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Archive for Saturday, January 7, 2012

Kansas leaders pursuing 2 paths in next step after Boeing announces plant closure

The first production model of the new Boeing 787 Dreamliner airplane is unveiled to an audience of several thousand employees, airline executives, and dignitaries during a ceremony at Boeing's assembly plant in Everett, Wash., in this 2007 file photos. Kansas leaders are insisting that Wichita still will be able to define itself as the aircraft manufacturing capital of the world even without the Boeing plant, which announced it will close this month. Gov. Sam Brownback is promising aggressive attempts to attract new commercial aviation work — even mentioning Boeing rival Airbus.

The first production model of the new Boeing 787 Dreamliner airplane is unveiled to an audience of several thousand employees, airline executives, and dignitaries during a ceremony at Boeing's assembly plant in Everett, Wash., in this 2007 file photos. Kansas leaders are insisting that Wichita still will be able to define itself as the aircraft manufacturing capital of the world even without the Boeing plant, which announced it will close this month. Gov. Sam Brownback is promising aggressive attempts to attract new commercial aviation work — even mentioning Boeing rival Airbus.

January 7, 2012

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— Some Kansas officials felt betrayed when they learned Boeing Co. was contemplating closing its defense plant in Wichita, and the area’s congressman says he’s researching whether the company can be held to promises to bring thousands of jobs to the Sunflower State.

But the state’s leaders are pursuing another path, too, insisting that Wichita still will be able to define itself as the aircraft manufacturing capital of the world even without the Boeing plant. Gov. Sam Brownback is promising aggressive attempts to attract new commercial aviation work — even mentioning Boeing rival Airbus.

Boeing’s longtime presence in the Wichita area was a big part of the city’s claim to its title, and state officials were aggressive Boeing boosters over the past decade. As the company announced last week that its Wichita plant, with 2,160 workers, will close by the end of 2013, Brownback attempted to soften the psychological blow by predicting that the state’s aviation industry will emerge larger and more vibrant.

“For people in Kansas, this is tough,” said Carter Copeland, an aerospace analyst for Barclays Capital. “This is an aerospace center of excellence. There is a very skilled work force there that knows how to work in this industry.”

Broken promises?

Boeing’s announcement that it will move work from the Wichita plant to Oklahoma, Texas and Washington wasn’t a surprise to Kansas officials because the company had disclosed in November that it was looking at closing the Wichita plant. But Kansas officials were upset because of the efforts they’d put into promoting Boeing’s bid for a contract worth at least $35 billion to build 179 refueling tankers for the Air Force.

The Air Force had awarded the contract to a rival consortium in 2008 but came under pressure from Kansas’ congressional delegation and other critics to reopen the bidding process. Boeing won the contract in February, and Kansas officials contend the company promised them that work would be done in Kansas — creating as many as 7,500 jobs with an economic impact of nearly $390 million.

Nor was it the first time Kansas officials helped the company. In 2003, with Boeing preparing to launch work on what became its 787 commercial jetliner, legislators and then-Gov. Kathleen Sebelius authorized up to $500 million in bonds to help bring work to Kansas. According to the state Department of Commerce, the incentives eventually were tapped by Spirit Aerosystems, which took over Boeing’s commercial operations in Wichita.

U.S. Rep. Mike Pompeo, a Republican whose 4th Congressional District in south-central Kansas includes the Boeing plant, said he and his staff plan to examine the bidding process for the Air Force contract more closely. He said the company made “a very public commitment to the workers in Kansas.”

“We’re going to go try to gather the data set so that we can understand whether the federal government got what it bargained for when it chose the Boeing Company,” Pompeo said. “We’re trying to go back and dig up precisely who was told what and when.”

A changed market

Boeing has said the market for defense work changed dramatically in the past 18 months and its Wichita site, with 97 buildings and 2 million square feet, wasn’t competitive. After Boeing spun off its commercial operations in the area in 2005, it kept 4,500 defense workers, but layoffs caused that number to dwindle.

“Boeing was not utilizing that facility to its full capacity,” said Jeremy Hill, director of Wichita State University’s Center for Economic Development and Business Research. “When someone holds onto a facility and they only use it marginally, it can be the worst thing for a community.”

Copeland said with ongoing debates in Washington over the federal debt and budget deficit and the prospects for large spending cuts, even in defense, it has become clear that there’s too much manufacturing capacity among aviation’s defense contractors.

