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Aerospace manufacturing takes off in Southern states

By Pamela M. Prah

The South is home to auto giants Mercedes-Benz, Volkswagen and Nissan. It is increasingly attracting some of the biggest names in aviation, including Boeing in South Carolina, Airbus in Alabama, Gulfstream Aerospace in Georgia, and GE Aviation in North Carolina.

Aerospace companies are taking a cue from the auto industry and moving their manufacturing operations to Southern states. The region’s lower costs, generous state incentive packages, and right-to-work laws that make it hard for unions to organize are motivating these companies to choose the South.

Four Southern states are among the top 10 states in aerospace job growth between 2007 and 2012, with South Carolina far ahead of the others, thanks to Boeing. Aerospace jobs in South Carolina jumped by more than 600 percent over that time period, from 865 workers to 5,685 workers, said Amy Holloway, president of Avalanche Consulting of Texas, who analyzed data from the U.S. Bureau of Labor Statistics.

Boeing selected North Charleston, S.C., in 2009 to produce its 787 Dreamliner aircraft, in large part because of the $900 million in tax breaks and other incentives the state offered over 30 years.

North Carolina ranks second in aerospace job growth with a nearly 34 percent increase over the same period. California, Connecticut, Kansas, Texas, and Washington state still have 65 percent of the country’s nearly 500,000 aerospace jobs. But of those states, only Washington state has seen an increase in aerospace jobs since 2001, Holloway said.

The other states have either remained relatively unchanged or lost employment. California, for example, has lost more than 8,000 aerospace jobs since 2002, including Lockheed Martin, which moved its corporate headquarters to the Washington, D.C., area. Besides opening its plant in South Carolina, Boeing in 2012 announced it was closing its Wichita, Kan., plant and moving that production to Oklahoma, Texas and Washington state, affecting more than 2,100 workers.

U.S. manufacturing jobs in general were waning even before the recession, with employment shrinking by 22 percent between 2002 and 2012. The aerospace sector grew 7 percent over that same period. Even with the fiscal austerity in Washington, D.C., sales in the aerospace industry grew 41 percent from 2002 to 2012, driven largely by military and international sales, Holloway said.

And the sector is expected to grow. Boeing projects a demand for 35,000 new planes by 2032. Airbus projects building more than 29,000 jets in the same period.

States are fighting to land these jobs. Boeing, the world’s largest aerospace company, sparked a bidding frenzy among states last year when a workers’ union in Washington state rejected the company’s contract offer and the company started looking elsewhere to make its 777X jet. Missouri, for example, held an emergency special legislative session in December 2013 and approved a $150-million-a-year economic incentive package to lure Boeing there.

Washington kept the project after the union decided to accept the offer after all, including freezing pensions and changing to a 401(k) plan. But the significant incentives being offered reflect the importance of these jobs to states.

“These are crown jewel industries. States are not wrong to value them inordinately,” said Mark Muro, a senior fellow and policy director at the Brookings Institution in Washington, D.C.

Jobs in aerospace are considered “advanced” industries, meaning they are high in research and development, they employ and train a variety of well-paid workers, and they help foster regional and national economic prosperity. “The South has been turning itself upside down to create effective systems to attract these companies,” Muro said.

The auto industry’s strong presence in the South has helped the region compete for aerospace jobs, in part because of the number of suppliers there that can provide goods to both sectors. The lower cost of living in some areas and a military presence with aviation-focused technologies and expertise also help attract aerospace companies.

Hourly compensation rates in general averaged $27 in Southern states in 2013, compared to $30 nationally. In the aerospace industry, labor costs in Washington are among the highest in the country. The mean annual salary of an aerospace machinist in Everett, Wash., was $53,500, compared to $45,500 in Charleston, S.C., and $42,500 in Kinston, N.C., according to a 2009 consultant’s report. The report also said that the “frequency and high costs of work stoppages, fairly or unfairly, reflect negatively on Washington” in attracting aerospace work.

States in the South and Midwest also had the least expensive areas to live in 2013.

But a qualified workforce is one of the most important considerations of companies looking for plant locations.

In previous years, California, Kansas and Washington state all had educational institutions that provided aerospace companies with a stream of engineers and technicians with the know-how for such complex work, explained Sujit M. CanagaRetna, a fiscal policy manager at the Council of State Governments. These states still can offer the expertise, but other states are offering to provide specialized training, including those in the South.

States have offered billions of dollars in tax breaks to lure companies, and many packages offer extensive worker training.

Southern states that underwrite aerospace industry training include:

Alabama: The $158 million in incentives promised in 2012 for Airbus to locate its first American manufacturing facility in Mobile includes $52 million to build a 40,000-square-foot, on-site center where workers are trained at state expense.

North Carolina: Of a nearly $250 million incentive package the state offered in 2008 for Spirit AeroSystems to locate in Kinston, $136 million is for workforce development. This includes a new Aerospace Manufacturing Readiness program at nearby Lenoir Community College.

South Carolina: Besides the $900 million in tax breaks and other incentives the state is expected to provide Boeing, it also is spending $33 million for worker training. Several high schools near the Boeing facility now offer aerospace classes.

Georgia: The state agreed to provide nearly $30 million in incentives including job training to encourage Gulfstream Aerospace Corp. to expand its operations in Savannah.


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