LDN - Business

Boeing's Chicago HQ a 'ghost town' as priorities shift

[October 07, 2021] By Eric M. Johnson

SEATTLE (Reuters) - Twenty years ago, just days before the 9/11 attacks on the United States crippled the aerospace industry, Boeing Co moved its headquarters from its historic Seattle manufacturing hub to a stylish downtown Chicago skyscraper.

The move was central to Boeing's plan to forge a new identity as a diversified global juggernaut, distancing top executives from the daily operations inside far-flung business units, and getting closer to Wall Street and major customers.

Two decades on, in the midst of a fresh crisis shaking the industry, Boeing's corporate hub is in a state of limbo.

A new crop of top executives based mainly on the coasts are managing industrial and safety certification problems at its major divisions and the lingering fallout from the 737 MAX and coronavirus crises. At the same time, tax incentives heaped on Boeing by Chicago and Illinois run out at year-end.

Once the symbol of a new Boeing, the vision of a corporate epicenter rising above its constituent parts has fallen at odds with the imperative of recapturing engineering dominance and repairing relationships with customers and federal regulators.

Chief Executive Dave Calhoun, for example, spent the beginning of the year at Boeing's factory in South Carolina dealing with production-related defects that have hobbled the program, people familiar with the matter said.

Other top executives, like newly minted CFO Brian West, are also based primarily on the U.S. East Coast and a hush has descended on the exclusive but functional top floor, although the pandemic has also been a major factor, the people said.

"It's a ghost town," one of the people added.

The headquarters - a 36-floor, $200 million riverfront skyscraper - sits at the crossroads of a cost-cutting campaign that has seen Boeing shed real estate, including its commercial airplane headquarters in Seattle.

Several people close to the company say cost cuts and a more hands-on corporate culture have raised questions about Boeing's long-term future in the city, and in turn the broad direction Boeing intends to take as it tries to regain its stride.

Boeing, however, insists significant operations still take place there and rebuffs any suggestion that the giant may leave its Midwest base. "Chicago is strategically important to Boeing's U.S. and global operations," a spokesperson said.

"As with other companies, we have adapted to hybrid ways of working in the midst of the global pandemic to engage with our people, and our customers and other stakeholders."

Boeing and employees have invested nearly $50 million in support of Chicagoland communities in recent years, Boeing said.

Despite the new focus, others caution exiting the city would risk a local firestorm and remains far from Boeing's immediate priorities amid a slew of industrial and regulatory problems.

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he Boeing logo is seen on the world headquarters office building in Chicago April 26, 2006

NEUTRAL LOCATION

Boeing left its Seattle home after 85 years following its 1997 merger with St. Louis-based rival McDonnell Douglas - a decision that angered rank-and-file mechanics and engineers.

Boeing was seeking a post-merger headquarters in a neutral location separate from those existing divisional power centers.

But some critics viewed Boeing's Chicago move as a symbol of a company that prized near-term profits and shareholder returns over long-term engineering dominance - a charge repeated after crashes of 737 MAX jets that killed 346 people in 2018 and 2019.

"It began as a way of signaling that they would make future investments without regard to any legacy loyalties," Teal Group analyst Richard Aboulafia said. "To some, it has merely become a way of indicating that they will not make any future investments at all."

INCENTIVES EXPIRING

Chicago, Cook County and Illinois awarded Boeing more than $60 million in tax and other incentives over 20 years to relocate. Those credits have expired or will expire at year-end, though Boeing will receive 2021 funds next year, the spokesperson said.

The incentives, which were temporarily swept up in a trade spat with Europe's Airbus over mutual claims of unfair support, required Boeing to keep 500 full-time employees at the office.

Boeing reported 513 full-time employees in Chicago for 2020, a city spokesperson said.

Boeing also employs thousands of people in Chicago and the Metro East region in southern Illinois near St. Louis, a state spokesperson said.

But analysis last year by the Better Government Association, which scrutinizes Illinois state decisions, found that Boeing fell short of the 500-employee mark in at least four years.

"Numbers reported by the company to the state and city differ, have never been audited, and in some years fell short of the public target," it said.

The indirect impact from Boeing employees in the Chicago area had been pegged at $4.3 billion over 20 years, Pam McDonough, a former director of the Illinois Department of Commerce and Community Affairs, said in a LinkedIn article last year.

"These large projects are complicated and strategic but do result in tremendous benefits both financial and civic."

(Reporting by Eric M. Johnson in Seattle; Additional reporting by Tim Hepher in Paris; Editing by Nick Zieminski)

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