KeNo's Housing and Economic Portal: Monday November 16 Housing and Economic stories

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Boeing picks Charleston for new 787 line - (seattletimes.nwsource.com) Boeing's board has voted unanimously to build a second 787 final assembly plant in Charleston. "We're taking prudent steps to protect the interests of our customers as we introduce the 787-9 and ramp up overall production to 10 twin-aisle 787 jets per month," said Jim Albaugh, president and CEO of Boeing Commercial Airplanes, in a prepared statement. South Carolina offered the company $170 million in upfront grants for startup costs, plus multiple tax breaks that would be worth tens of millions of dollars more. The legislation assumes the company will invest $750 million and create 3,800 new jobs in South Carolina within seven years — if it doesn't create that many jobs, it doesn't get any of the money. Boeing's decision could vastly increase the footprint it established in Charleston through primary partners on the 787 program. At Boeing Charleston, the plant where Boeing bought out co-owner Vought this summer for $1 billion, about 900 workers fabricate the 787's single-piece rear-fuselage barrels out of composite plastic. At the adjacent Global plant, owned 50-50 by Boeing and Alenia, 1,600 workers assemble the Dreamliner's central fuselage. Albaugh said that "while we welcome the development of this expanded capability at Boeing Charleston, the Puget Sound region is the headquarters of Boeing Commercial Airplanes. Everett will continue to design and produce airplanes, including the 787, and there is tremendous opportunity for our current and future products here. We remain committed to Puget Sound." Boeing said that until the second 787 assembly line is operational in North Charleston, the company plans "transitional surge capability" in Everett to ensure the successful introduction of the 787-9, the first derivative model of the 787. "When the second line in Charleston is up and operating, the surge capability in Everett will be phased out," Boeing said without giving specifics. Boeing's decision to add a 787 line in South Carolina will make it that much harder for Washington to pull itself out of its jobs slump. High-paying jobs such as those at Boeing support other jobs throughout the local economy — a Boeing worker buys a new fridge, the fridge salesman buys a sandwich for lunch, the sandwich-maker renews her gym membership, and so on. The more people work in well-paying jobs, the more jobs are created further down the economic food chain. Local economist Dick Conway, who has studied Boeing's impact on the regional economy for decades, estimates that each Boeing job generates spending that supports 1.7 other local jobs — one of the highest "multipliers" of any private-sector employer. That means every job that Boeing creates in South Carolina represents nearly three jobs that won't be created in Washington.

Boeing rejects Murray offer on further talks - (seattletimes.nwsource.com) A statement from Boeing this morning appears to reject an offer by Sen. Patty Murray to revive the talks between Boeing and the Machinists union in a last-ditch effort to save the second 787 line for Everett. "No decision has been made" between Charleston, S.C., and Everett, said Boeing spokesman Tim Healy. "But we have the information we need to make the decision. We were very clear with the union about when we needed their best and final offer." Healy said he could not offer any clarification beyond that statement. But the clear implication is that Murray's attempt earlier this morning to revive the talks has come too late. Earlier this morning, Murray's spokeswoman Alex Glass described what sounded like a Hail Mary pass. "The Senator has placed calls to the Machinists and Boeing, asking them to sit down in her office," Glass said. "The machinists have agreed. We are waiting to hear back from the company." Murray was involved in facilitating talks between the two sides over the past weekend. There was no indication that the new effort would succeed. A person close to the talks late Tuesday said they were effectively dead and that Boeing was likely to choose Charleston, S.C. for the second line. "We're giving it everything we've got," Glass said. "The Senator feels there is still room for negotiation. For the good of our workforce and the company, she wants to make sure that they talk again."