And even before Boeing formally announced that it would close the Wichita defense plant, Brownback had suggested the Kansas aviation industry’s future was in its commercial side. In a December interview with The Associated Press, he predicted “a substantial decline in the defense sector.”

During a Statehouse news conference responding to Boeing’s announcement, the governor brushed aside a question about the potential embarrassment of the company leaving Kansas after state officials’ efforts on its behalf. Brownback said he expects positive announcements about commercial aviation in the near future.

“We are going to see more aviation work in the state of Kansas,” he said. “That’s the long term, and so all those investments have been proper, and they are moving us forward.”

Copeland said he sees Spirit “on the cusp” of significant growth and expects an increase in Boeing’s commercial business in the next several years, and Wichita already has a pool of industry talent. Hill said Boeing’s vacant defense plant can be marketed by local officials to other firms.

“There are not a lot of facilities on land available for new industry to come here,” he said. “There’s a value for the community to attract new industry there.”

Comments

blindrabbit 2 years, 11 months ago

What about Roberts, Tiahrt, Pompeo, Moran, Gates and Brownbacks role in letting this get away, Repubs. all! . I'll bet the Koch-a-Kolas had a hand it it; don't want continued competition in Wichita!

jhawkinsf 2 years, 11 months ago

Yes, it's those damned Republicans who keep wanting to slash the military budget which caused Boeing to consolidate their operations. Maybe Kansas Democrats should try to lure Haliburton to Wichita as a suitable replacement. This is neither a Democratic nor a Republican thing. Boeing made a business decision. It happens that this one will certainly have a negative impact on Kansas. It happens. For those that will lose their jobs, it's a tragedy. Maybe for a change all Kansans should pull together to soften this loss by working cooperatively to lure some business to Wichita.

jafs 2 years, 11 months ago

Did you miss the part about how politicians in this state worked hard on behalf of Boeing, based on promises from them that were then broken?

I suppose these days that promising things to get what you want, and then breaking those promises is indeed just a "business decision".

jhawkinsf 2 years, 11 months ago

I'd bet that if you asked Boeing executives about that they'd say something like this: "we said we would "try" to keep the jobs in Kansas". And I'd bet the politicians would say they heard: "they said they'd keep the jobs in Kansas". If it were a promise that Boeing could be held to, one that everyone agreed was a deciding part in getting the bid, then it should have been put in the contract. We could then go to court to either seek enforcement of those terms or seek monetary compensation. But you know and I know that's not how it works.
This is like a person who hires a really bad lawyer, one with a bad reputation, one known to do poor work but is cheap to hire, and later complains that the lawyer didn't do his job well. Should we blame the other side in the legal dispute we were having, or should we blame the lawyer who did the poor work? Or should we blame ourselves for knowingly hiring a cheap, bad lawyer.
The point is we know that this is how business is done, that deals between businesses and politicians aren't worth much. Then we blame either the business or the politician when we all share the blame for hiring those politicians. Maybe Boeing lied, or mislead. Maybe the politicians heard what they wanted to hear and then passed on to the voters a too rosey picture. Maybe the voters are getting the type of government that a non involved and non informed electorate deserves.

jafs 2 years, 11 months ago

But, I thought that you were in favor of government helping business, so that we can all benefit?

That's what these guys were doing.

And yet,...

So, now you're saying that helping Boeing get a bid, in order to help "create jobs" in KS is like hiring a cheap, bad lawyer?

I guess you've changed your position on the relationship of government and business.

jayhawkinsf 2 years, 11 months ago

I've always said that government incentives can be given if there is an overall net benefit to the community and that an independent analysis should be made to access whether or not there is indeed a net benefit. It seems that was the case for a long time, but that recently ended. What ended the net benefit was the "promise" to stay in Kansas and then not live up to the promise. Had Boeing stayed in Kansas, keeping all those jobs, would you be upset they got the benefit? Would you have advocated for the loss of thousands of jobs? The question I posed was whether or not a promise was actually made. Was it? Let's see it. Where is it? Like any contract, there are terms that can be enforced and terms that cannot. If a promise was made conditional to considerations given, then the promise can be enforced in court. If it was done with a wink and a nod, then we've hired some pretty poor contract writers.

jafs 2 years, 11 months ago

I think that this is the sort of thing you can expect when government gets involved in "incentivizing" businesses.

