OKLAHOMA CITY — On a sun-soaked morning in Oklahoma City, construction workers were busy working on a new six-story office building for Boeing as the company expands its presence into a second building.
While crews worked, planes took off from the sprawling Tinker Air Force Base just across the street.
Boeing’s expansion in Oklahoma will make room for the Boeing B-1 Lancer and C-130 Hercules programs moving from Long Beach, Calif.
It’s also needed as Boeing closes its historic Wichita facilities and moves engineering and program management work to the site. The move will bring 800 to 900 jobs to Oklahoma City and boost employment to 2,000.
Wichita’s military maintenance and modification work will move to San Antonio.
And work on Boeing’s Air Force tanker program slated for Wichita will now go to Puget Sound in Washington state instead.
Boeing announced in January that it will close its Wichita facilities in 2013. It cited high overhead costs, waning work and, facing looming defense budget cuts, little hope of bringing more work in, officials said.
“This wasn’t about labor costs,” said Boeing spokesman Forrest Gossett. “This was about this massive structure we have (in Wichita).”
The transfer of work to Oklahoma City is scheduled to begin this fall.
It will be the end of 2013 before the Wichita site, which employs 2,160 people, will close completely.
Boeing has made job offers to several hundred Wichita workers to transfer to other Boeing locations. The majority of the offers are for the Oklahoma City site.
Others are for jobs in San Antonio, Puget Sound and a “handful” for jobs open in St. Louis, Gossett said.
He declined comment on how many have accepted positions.
Additional offers will be made on a case-by-case basis, he said.
Wichita employees work on the B-52, the jet-powered bomber designed for the Air Force, and its blue-and-white fleet including Air Force One, or the VC-25, the C-32 vice presidential and first lady transport, C40s and E-4s, along with some other work.
Moving Wichita’s engineering and program management work to Oklahoma City makes sense, Boeing officials say.
Boeing looked at a variety of locations before making its decision, said Michael Emmelhainz, Boeing’s site leader for Oklahoma City.
Oklahoma City’s facility has a good track record, performs well and has space available, Emmelhainz said.
And costs are lower.
That’s mainly because Boeing leases a four-story, 200,000-square-foot office building along with the 320,000-square-foot office building under construction. Workers there are moving into the first floor while work continues on the remaining floors.
“When you lease just a couple buildings and do things in a low-cost manner like that, it makes a good business case,” Emmelhainz said. “Fundamentally, it’s the infrastructure cost.”
Boeing has had operations in Oklahoma City for more than 50 years because of its long relationship with its next-door neighbor, Tinker.
Boeing provides engineering support to Tinker on a variety of programs.
The move of Wichita’s work to Oklahoma City is a big undertaking, Emmelhainz said. His job is to make sure the transition is successful for the employees and for Boeing.
“It’s a big deal, and it has a lot of moving parts,” Emmelhainz said.
Boeing and its workers will make the move program by program.
Managers must look at availability of space and program needs.
In the midst of it, “we have to execute the programs that we have,” Emmelhainz said.
Not everyone offered jobs accepted the offers.
“Relocation is always a personal choice, and they have to consider their families,” Emmelhainz said. “For some people, it will be a tough choice; for others, it may be an easy choice.
“But when they choose to move, I want to make it as seamless as possible for them, and make sure they have the resources, and they’re welcomed, and they become a part of this family.”
Recently, the mayor of Oklahoma City, staff members and others came to Wichita to hold an information session with Wichita employees.
“It was well received,” said Boeing’s Gossett. “That got a lot of information.”
Merits of moving
Many have wondered why Wichita must close and the work move. Why not put work from Oklahoma City and San Antonio here, some ask.
It boils down to two decisions, Emmelhainz said.
“First, there’s a decision that says we need to do work somewhere else because of the costs in Wichita,” he said. “That decision gets made on its own merit.”
Wichita’s massive facilities aren’t close to full. That increases costs.
With the decision to close made, the next question is where to put the work.
“Business cases are then built around all those different locations, and decisions are made based on the merit of those cases,” said Emmelhainz, who wasn’t part of the evaluation or decision-making.
“It really ends up being about building space and total infrastructure and costs associated with that.”
“I think having engineers co-located and feed off each other is just a wonderful environment,” he said. “As we get to work together, I think we’ll find a lot of bright ideas and some opportunities.”
As a state, Oklahoma has been an aggressive recruiter focusing on the aviation industry.
“Aviation and aerospace has been one of our key industry clusters for decades,” said Robin Roberts Krieger, executive vice president for economic development with the Greater Oklahoma City Chamber. And Boeing is a major aerospace employer in the Oklahoma City region.
Economic development officials work closely with Tinker, the Air Force, the Department of Defense and the Federal Aviation Administration, which has the largest FAA office outside Washington, D.C. It also works with the private sector.
The city’s strategy is connected with retention and expansion of existing companies.
Jim Perschbach, a San Antonio lawyer who heads the Greater San Antonio Chamber of Commerce Aerospace Committee, tips his hat to Oklahoma.
“There’s not a doubt in my mind that they would love to have every aerospace and engineering operation in San Antonio pick up and move to Oklahoma City and Tulsa,” Perschbach said.
Oklahoma City and the state also provide a model of how to showcase an industry, he said.
“The presentations that they give and the materials that they have are really about the strength of their industry,” Perschbach said. For example, he said, “if you’re an airline or a charter operator, and you’re looking for an engine MRO (maintenance, repair and overhaul) shop, they will help you. They will help be matchmakers.”
That bolsters the local companies.
Oklahoma’s incentives didn’t drive Boeing’s decision to move the work from Wichita, Emmelhainz said. But “once the decision was made, then you look at it.”
Oklahoma offers a variety of incentives, including programs based on new job creation and salaries.
A Strategic Investment Program offers cash payments to eligible companies that create at least 50 jobs exceeding the city’s average annual wage and have at least a $1.75 million payroll in Oklahoma City. The state also offers job creation incentives.
Under the 21st Century Quality Jobs and the similar-sounding Quality Jobs programs, employers receive 10 percent and 5 percent respectively of their payrolls back in quarterly cash rebates for a period of years based on wage and payroll criteria.
There are also incentives for employee training, tax exemptions and workforce tax credits to aerospace companies that hire engineers.
Wichita’s loss is Oklahoma’s gain, and Oklahoma City officials say they can sympathize with what Wichita is feeling.
“I absolutely know what you’re going through,” Roberts Krieger said. “Every community goes through this, and it’s really painful.”
Oklahoma City has had its share of closures.
It took a blow when the Lucent Technology sold its plant to Celestica in 2002, which closed it the following year. It employed 9,500 people at its peak.
In 2006, General Motors closed a sport utility assembly plant, which employed more than 2,000.
Boeing’s job move to Oklahoma City is good news for the city and the state, Roberts Krieger said. But “Kansas is our neighbor. … It’s painful for Wichita.”
Boeing’s Emmelhainz agreed.
“Are we glad work’s coming to Oklahoma? Absolutely,” he said. “But part of our team is Wichita. So it’s bittersweet as well.”
The Wichita closure affects the team, Emmelhainz said.
“The joy kind of goes down when it’s at the expense of someone who’s on your team,” he said. “We are all one company.”