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* Crain’s…
Last fall, when Northrop Grumman beat out a joint Boeing-Lockheed Martin bid to engineer a bomber for the U.S. Air Force, it felt like a big loss for Chicago. With orders for other military aircraft winding down, the defense unit at Chicago-based Boeing desperately needed the $79.40 billion deal—so much so that executives formally protested the decision. A ruling due Feb. 16 from the Government Accountability Office will determine whether the Air Force has to rebid the contract.
But Boeing’s loss appears to be the region’s gain. While Boeing is the most prominent defense contractor based here, with about 560 employees downtown, Northrop operates the most significant military-focused factory in metro Chicago, with 2,100 people at a campus in Rolling Meadows. For those engineers, technicians and production workers, the bomber win likely adds a measure of job security at a time when military spending has fallen off because of automatic federal budget cuts known as sequestration.
The bomber business could trickle down, too, to smaller manufacturers nearby linked to Northrop’s facility. It’s the rare example of how the Chicago area, which isn’t known for defense manufacturing, could catch a tail wind from a big-ticket military procurement effort.
Would a Boeing win have helped the region? Probably not much, because the company doesn’t employ anyone other than HQ workers here.
* Crain’s recently published a story entitled “The incredible shrinking corporate headquarters.” It’s a good read…
Corporations moving their headquarters to Chicago arrive with only a handful of employees and a modest economic impact
The Boeing example is worth noting…
Even Boeing, the largest company to come to Chicago from out of state, brought just 400 employees here in 2001, compared with the 1,000 it employed at its headquarters in Seattle. Fifteen years later, its Chicago headcount is up to roughly 560. […]
Boeing’s Seattle location was identified with its commercial airplane unit at a time when the company was still digesting its merger with St. Louis-based defense contractor McDonnell Douglas and it needed a “neutral location” for its headquarters.
Since that Boeing relocation, it’s becoming obvious that some (not all) of these big companies are trying to get away from their employees by moving to the Chicago region. And that means the region has little to no shot at any manufacturing or other expansion gains. The bomber contract is a good example of this. A win for Boeing doesn’t really do much for the region.
* The big brains need to start thinking about this. Snatching a corporate HQ is a great PR win, but if it puts the region out of the running for “real” jobs, is it worth anything at all?
* Meanwhile, the state government should probably rethink this strategy as well…
Peabody Energy, one of the state’s largest coal mine operators, soon could be in bankruptcy, but regulators are allowing it to meet future cleanup obligations with a promise rather than a bond.
The state permits certain companies to “self-bond”—effectively to pledge, backed by audited financial statements, that the money will be there to clean up the mine sites after they’ve been tapped out. That practice is under fire from environmentalists now that plummeting commodity prices are putting intense financial pressure on the industry.
In Illinois, just one of the state’s top five operators, St. Louis-based Peabody, self-bonds. The projected cost of cleaning up three large Peabody mine sites in southern Illinois is $92 million, according to the Illinois Department of Natural Resources. That’s 22 percent of the $412 million the state estimates is needed to reclaim all of Illinois’ mines.
The state risks having to shoulder at least some of that cost if Peabody files for bankruptcy protection, as five publicly traded U.S. coal companies have done in the past two years.
It’s not like we’re rolling in dough or anything.
posted by Rich Miller
Monday, Feb 8, 16 @ 9:39 am
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Imagine, corporate leaders want to get away from their employees. Maybe they feel bad about their compensation compared to their employees. Nah.
Comment by Sir Reel Monday, Feb 8, 16 @ 10:05 am
Lets hope Northrup prevails. Watching the GAO, Feb 16.
Cheering for many factory jobs (Northrup), versus pomp and circumstance of a contract award for manufacturing done else where, is a no-brainer.
Excellent observations here.
Comment by cdog Monday, Feb 8, 16 @ 10:12 am
Hello?……DCEO…..anyone home? Oh, right everyone is busy working on the EDC. Well I’m sure everything will work perfect when it’s up and running in a few years. Then we’ll catch those big fish. Keep net building on shore guys, good plan. Don’t worry about mending the nets in the water. s/
Comment by Honeybear Monday, Feb 8, 16 @ 10:38 am
That Crain’s article was excellent and long overdue–I am sick of Rahm making a big deal about attracting corporate HQs that, on inspection, employ maybe 200 people and the C-suite execs will probably not live in Chicago, anyway. Rahm’s buddies, but they don’t need help, anyway.
If the B-3 deal really helps those 2100 factory workers and engineers in Rolling Meadows, I’m all for it.
Comment by Harry Monday, Feb 8, 16 @ 10:55 am
On the other hand, that Boeing factory in St.Louis (on the north side of Lambert Field) likely has an economic impact beyond the state line.
Lobbying efforts would be better spent on keeping the F/A-18 Super Hornet line going in St. Louis for awhile imho than trying to get a vaporware bomber that may never get funded.
Comment by Arthur Andersen Monday, Feb 8, 16 @ 11:37 am
Boeing still considers itself an American Company?
“Boeing is one of the U.S. companies that has aggressively transferred manufacturing to China and now (2012) accounts for 20,000 jobs in the People’s Republic. Equally worrisome is the Faustian bargain Boeing has struck with China: in exchange for being allowed to build plants there and gain access to China’s market, Boeing is sharing its technical knowhow and proprietary knowledge—some of which was underwritten by U.S. taxpayers—to help China develop its own aircraft industry.”
Barlett & Steele
Comment by TinyDancer(FKA Sue) Monday, Feb 8, 16 @ 2:09 pm
=== “The big brains need to start thinking about this.” ===
Rich, the thinking is that having the HQ’s here is good for law firms, financial firms, lenders, and everyone else doing B2B.
It’s not who Boeing employs, but whom their vendors employ.
Comment by Juvenal Monday, Feb 8, 16 @ 2:53 pm
HQ are most definitely important. That doesn’t mean that other operations aren’t as well.
Comment by Tone Monday, Feb 8, 16 @ 2:58 pm
What are state regulators thinking in trusting a corporate promise to clean up after itself? Especially when the industry involved is in rapid decline? If Peabody reneges, taxpayers get stuck with the tab. Would any State official be held to account for such an expensive blunder??
Comment by anon Monday, Feb 8, 16 @ 5:44 pm