The Wall Street Journal is reporting Boeing is planning on moving the assembly of the 787 Dreamliner from Washington to South Carolina.

Boeing, over the last few years, has been gradually moving its production capacity to South Carolina due to its more favorable non-unionized labor costs and Boeings rocky past with organized labor here in Washington.

The COVID-19 crisis and the decrease in demand for planes has forced Boeings hand. Due to the heavily integrated 787 assembly facility and the economic benefits of one facility in Everett, Boeing had been reluctant to move the production line. With the decline in plane demand, that advantage has evaporated and combining operations in South Carolina now makes more economic sense.

Additionally, the Washington Boeing Business and Occupation (B&O) tax credit was reversed (at Boeings request) earlier this year, making Washington a less attractive place to build airplanes. The tax credit was removed so Boeing could avoid a retaliatory trade tariffs and be more competitive on international markets under the Word Trade Organization (WTO) rules.

The Governor’s office issued the following statement on the move by Boeing.

“Washington state has supported the company with a well-trained workforce, a robust supply line, unparalleled infrastructure, world-class research institutions and the best business climate in America. If this report is true, it would force a review of that partnership, including a hard look at the company’s favorable tax treatment.”

The impact to the local economy will not just be the direct job losses at Boeing, but to supporting small business and parts manufacture. Everett Community College will see a decline in demand for its machinist and composite programs that have traditionally supplied a trained workforce for Boeing.

The International Association of Machinists (IAM) that represents about 32,000 local workers, stated in response to the move that they “strongly feel that we’ve already earned that work”. Given the history of strikes and walk offs the union has forced over pay and benefits negotiations, Boeing is seeking a more business friendly area to build planes in South Carolina. Boeing first started moving its production facilities to South Carolina after the IAM workers’ strike in 2008 shutdown plane production for 58 days.

The 787 assembly relocation follows the move of the Boeing corporate headquarters to Chicago in 2001.

The Washington legislature needs to be wary of continually increasing B&O taxes on companies and passing anti right-to-work legislation which makes Washington a less competitive place to locate a business. Other states are willing to make the concessions to win those jobs. Recent proposals, such as an income tax on corporate gains will encourage less businesses to locate in Washington and more businesses to leave.

Boeing plans on publishing more details on the decision in the coming weeks.