How many jobs? Boeing's Iran deal goes big league

 14 Dec 2016 - 23:59

How many jobs? Boeing's Iran deal goes big league
The Boeing logo at Chicago headquarters (Reuters / Jim Young)

By Brooke Sutherland / Bloomberg

Boeing Co. can throw around "big league" numbers, too, Mr. President-Elect.

The aircraft maker announced on Sunday that Iran Air would purchase 80 planes with a catalog value of $16.6 billion. The agreement is a byproduct of the 2015 Iran nuclear accord and marks Boeing's first deal with the country since the 1970s. But while Boeing's press release addressed the political backdrop and the planes' technological capabilities, a decent chunk of the text was devoted to another topic: jobs.

Boeing went out of its way to highlight how this new order would support nearly 100,000 U.S. positions. Jobs talk isn't a regular feature of Boeing's major order announcements, in part because employment requirements can be difficult to predict. For example, there's no specific mention of jobs in the May announcement of an $11.3 billion order from VietJet Aviation Joint Stock Co., nor in the 2015 release detailing AerCap's order for 100 of Boeing's 737 Max 8S airplanes. When Emirates Airline finalized a request for 150 jets in 2014 -- Boeing's largest ever single order -- it was the buyer's management, not Boeing's, that talked about supporting jobs and no specific numbers were given.

Actual Aerospace Jobs Iran Deal Will Create?

The unique wording of the Iran statement comes across as a peace offering to Donald Trump, who made an American manufacturing renaissance a key pillar of his campaign. Boeing has extra reason to make nice after the president-elect accused the company of over-charging for an Air Force One revamp. It's helpfully given Trump a big-league number (his favorite kind) to bandy about. A headline with 100,000 jobs is much better PR than the 1,100 -- sorry, 800 -- positions that Trump convinced United Technologies Corp.'s Carrier unit to save in Indiana.

But as with the Carrier deal, there's some nuance here. Consider the fact that Boeing employed about 152,000 people in total as of late November. This Iran deal is big, but it's not big enough for the company to expand its workforce by more than 50 percent. Boeing, notably, isn't creating 100,000 jobs -- it's "supporting" them. Those aren't even necessarily Boeing positions. The 100,000 jobs described in the press release are "in the U.S. aerospace value stream," meaning they could exist at one of Boeing's thousands of U.S. suppliers.

Boeing's larger point is that this deal is good for jobs, and it's right about that. The more orders the company gets, the more people it needs to employ -- or put another way, the more money it makes, the fewer people it needs to fire and the less likely shareholders are to press for cost cuts. If some jobs-touting can get Trump to keep the Iran nuclear deal in place and allow Boeing to keep pace with rival Airbus Group SE, why not throw it in the press release? It's not like it's actually costing the company anything.

But a pattern is emerging in the way Trump interacts with Corporate America, and there seems to be a growing realization among CEOs that succeeding in Trump's administration is as much a public-relations game as anything else.

SoftBank Group Corp. CEO Masayoshi Son's pledge to create 50,000 jobs in the U.S. was substance-light and unrealistic, but it sure sounded great when Trump tweeted about it. The irony is that Son's efforts to curry favor with Trump could help ease approval of a deal between SoftBank-controlled Sprint Corp. with T-Mobile US Inc., a merger that would almost certainly result in job cuts. Carrier, meanwhile, is still moving more than 1,000 jobs to Mexico and will drive down the cost of keeping its Indianapolis plant open by investing in automation, something which CEO Greg Hayes acknowledged ultimately means fewer employees will be needed.

Point being, by focusing on headlines over details, Trump risks missing opportunities to effect real change in the jobs landscape, whether that's through careful oversight of large mergers or investing in training that can give traditional manufacturing laborers the skills they need to work on products whose complexity demands a U.S. talent pool, such as United Technologies' jet engines.

Absent bigger change, a few soothing words seem to be doing the trick. Trump hasn't even mentioned the Boeing deal today, despite previous criticisms of the Iran accord that enabled it. Instead, he's attacked the "out-of-control" costs of the F-35 fighter-jet program, even though expenses have fallen by 60 percent as the planes near full production.

The maker of the F-35, Lockheed Martin Corp., may want to call its PR people.