Boeing, Boeing, Gone

Lus

h and livable, Seattle is the kind of place that always makes those Best Cities for Business lists. So perhaps Boeing has had too much of a good thing. How else could city and state officials explain last week's announcement by CEO Phil Condit at a press conference in Washington that Boeing is blowing town. The Jet City's jet company is enplaning for parts known: either Dallas, Denver or Chicago.

"I'm waiting for the locusts," says Seattle Mayor Paul Schell, whose city suffered a major earthquake in February. The company is taking only 500 or so of its 1,000 headquarters employees to the new digs; typically, half refuse to make such relocations anyway. Boeing's massive Seattle-area aircraft plants, where the company employs some 78,000 people, aren't going anywhere. For now.

The headquarters shift is Condit's dramatic coda to a corporate overhaul designed to take Boeing into businesses that are growing faster on average than aircraft manufacturing, which is subject to severe cycles. In the past five years, Boeing (2000 sales: $51.3 billion) has purchased McDonnell Douglas (F-15s) and the satellite division of Hughes Electronics and Rockwell International's space and defense units. These far-flung companies--Rockwell and Hughes are in California, MDD in St. Louis, Mo.--will compete for capital and talent with the eponymous aircraft division. "This is about nimbleness and flexibility. It's about being organized to operate in a changing and expanding business environment," Condit says.

Nimble and flexible are not words normally ascribed to Boeing, and leaving town won't magically transform the company, which has a mixed record in its efforts to diversify. At the same time, it risks taking its eye off the jet business, which still accounts for about 60% of sales. But running a lean holding company removed from its operating divisions is the fashionable corporate architecture these days. And Condit believes a neutral perch is the best place to decide how to feed each of his hungry corporate chicks.

Not many folks in Seattle were buying that. In the past decade, scores of companies have set up shop in Starbucksland for its highly educated work force, tons of cultural and sports offerings, and the whole package cloaked in a magnificent natural setting of forest, mountain and ocean. So what if it rains a lot?

But the more popular Seattle became to other companies, the less attractive it became to Boeing. In the booming late '90s, with a local work force topping 100,000 at its peak, the company found itself in fierce competition for skilled workers, not to mention in an increasingly antagonistic relationship with the ones it already had. Last year the Society of Professional Engineering Employees in Aerospace staged a 38-day walkout. The unions suspect Boeing's move as the beginning of a plan to take assembly work out of the Seattle area. With some reason: two days later, Boeing confirmed it would move fuselage assembly on its 757 jets from nearby Renton to a plant in Wichita, Kans.

The company's size, oddly enough, might have diminished its local political power, because officials assumed that Boeing was too big to fly away. So pleas for tax relief met with resistance. Seattle's prosperity also comes attached with zoning and environmental regulations that are constantly chafing against growth. More than once, Boeing has run up against opposition to expansion.

Corporations usually cite such issues as high labor costs and the regulatory and tax environment as primary factors in their relocation decisions. They also move to get closer to customers or suppliers or technologies. Or because the CEO wants to.

So the next big corporate sweepstakes is on, and the contestants can commence begging. Although Condit says the company isn't just shopping for tax breaks and other incentives, he won't have to--the states and cities will come running, money in hand. Dallas offers a tax-free state, a business-friendly government and proximity to big customers American and Southwest. And because Boeing is fighting to win the contract for the next generation JSF fighter, its cause wouldn't be hurt by locating in the home state of the President, so the theory goes.

Denver, on the other hand, is the only one of the three cities that can match Seattle's outdoor-focused lifestyle, an important consideration for many employees. Yet mighty Chicago, home of another big customer in United, might be the best atmosphere in which to find and develop the sort of experienced corporate warriors that Boeing needs. And fortunately for Chicago officials, Boeing won't be making its decision in the winter.