Southern California's last major airplane factory got a reprieve Tuesday as Boeing Co. announced it would keep open its Long Beach production line for the C-17 Air Force transport for at least six more months.
With no new orders, the sprawling plant next to Long Beach Airport had been scheduled for closure by mid-2009 with the rollout of the last C-17. It would have dealt a major economic blow to the region.
But Boeing told its Long Beach workers Tuesday morning that the company would invest its own money to keep the line going until at least 2010, with the hope of securing more orders from the Air Force and foreign nations.
"We're putting some skin in the game," said Rick Sanford, a Boeing spokesman in Long Beach. "We're committed to keeping the line viable until we get funding."
The decision was hailed by lawmakers and local officials who have been fighting to keep the plant open.
"This is good news," said Sen. Dianne Feinstein (D-Calif.), who has been seeking additional congressional funding for the Air Force to buy more C-17s.
It also drew support from the Air Force, which has maintained that it wants to buy more C-17s but can't do so until after 2010 because of budget and planning constraints.
The gap would have meant shuttering the plant and then restarting it months later at a cost of more than $500 million.
Speaking to reporters Tuesday at the Paris Air Show, Air Force Secretary Michael Wynne called Boeing's decision a "very good gesture on their part."
For Boeing the move would help prevent disrupting the C-17 Globemaster III's supplier chain at a time when many aerospace companies are enjoying double-digit growth in their commercial aircraft business. Boeing risked higher production costs as it renegotiated contracts with emboldened suppliers.
Still, Chicago-based Boeing had until now resisted taking the financial risk of paying for parts for planes that had yet to be ordered.
With 31,000 workers in Southern California, Boeing is the region's largest private employer. Of that total, 5,500 work on the C-17 in Long Beach.
With the C-17's future still up in the air, Boeing's decision to keep the line open for an additional six months is a bold one, said Robert Swayze, manager of economic development for Long Beach: "It's a little bit nervy to think about building $200-million airplanes on spec, and that's really what they're doing."
Long Beach officials have been lobbying Congress in an effort to secure funding for more C-17s to prolong the plant's life and preserve its contribution to the local economy.
In addition to its direct payroll, the plant provides jobs for about 5,300 workers at suppliers around Southern California, city officials estimate. Only about 15% of the plant's workers are Long Beach residents, giving other Southland cities a stake in the factory's survival, said Swayze, who heads the so-called Red Team of C-17 boosters.
"It's terrifically important to the Long Beach economy, but it's even more important to the regional economy," Swayze said. "It's a regional economic asset." Including the indirect employment, the plant generates economic activity of well over $1 billion a year, officials said.
In addition to its economic significance, the plant also provides a meaningful tie to the state's past as a major aircraft producer.
"It's California's last major aircraft production facility," Swayze said. "California used to be the home of the aircraft industry, and this is what's left."
But in March, Boeing began telling some suppliers to stop producing parts for the large four-engine jet. It takes about 34 months from the production of the first part to final assembly.
Boeing executives said Tuesday that they were telling suppliers to continue making parts for the plane beyond the 190 that have been ordered so far with the anticipation that Congress would provide funding for an additional 10 aircraft. Boeing has delivered 165 C-17s so far to the Air Force.
The decision was based on "continued bipartisan congressional support and increasing signs that the U.S. Air Force has requirements for 30 additional C-17s," a Boeing executive said.
The Air Force has been constrained by a congressional mandate that it also upgrade aging C-5 cargo planes. The Pentagon is weighing whether the upgrades are worth the cost, but the study is not expected to be completed until 2010, or after the C-17 line was scheduled to be shuttered.
"We believe they've bought enough time that we can bridge over," Wynne told the Dow Jones news service in Paris.
The plane, a workhorse that has transported troops, supplies and casualties in Afghanistan and Iraq, has been in production since the early 1990s. The program has been one of Boeing's largest, generating about $3 billion in annual sales.
Also on Tuesday, Boeing's commercial aircraft division received a major boost as Century City-based International Lease Finance Corp., the world's largest airline leasing company, ordered 63 passenger jets, including 50 787 Dreamliners.
The Dreamliner, which has yet to be flown, is assembled in Seattle.
At list prices, the deal is potentially worth $8.8 billion, though the leasing company is likely to have paid far less because of discounts often given to large purchasers.
Copyright 2005 LexisNexis, a division of Reed Elsevier Inc. All rights reserved.
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