California vying for plant to assemble Boeing's Dreamliner

By GARY GENTILE
AP Business Writer

LOS ANGELES (AP) The state has put together a package estimated to be worth $250 million over five years to persuade Boeing Co. to assemble its next big passenger jet, the 7E7 Dreamliner, in California.

Nine communities, including Long Beach, where two Boeing planes are already assembled, have submitted proposals, which will be included with the state's package to be presented to Boeing on Friday.

Boeing has asked states to submit proposals by Friday. Washington state is seen as a front-runner. The legislature there recently approved special phased-in tax incentives worth about $400 million over the next six years and potentially an estimated $3.2 billion over 20 years.

Other states known to be vying for the work, which is worth between 800 and 1,200 jobs, are Texas, Arkansas, Oklahoma, Ohio and Colorado. Boeing has said it will not reveal which states submit proposals.

California is not offering any new tax breaks or special incentives just for Boeing. But state officials say the state's skilled aerospace workforce, transportation system, access to ports and other natural advantages make it competitive.

``We're confident that California's natural competitive advantages combined with things being discussed at the state and local level will help California make the short list,'' said Jason Kimbrough, a spokesman for the California Technology Trade and Commerce Agency. ``It's still a long haul from there.''

The state package does not include worker's compensation reforms, which Kimbrough estimates could provide a conservative $1.5 billion in annual savings to Boeing. The state Assembly is considering reforms this year.

Analysts say California will have a tough time beating Washington state's offer.

``We've got our fingers crossed because it would definitely be a plum, but it's going to be very competitive,'' said Jack Kyser, chief economist at the Los Angeles Economic Development Corp. ``Washington state has jumped through hoops and now they are getting ready to jump through them backwards.''

The company has not said when it will announce the location of the plant. But a spokeswoman said Boeing will likely have further discussions with the most promising candidates once it evaluates all the proposals.

Boeing has yet to officially approve the 7E7 project. The 7E7 is Boeing's third proposed jet in the past two years. Boeing scrapped plans for a 747 jumbo jet called the 747X and the Sonic Cruiser, a jet that would travel near the speed of sound.

Boeing will only make the jet if it can do so economically enough to compete for business with Airbus.

``Costs are crucial,'' said Paul Nisbet, an analyst with at JSA Research.

Nisbet said California is at a disadvantage with high labor costs, strict environmental laws and high taxes.

If Boeing's board approves the Dreamliner, it will go into production in 2005, with the first jets delivered to airlines by 2008.

California's offer includes existing tax credits for capital investment, retraining workers and credits offered in enterprise zones. Local communities are free to offer additional tax and other incentives.

``We wanted to show them the kinds of things we already have on the books,'' Kimbrough said. ``We wanted to show them some conservative numbers.''

Boeing is already California's largest private employer, with 40,000 workers. The business it supplies to 8,000 subcontractors contributes more than $8 billion to the state's economy each year, according to the governor's office.

The nine communities vying for the Boeing plant include: the former McClellan Air Force Base in Sacramento; Fresno; Palmdale/Lancaster; the Southern California Logistics Airport in Victorville; and the former Norton Air Force Base in San Bernardino.

Also competing are the March Air Reserve Base in Moreno Valley; the Desert Resorts Regional Airport in the Coachella Valley; Imperial Valley and Long Beach.

(Copyright 2003 by The Associated Press. All Rights Reserved.)