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New Jets Could Be Made in Southland

An executive outlines a scenario in which Boeing would build the tankers in Long Beach.

February 15, 2006|Peter Pae | Times Staff Writer

Boeing Co.'s finance chief said Tuesday that its endangered Long Beach factory could stay open if the company won a contract to build aerial refueling tankers for the Air Force.

Under the scenario, Boeing would shift tanker production to Long Beach after the last C-17 cargo plane rolled off that assembly line, probably in 2008.

About 7,000 people work on the C-17 at an assembly plant next to Long Beach Airport. Boeing has completed 149 of the 180 four-engine jets, which cost about $175 million each.

The C-17 has been a workhorse for the Air Force, but last fall the Pentagon, in a cost-cutting move, decided not to buy any more than the 180 planes. That set in motion a shutdown of California's last major airplane manufacturing plant, despite efforts by some members of Congress to keep it open.

But Chief Financial Officer James Bell said the Long Beach plant could remain open if Boeing won the contract to build tankers based on its 767 passenger jet. The 767, which is made in Everett, Wash., is being phased out because of insufficient orders.

"We have a motivated workforce in Long Beach that really has done a good job working on these kinds of programs for the Air Force," Bell said during a Lehman Bros. investment conference in Miami. "Obviously, we're looking at all the options, particularly if the C-17 stops."

Bell cautioned that a number of steps would have to occur before the Long Beach plant was spared. The Air Force, for instance, hasn't decided whether it wants a tanker based on a mid-size aircraft like the 767 or a larger plane like the 777.

"It depends on what the requirements are. We don't know that yet," Bell said.

If the Air Force wants a tanker based on the 777, that work would be done in Everett, he said.

In addition, Boeing faces competition on the tanker contract from European rival Airbus, which has teamed up with Century City-based Northrop Grumman Corp. to compete for the multibillion-dollar contract. The Air Force is expected to award the contract for a new generation of tankers next year.

Also, there is a possibility that Congress could fund additional C-17s beyond what the Pentagon has ordered.

The possibility of keeping the Long Beach plant open by building a different airplane caught some company and industry officials off guard. Boeing executives in charge of the C-17 program had been focusing on trying to win congressional support to reverse the Pentagon's decision to halt purchases of the cargo jet.

"We just need to be open to any kind of alternatives. We're certainly not giving up on the C-17 line," said Dan Beck, spokesman for Boeing's Integrated Defense Systems unit, which oversees C-17 production.

Scott Hamilton, an aviation consultant in Seattle, said that moving the 767 line to Long Beach could resolve a number of thorny production issues.

Boeing's assembly plant in Everett is running out of space amid a boom in commercial aircraft orders. The Boeing plant currently builds 747, 777 and 767 models, but next year it will begin making the hot-selling 787. The 787, touted as the most fuel-efficient passenger jet, has grabbed some momentum away from Airbus' family of jets.

Chicago-based Boeing has received so many 787 orders that it plans to take over the space occupied by the assembly line for the 767, which is being phased out, Hamilton said. If the Air Force selects the 767 for its new tanker, Boeing would have to find another assembly site.

"If the Air Force were to pick the 767 platform [for the tanker contract], the question then is where do you build it?" Hamilton said. "Long Beach seems like a logical place."

Shares of Boeing rose 60 cents Tuesday to $72.71.

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