Sometimes those businesses will follow through on their end, and other times they won't do so.

Sometimes the gain is worth the investment, other times it isn't.

And, unless you absolutely force the businesses to live up to their end, it's most likely they won't do so.

Which is certainly the case if you are trying to predict an uncertain future, as happened with the tif in downtown Lawrence.

Unless there's something in writing, I think that both sides will have a different version of what happened, and there'll be no way to determine whose is accurate. But, if they did in fact exercise influence to get Boeing the chance for that contract based on anything like "we'll try" they're idiots, plain and simple.

So, even though I dislike them, I think there most likely was a promise made that's been broken.

I think that the public sector and the private should be separate - they (should) operate in different manners, with differing goals and means.

Ron Holzwarth 2 years, 11 months ago

jayhawkinsf:, re this: "The question I posed was whether or not a promise was actually made. Was it? Let's see it. Where is it? Like any contract, there are terms that can be enforced and terms that cannot. If a promise was made conditional to considerations given, then the promise can be enforced in court."

One of my cousins is a president of a large bank in Wichita, and last time I saw her I asked her a question because some friends of mine had a massive loss because a breach of an oral contract.

In essence, the question I asked her was: "Are verbal contracts legally binding?"

"No. Only what's written on the piece of paper."

The article mentions only a "promise", which implies it was verbal in nature. No contract was mentioned.

jafs 2 years, 11 months ago

Actually, verbal contracts are legally binding, as far as I know.

The trouble is in proving they existed, without anything in writing.

If you have a written agreement, on the other hand, then verbal alterations to that aren't binding - any changes have to be in writing.

A promise by Boeing to do certain things in exchange for certain actions on the part of politicians would qualify as a verbal contract, I think.

jhawkinsf 2 years, 11 months ago

Verbal contracts aren't worth the paper they're written on. One slight misunderstanding on the part of either side negates any agreement, because by definition, no "agreement" existed. So why blame the company when it was the politicians who were supposed to be looking out for the best interests of their constituents, the people. As I said earlier, we hired bad lawyers. We knew ahead of time they were bad lawyers. Yet we hired them anyway. So if anyone is to blame we all need look in the mirror.

Ron Holzwarth 2 years, 11 months ago

Hey, just 'cause I told you I was gonna do somethin' don't mean I gotta do it.

I need some money. Will you loan me $1,000? I'll pay you back, I promise!

jafs 2 years, 11 months ago

Ah - so the bad lawyers are the politicians?

Well, I'm off the hook then - I didn't vote for any of these guys.

jhawkinsf 2 years, 11 months ago

I didn't vote for any of these guys either. But "we the people" did. So rather than play the blame game, we all should make a greater effort to impact the system enough that these types of things don't happen in the future, if in fact there are enough of "us" who are displeased with the way things are working out. We can each impact the system in a variety of ways. Be that sending a letter, collecting signatures, attending a caucus, becoming members of third parties, etc. Voting is the bare minimum we can do.

jafs 2 years, 11 months ago

Since I didn't vote for them, I feel no responsibility for their actions. I vote, and I consider carefully how I vote in order to have the most impact I can.

Especially since my efforts to communicate with them and similarly oriented politicians has shown me that they're completely uninterested in my views.

And, understandably, since they know I'd never vote for them at all.

Heck, I can't even convince you that this sort of government assistance to businesses is a bad idea, and you have little/nothing to gain from it personally.

jayhawkinsf 2 years, 11 months ago

Your last paragraph is interesting in that it brings up a question that I am not informed enough to know the answer, yet I'll throw it out there anyway. In all the years Boeing was in Wichita, and we're talking decades, right, how many incentives were they given to do the work here, provide the jobs here, etc.? If they were given incentives, was it a good investment for decades or does this loss negate all the good that was provided to the local economy, local and state tax coffers, etc.? As a hypothetical, if they were given 50 incentives and they kept their "promise" 49 times and reneged on their last promise, were the benefits of the 49 kept promises worth the losses of the one broken promise? I've tried to make the point before, it's not all black and white. If these incentives to which you are so opposed have been a regular part of Boeing's business practices in Wichita, and Boeing's presence has been a net benefit for decades, then how would you feel about that?

jafs 2 years, 11 months ago

I'd have to look at the numbers to come up with a reasonably intelligent answer to that.