State offers no goodies for new Boeing 787 line - (seattletimes.nwsource.com) Washington state will not offer new financial incentives to induce Boeing to put a second assembly line for its 787 Dreamliner beside the first one in Everett rather than in Charleston, S.C. And state officials said they are deliberately staying out of the one contentious issue that could change the competitive picture here: Boeing's push for a no-strike agreement with the Machinists union. Gov. Chris Gregoire released a 32-page document Monday that outlined the business case for building a second 787 line here. It includes no new concessions specific to Boeing or the aerospace industry, but instead summarizes the state's existing advantages as a center of aerospace manufacturing. Boeing needs a second assembly line to get the production rate up to 10 jets a month by the end of 2013. Last Friday, Gregoire presented the document to the new CEO of Boeing Commercial Airplanes, Jim Albaugh. He is expected to send a recommendation to the Boeing board in Chicago possibly as soon as the end of October, with a firm decision on the assembly site by the end of the year, state officials said. Rogers Weed, director of the state Department of Commerce and chairman of the Governor's Aerospace Council, said Monday some 700 to 900 jobs are immediately at stake. "That's a lot of jobs, especially in this kind of economy," Weed said in an interview. He acknowledged that manufacturing costs are higher here, but said the quality of work is higher than in Charleston, the risks to the already much-delayed 787 program are lower, and the broad infrastructure support for the aerospace industry is unmatched elsewhere. Boeing will be able to build the Dreamliner more flexibly and more quickly if it works with the aerospace work force in Washington that already has valuable experience operating the first assembly line, Weed said. The governor's document says Boeing will benefit from "the transfer of learning curve efficiencies" if the new line is alongside the existing one in Everett. That judgment was echoed by International Association of Machinists (IAM) district President Tom Wroblewski. "Nobody has shown me how having two separate assembly lines on opposite ends of the continent would be more efficient than having two of them next to each other in Everett," he said in a statement Monday. Under previous Gov. Gary Locke, Washington secured the first 787 production line for Everett after an intense site-selection competition in 2003. To win that competition, the state offered tax breaks and other incentives worth around $3 billion over 20 years. South Carolina is expected to offer Boeing financial enticements. State Republicans responded critically to the lack of specific incentives in Gregoire's business-case presentation. "I am disappointed to learn that the state has not seen fit to offer additional financial incentives," said U.S. Rep. Dave Reichert, R-Auburn, in a statement. "The 787 being built in South Carolina would be a blow. ... We must think creatively and strategically."

US Airways cutting 1,000 jobs, reducing flying - (finance.yahoo.com) Struggling US Airways said Wednesday it will cut some 1,000 jobs next year, shift nearly all of its flying to its three hubs and Washington, and suspend several international routes. The retrenching is aimed at putting its airplanes where the money is -- its hubs at Philadelphia, Phoenix, and Charlotte, North Carolina, as well as Washington. US Airways said flying from its hubs has been profitable. Once the changes are made early next year, 99 percent of its flying will be to or from those cities, up from 93 percent now. It's also keeping its US Airways Shuttle between Boston, New York, and Washington, although some of the Boston flying is shifting to its smaller Embraer 190 jets. US Airways has said its domestic flying will drop slightly next year, while international flying will rise a little. The carrier is scaling back international flying from Philadelphia. It will suspend flights between there and London Gatwick; Birmingham, England; Milan, Italy; Shannon, Ireland; and Stockholm. It will also formally give up its government permission to fly between Philadelphia and Beijing, which it never used. Us Airways said its first flights across the Pacific will now be on its planned route to Tokyo, beginning in 2012 "or when market conditions become favorable." The company said revenue on trans-Atlantic routes has fallen $273 million this year through September. The Tempe, Arizona-based airline said the job cuts will happen in the first half 2010 and will include 600 passenger and ramp service workers, 200 pilots, and about 150 flight attendants. The airline will close crew bases in Las Vegas and at LaGuardia airport in New York on Jan. 31, and in Boston on May 2.

Crisis reveals worry about retirement funds - (www.bloomberg.com) American savers watched in horror this year and last as the balances on their retirement accounts evaporated with the meltdown in the financial markets. Fast forward to now and the markets have stabilised, taking these accounts back toward break even or better. But the experience has left many investors cold on so-called 401(k) plans and launched a debate in the money management industry and on Capitol Hill on whether the $2,458bn system is inadequate. "The economic collapse has fuelled Americans' concerns about whether they will have enough savings to last them throughout retirement," George Miller, a Democratic congressman from California, said earlier this year. "[They] are justified in losing confidence with our financial system and their ability to save for retirement." Through 401(k) plans, workers in the US can save a portion of their salaries while deferring income taxes until they withdraw the money in retirement. Employers often match the employee contribution at some level and the money typically is invested in mutual funds. The plans gained in popularity over the past two decades as companies phased out traditional pensions and concern grew that Social Security, the government programme, would fall short. Among the benefits compared to traditional pensions are that workers can take 401(k)s with them when they change jobs and the account is ringfenced against the failure of the employer, but it does not guarantee a payout in retirement. At the end of 2007, the amount of money in 401(k)s topped $3,000bn, according to the Investment Company Institute, about double the $1,541bn in 1998. When financial markets around the world dropped sharply in 2008, 401(k) plans, too, were hit. The average workplace savings account at Fidelity Investments, the largest provider of 401(k)s, dropped 27 per cent in 2008 to $50,200 from $69,200 at the end of 2007. Calls to Fidelity's hotline spiked to more than 100,000 a day in the period after Lehman Brothers collapsed, when credit froze and the Dow Jones Industrial Average fell below 9,000 for the first time in five years. By March 30, that balance was $47,500. "The drop was so steep that people were wondering if we would ever come back," said Michael Doshier, vice-president of Fidelity's workplace investing group. "The surprise has been how steep the return back was."

