Aerospace giant Boeing has been an aggressive seeker of subsidies both in cases when it was relocating facilities and when it was staying put.

In March 2001, after 75 years of being based in Seattle, Boeing held a press conference in Washington, DC to reveal that it planned to move its headquarters to another part of the country. Boeing reportedly wanted a neutral place, without any major company operations, to make the announcement. This was apparently part of a plan by Boeing to reinvent itself as a global high-technology company.

After making the announcement, Boeing launched an unusually public auction among three metropolitan areas--Chicago, Denver and Dallas-Ft. Worth--that had already been selected as finalists. The three areas launched frantic, high-profile campaigns to win the prize. Each city enlisted public officials and celebrities to sing its praises, and, of course, each one put together a generous package of subsidies. The most generous of the three was the deal put together by Chicago and the State of Illinois, which had a total value estimated at $56 million. The amount is all the more amazing in light of the fact that Boeing's new headquarters was expected to bring only about 500 jobs to the Windy City.

To justify the big subsidy package, the Illinois Department of Commerce and Community Affairs cited a dubious projection (from the now-defunct accounting firm Arthur Andersen) that for each new Boeing headquarters job, the region would gain five more "high end" jobs.

The loss of Boeing's headquarters sent chills through the Seattle; leaders there feared that the company was thinking of relocating its production facilities as well. That fear of disinvestment likely softened up Washington state for the company's next auction. In 2003, Boeing launched a 20-state bidding war for its next-generation passenger jet, the 7E7 "Dreamliner" project. Recognizing that the company was looking to win major concessions to keep its assembly operations in Seattle, the engineer's union denounced the auction as "corporate extortion of the communities and people who have long supported Boeing."

Boeing wanted a lot more (financial) support, and the state's elected officials were eager to provide it. They put together a $3.2 billion subsidy package for Boeing and its suppliers that was meant to pre-empt the deals being offered by other jurisdictions. The strategy was successful, though there were lingering suspicions that Boeing never seriously considered leaving the Seattle area.

The fact that Boeing became the recipient of a huge amount of government assistance in Washington State has not prevented the company from expressing righteous indignation over the government aid received by its European competitor Airbus. In a 2004 conference call with analysts and the media, Boeing's CEO said that the state aid his company received was not a subsidy but was simply a matter of "lowering the cost of doing business." It was not reported whether the remark was made with a straight face.

SOURCES

Jeff McCourt and Greg LeRoy, A Better Deal for Illinois: Improving Economic Development Policy, Washington, DC: Good Jobs First, January 2003, pp. 57-65.

Greg LeRoy, The Great American Jobs Scam, Berrett-Koehler 2005, pp. 29-31, 56-57, 87-88.

John Gillie, "State Piled on 7E7 Incentives," Tacoma News-Tribune, January 22, 2004.

"Inside Boeing's Big Move: A Conversation with John Warner," Harvard Business Review, October 2001.

Jack Lyne, "The 7E7: A Bold Gamble for Both Boeing and the State of Washington," Site Selection, March 2004.

Ralph Martire, "Boeing Gained in Move Here, But Did We?" Chicago Sun-Times, June 9, 2001.

Kate Pfleger and Dominic Gates, "Sky-High Request? 7E7 Bidders Asked to Provide Freighters," Seattle Times, October 14, 2003.

Ron Starner and Mark Arend, "Behind Boeing's Flight Plan," Site Selection, September 2001.

Edward Wong, "Boeing Wants to be Wooed, Or It Moves On," New York Times, June 10, 2003.