But, generally speaking, I think the downsides to these sorts of incentives outweigh the upsides.

You have to look at the broader picture of what happens when government/business get intricately involved in this way.

Incentives distort the market in a number of ways, and business involvement in government distorts government functioning as well.

jayhawkinsf 2 years, 11 months ago

While you're looking up those numbers, think about this. Suppose every city and county in the state decided to never give incentives. Suppose the state did the same. But other states did not follow suit. What would be the likely result?
Jafs, you tend to focus on your strongly held beliefs, which I respect. I'm just asking you to consider the real world when you do that. As you said, I have no interest in this particular situation, nor in the buildings being considered here (9th. & N.H., Olive Garden, Masonic Temple, etc.). But there are real world jobs to be considered.

jafs 2 years, 11 months ago

The most recent incentive was given to a project that was planned and completed without being dependent on it at all - the apartment complex at 9th and NH.

If there was ever a case for denying it, this would be a great one - and yet, you applaud this as well.

By the way, I'm not planning to "look up" those numbers, but I'm sure you know that.

Some of the downsides to these sorts of things are harder to measure, like the extortion-like mentality that applies now to various projects.

jayhawkinsf 2 years, 11 months ago

Yes, I knew you wouldn't look it up. Just as you know I will say some projects will go forward without incentives while other will not. It's a gamble on the parts of both business and government.
A couple of days ago a poster said he was driving through Manhattan and passed an Olive Garden with a full parking lot. Did they receive a tax abatement? I have no idea. But they have one and we have a, well, we have Plum Garden (or whatever it used to be called). We have a property bringing in tax dollars at a very low rate, I assume. Maybe you're brother-in-law is a carpenter. I'd like to see him pounding nails and earning a wage. I'd like to see him spend his money at a local restaurant and buy clothes at a local store. I'd like to see his kids buying an ice cream downtown, or maybe get a part time job after high school in the building his father helped build. And with the money he earns in his part time job after high school he will attend K.U. instead of Jo.Co. Community College. I want to see that earned dollar spent a thousand times right here in Lawrence.

jafs 2 years, 11 months ago

This particular one was not dependent on incentives at all - the developer himself said so publicly, and started work on the project before even requesting it.

Should we still grant it?

I completely agree - I want a thriving local, as well as national economy. But, I don't want our economy held hostage by businesses threatening to "take their money elsewhere" if we don't give them various breaks/incentives. And, I don't want to see projects approved based on rosy projections of future gains that don't pan out as planned. And, I don't want to see counties and school districts lose massive amounts of tax revenue in the process.

Basically, I think that the public sector should be in the business of collecting taxes and providing services/infrastructure - all of which should be agreed upon by the majority of voters (levels of taxation and services).

And, the private sector should be in the business of investing in projects, creating and running businesses, etc.

That's what those sectors are designed to do, and they might do it pretty well if they limited themselves to what they're designed for.

jhawkinsf 2 years, 11 months ago

And I agree with you in every way except one, that being that I don't want Lawrence being at a competitive disadvantage given the real world fact that other communities do in fact blur the line between public and private enterprise. We always hit that wall when we get down to the most fundamental level, your philosophical opposition and my real world outlook. Politics has been described as the art of compromise. Our current situation in Washington is what happens when people don't compromise.

jafs 2 years, 11 months ago

I notice you didn't answer the question about the 9th and NH project at all.

Should we grant that one or not?

jayhawkinsf 2 years, 11 months ago

Certainly not if they're not asking for one. If they are, or if they do, then comes the process I believe in, the independent cost/benefit analysis with the city's overall interest being the deciding factor.

jafs 2 years, 11 months ago

As I've said numerous times, they asked for one, but the project wasn't dependent on it, and in fact was started before the request was made.

The developer said publicly that he would complete the project without the assistance.

So, should it be granted or not?

FlawontheKaw 2 years, 11 months ago

Not Rep. or Dem. You got to be kidding. No Haliburton please. We have had enough of the Dick Cheney and the agendas of his Neo-fascist nation building buddies.

Robert Rauktis 2 years, 11 months ago

"But Kansas officials were upset because of the efforts they’d put into promoting Boeing’s bid for a contract worth at least $35 billion to build 179 refueling tankers for the Air Force."

Amazing how they decry big government and expound the free market until it works against them. Then they're out there with the same pork on their breath.

