Boeing Plans To Finish Building Some 737s In China: Report

By Alwyn Scott

MOBILE, Alabama (Reuters) -- Boeing Co is planning to move final production work for some 737 jetliners to a new facility in China, and is timing an announcement to coincide with the first U.S. state visit of China's president, Xi Jinping, later this month, according to a published report.

The report in Aviation Week on Friday appeared to surprise elected officials, unions and industry leaders in Washington state, where Boeing now builds all 737s. The governor's office, labor leaders and the industry association told Reuters they had not heard of the plan.

Boeing declined to comment on the report, but issued a statement that left open the possibility, saying that it is always looking to expand and improve productivity.

"One way we do this is by working with partners around the world, including in China, our largest international market," the company said. "However, we do not comment on options we may be exploring."

Moving work to China from Boeing's plane-production stronghold in the U.S. Pacific Northwest would represent a bold step for the Chicago-based company, which so far has set up one full assembly line outside Washington state, in South Carolina.

But the move would be in line with increased global sourcing of aerospace parts and supplies. Foreign contracts and operations are seen as helpful in winning fierce sales competitions with European rival Airbus Group NV.

Airbus is due to inaugurate this weekend its first U.S. final assembly line, in Mobile, Alabama. The $600 million factory, which sports a large U.S. flag, allows Airbus to lay claim to employing American workers, as foreign automakers did after building U.S. plants.

Airbus, with major manufacturing in Toulouse, France, also has final assembly lines in Hamburg, Germany, and Tianjin, China.

Boeing also has relied on foreign suppliers to help cement sales relationships. Three Japanese industrial giants produce portions of Boeing's 777 and 787 aircraft, and Japan's major airlines have been almost exclusively Boeing customers.

According to Aviation Week, Boeing's China facility would paint 737 aircraft built at its Renton, Washington, factory, conduct flight testing, and perform some interior installation.

But the move could conflict with a deal Boeing struck in 2011 with the machinists union. In exchange for ratifying a labor contract, Boeing agreed to build the 737 "in its existing Renton facility," the company said at the time.

(Reporting by Alwyn Scott; Editing by Lisa Shumaker)