Apollo Shares Plunge as SEC Starts Accounting Inquiry - (www.bloomberg.com) Apollo Group Inc., the biggest publicly traded U.S. educator, plunged the most in more than 19 months in New York trading after the company said its accounting is being investigated by the U.S. government. The Securities and Exchange Commission’s Enforcement Division has begun an informal probe of Apollo’s “revenue recognition,” the Phoenix-based company said yesterday in a statement. The company also expects to pay about $80.5 million in settlement and legal costs for a lawsuit related to its recruitment practices, according to the statement. Apollo was forced to restate earnings in 2007 because stock-option grants to executives between 1994 and September 2006 were incorrectly dated. Chief Financial Officer Kenda Gonzales and Chief Accounting Officer Dan Bachus resigned in November 2006 following the company’s investigation. Apollo didn’t say when the alleged misstatement of revenue occurred. “Management has provided little information that would enable investors to assess what the issue can be,” said Ariel Sokol, a Wedbush Securities Inc. analyst in New York who recommends selling the shares, in an e-mail yesterday. “The issue investors need to ask is whether this is company-specific or industry wide.” Apollo fell $12.91, or 18 percent, to $60.06 at 4:29 p.m. in New York Stock Exchange composite trading. It was the biggest drop since March 28, 2008 when the company’s earnings missed analyst estimates. Before today, Apollo had fallen 4.8 percent in 2009, compared with an 18 percent gain in the Standard & Poor’s 500 Index. University of Phoenix: Bridgepoint Education Inc., a for-profit provider of college classes that said last month that it was undergoing a federal audit of financial aid, fell $1.42, or 8.7 percent, to $14.87. Grand Canyon Education Inc., also a for-profit educator, fell $1.42, or 7.7 percent, to $17.14. RBC Capital Markets analyst Robert Wetenhall cut his rating on Apollo Group to “underperform” from “sector perform.” Morgan Stanley analyst Suzanne Stein cut her rating on the company from to “equal weight” from “overweight.” Apollo runs the University of Phoenix, the nation’s largest private university with 443,000 students, most of whom take classes via the Internet. Federal student aid accounted for about 86 percent of company revenue in fiscal 2009, Apollo said yesterday in a filing. That’s up from 82 percent in fiscal 2008 and 48 percent in fiscal 2001, according to company filings.

OTHER STORIES:

Gold to Rise to $2,000 Amid ‘Massive’ Inflation, Superfund Says - (www.bloomberg.com)

Bill Seeks to Shift Rescue Costs to Big Banks - (www.nytimes.com)

Picard says $21.2bn lost in Madoff scheme - (www.ft.com)

Bond Weakling California Shows States’ Failure to Disclose Debt - (www.bloomberg.com)

Norway Lifts Rate to 1.5%; First in Europe to Reverse Easing - (www.bloomberg.com)

Cold Water for Asia Property Market - (www.nytimes.com)

Irish Bar Values Plunge 40% as Pub Culture Mirrors Economy Bust - (www.bloomberg.com)

New-Home Sales in U.S. Unexpectedly Fall as End of Credit Nears - (www.bloomberg.com)

U.S. Goods Orders Rise for Fourth Time in Six Months - (www.bloomberg.com)

US mortgage applications slump third straight week - (www.reuters.com)

Fed Unlikely to Shift Thinking on Interest Rates - (www.reuters.com)