Boeing Co. is bracing for what could be a years-long battle over its decision to put a production line for the 787 Dreamliner in South Carolina and not in Washington state, where its unionized work force has a history of labor strikes.
The matter has become the fulcrum of a larger conflict between supporters of labor union rights and those who believe U.S. companies should have the freedom to build factories where they want.
A hearing before an administrative law judge started Tuesday in Seattle, the home of Boeing's commercial airplane division.
The National Labor Relations Board has accused the world's largest aerospace and defense company of putting a second, nonunion, production line for its 787 in South Carolina to punish Washington-based workers for past strikes.
The NLRB, a government agency that is independent but dominated by Democrats, has "ample evidence" that Boeing acted in retaliation, its lawyer told the judge on Tuesday.
Boeing filed a motion to dismiss the case. A lawyer representing the company said Boeing was "not aware of any work being transferred to Charleston."
He said Boeing had actually added jobs in the Seattle area since the Charleston, South Carolina, plant was conceived, so no workers had suffered any harm. He characterized the NLRB complaint as "rather a strange runaway shop case," a colloquial term for a business setting up new facilities away from union involvement.
Boeing Chief Executive Officer Jim McNerney has weighed in on the complaint several times, saying the NLRB has overreached its authority.
The dispute has drawn the attention of pro-business politicians like U.S. Senator Lamar Alexander. The Tennessee Republican has said he will propose legislation prohibiting the NLRB from taking similar action against other companies.
NLRB Acting General Counsel Lafe Solomon issued the complaint against Boeing in April. It stems from one lodged in 2010 by the International Association of Machinists and Aerospace Workers, District Lodge 751, which represents the company's workers in Washington.
Boeing shares were up 2 percent at $74.45 Tuesday afternoon.
Tom Wroblewski, local IAM president in Seattle, has said Boeing opened the South Carolina line to "intimidate our members with the idea that the company would take away their work unless they made concessions at the bargaining table."
The $750 million 787 plant opened on Friday.
The company has said it did not violate the law by putting its second 787 production line in South Carolina, where workers will assemble three planes each month. The South Carolina jobs are new to Boeing and are not a relocation of work previously done in Washington, it says.
Boeing said that if it loses the NLRB case, it would be forced to assemble those three planes in Washington, where it is set to produce seven 787s per month.
"It means a headache, but it's one they'll probably be able to get around," said analyst Richard Aboulafia of Virginia-based Teal Group. "It's going to be very politicized."
The 2009 decision to open the 787 line in South Carolina came after an aggressive campaign by workers in Washington's Puget Sound area to keep the project there.
The IAM went on strike for 58 days in 2008 over a contract dispute. The strike led to one of the costly delays that have put the 787 program over budget and about three years behind schedule. Boeing also blames glitches in its global supply chain for the delays.
The 787, a lightweight, carbon-composite aircraft, is set for first delivery in the third quarter of this year.
The NLRB and Boeing expect the first round of hearings before the administrative law judge to take weeks or months. The losing side may then appeal, first to the NLRB board, then to a federal court, and finally to the U.S. Supreme Court.
The first several days of the hearing are likely to be largely procedural, featuring no testimony.
J. Michael Luttig, Boeing's general counsel and a former appeals court judge, has said he anticipates losing before an administrative law judge, but prevailing at the U.S. Court of Appeals.
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