Mike1949 2 years, 11 months ago

Is it political? No, it isn't. Same thing happened here in Manhattan a few years ago. A company that was a computer call center enjoyed a ten year tax cut, and I am talking about a big tax cut. But as soon as it ran out, they took all the jobs over seas and closed down the building. Talk about deceit! Though what is going on in Wichita isn't quite the same, the state of Kansas has spent a lot of money helping out the company as much as it is legal. Money that were out of tax payers pockets!

FlawontheKaw 2 years, 11 months ago

Of course it is political. Jeez. I guess the fact that Congress has to approve all the funding for these flying war machines is not political at all, huh?

FlawontheKaw 2 years, 11 months ago

I do agree with the rest of what you indicated though Mike. I think we should stop giving all the $$ breaks to the big corps. "No reason to get excited," The thief, he kindly spoke "There are many here among us Who feel that life is but a joke But you and I, we've been through that And this is not our fate So let us not talk falsely now, the hour is getting late" -Bob Dylan

geekin_topekan 2 years, 11 months ago

All those CHristians out of work! What is blowsalot thinking?

Maybe is Boeing offered itself up to the Lord, the one true and non-brown Lord, they would see the light.

Richard Heckler 2 years, 11 months ago

Brownback is promising aggressive attempts to attract new commercial aviation work — even mentioning Boeing rival Airbus.

Brownback is incompetent as are all Kansas elected officials. They look at tax cuts as an industry without realizing their kind of tax cuts are tax increases. Dumb and incompetent.

Sigmund 2 years, 11 months ago

"Some Kansas officials felt betrayed when they learned Boeing Co. was contemplating closing its defense plant in Wichita, and the area’s congressman says he’s researching whether the company can be held to promises to bring thousands of jobs to the Sunflower State."

But it probably isn't just Kansas officials who feel betrayed, but also Mike Hoeflich, LJWorld columnist, former KU law dean and law professor who teaches contracts at KU was willing to overlook Boeing's corrupt practices as long as Kansas gets a cut of the action, which is ironic because he teaches "Professional Responsibility." "State should fight for Boeing", by Mike Hoeflich. LJWorld Online, March 13, 2008. http://www2.ljworld.com/news/2008/mar/13/state_should_fight_boeing/#c546103

What do you expect when you support a company whose business practices include corruption, fraud, crony capitalism, and corporate welfare that is so widespread it is breathtaking, just because they provide local jobs? Let's just ignore the fact that the investigation of the first tanker deal revealed malfeasance, resulting in a $615 million fine for the company. Boeing's CEO, Phil Condit, was forced to resign. The company's CFO was sent to prison. Darleen Druyun, who had served as the second-ranking civilian official for Air Force procurement, also went to prison.

She pled guilty in 2004 to steering the tanker contract and other deals toward Boeing in the hopes of later securing lucrative jobs with the company for herself and her family members. "Boeing CFO and Top Pentagon Air Force Buyer Go to Prison Over $4 Billion Fraud" http://www.youtube.com/watch?v=vAhMer...

Make deals with people who cheat and then act all indignant because you get cheated.

Ron Holzwarth 2 years, 11 months ago

"Make deals with people who cheat and then act all indignant because you get cheated."

That's why traveling salesman need to keep on traveling!

Michael Throop 2 years, 11 months ago

While there's likely nothing in writing on this, I'd bet that the decision to close down the Boeing plant in a right-to-work state like Kansas is a message sent by the International Association of Machinists and the NLRB, though Boeing: ALL future work will be done in states with mandatory union membership, like Washington State. The prize: Boeing will be free to continue work on its "non union" plant in South Carolina.

yourworstnightmare 2 years, 11 months ago

Education and quality of life will attract new companies and jobs.

With brownback in charge, good luck.

pavlovs_dog 2 years, 11 months ago

Huffing and puffing for PR value, now Sam creates jobs for folks in other states without the inconvenience of them moving to Kansas.

blindrabbit 2 years, 11 months ago

Sam's efforts at saving Boeing jobs in Kansas bring to mind a few idioms: There are many more that are appropriate here!

"Closing the barn door after the horse has left" "Trying to put toothpaste back in the tube" "How can you keep them down on the farm once they have seen Paree"

yourworstnightmare 2 years, 11 months ago

Want cuts to the federal budget? This is what they will look like.

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