total number of workers, but that the five percent reduction would come through buyouts, attrition, and not filling open positions, according to Charles Bickers, spokesman for the company.

"We have said consistently this year that we have to reduce costs to be competitive and that would include employment reduction," Bickers said in a statement, noting that the company was also trying to find savings within its supply chain and other non-labor costs, and the ultimate number of positions eliminated would depend on how successful they were in finding other ways to cut expenses.

The company also emphasized that the cuts would include "hundreds of executives and managers," potentially in a bid to reassure machinists' unions that expressed dismay at the announcement.

The CEO of Boeing's commercial division, Ryan Conner, told employees during an internal webcast last month that Airbus was "attacking us with price" resulting in Boeing being "pushed to the wall," according to the Seattle Times, which obtained a transcript of the webcast. Boeing declined to provide the webcast to VICE News.

Conner told employees that Airbus had gained a larger share of global orders for single-aisle commercial jets due to its low pricing.

Boeing stock has plunged more than 10 percent over the past year.

Boeing's future competition with Airbus could also be complicated by the 2016 presidential election. Among Boeing's largest customers are airlines from Muslim nations: to cite only two, Emirates Airline, based in Dubai, is the biggest customer of the Boeing 777, of which it has 146 with more than 150 on order — and Indonesia's Lion Air is the largest customer of the new Boeing 737 MAX, with more than 200 ordered. The ability of executives from both companies to come to the US to sign contracts and take delivery of planeswould be uncertain under a Donald Trump presidency, if Trump carries through on his threat to ban all Muslims from entering the US.

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The bulk of Boeing's commercial planes are built in Washington, and therefore most of the cuts would take place in the state, Bickers said. The job losses drew criticism of union leaders who had hoped that the tax breaks given to Boeing in a bill passed by the legislature in 2013 would help guarantee jobs for years to come for the state.

That bill, ushered to passage by Governor Jay Inslee, carried $8.7 billion in tax breaks for the company through 2040 in exchange for a promise to build the company's 777X jet in the state. The deal, which passed by overwhelming votes in both chambers, was expected to bring more than 50,000 jobs to Washington.

Boeing is the recipient of the largest amount of tax breaks in the country, according to McClatchy.

"We continue to have concerns about work that has been moved outside of Washington State, which is why we focused so much energy on trying to get job number guarantees for the $8.7 billion in aerospace tax incentives that our citizens are paying," John Holden, District 751 president of the International Association of Machinists, said in a statement. "This should make it clear to the legislature why it is important to tie guaranteed job numbers to tax incentives like other states have done.

Just last month, Washington's House Finance committee voted down a bill that would have required Boeing to keep its employment number at 83,295 people in the state in order to keep its $8.7 billion tax break, according to Reuters. Under the proposed bill, eliminating 4,000 positions would have reduced the tax break by half, and eliminated it altogether if the company cut 5,000 positions.

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"The timing is not right, right now," state Rep. Cary Condotta, a Republican who voted against the measure, told Reuters in February.

Boeing called the vote "a crucial victory," while Holden said at the time that the vote showed "the power of corporate influence to overcome what is clearly the will of the people and the intent of the legislation."

In 2003 the Washington state legislature approved tax breaks for the company in exchange for building the 787 Dreamliner in the state, but the company found a way within that legislation to build an additional Dreamliner plant in South Carolina in 2009. So the legislature made the tax breaks passed in 2013 conditional on Boeing keeping the entire production of the 777X in Washington State.

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