Buried in the hoopla of Boeing Co.’s decision to move its corporate headquarters from Seattle to Chicago are the plans to relocate its Phantom Works advanced research and development unit to Seal Beach.
While only a handful of staff will be making the move from Seattle, the larger economic effect of the move is likely to be felt as the research and development unit consolidates its decision-making functions here. Many local subcontractors are licking their chops at the prospect of gaining a larger share of contract work.
While Boeing officials say the operation won’t necessarily give preferential treatment to local subcontractors, analysts said the company’s spending patterns might evolve that way because its engineers can keep a closer eye on work performed nearby.
“On paper, these kinds of moves are not supposed to result in additional local business, but in reality, they tend to because of proximity,” said Jon Kutler, president of Quarterdeck Investment Partners Inc. “People prefer to have workers that can be more responsive. If you have a problem that needs to be solved, it tends to be easier to deal with someone locally.”
Phantom Works’ research-and-development operation accounts for around 3% of Boeing’s $51 billion in annual revenue.
Phantom Works employs about 4,000 people nationwide, including about 1,000 at its operations in Long Beach, Huntington Beach and Seal Beach.
Despite its extensive in-house operations, Phantom Works contracts out some of its work, although officials could not say how much.
Joe Berenato, chief operating officer of Ducommun Inc., a Long Beach-based plane parts maker with $240 million in yearly sales, said he is eyeing work with Boeing on next-generation and “black” (top secret) programs.
Because these projects are particularly engineer-intensive, he said, he believes Boeing will be more likely to subcontract with a local company that it can monitor closely.
“(Boeing officials) would always be trying to optimize what they are doing,” Berenato said. “So the engineers are constantly redesigning or re-engineering, either to make the end product better or the manufacturing process easier. It makes the end product better if they can observe the entire manufacturing process.”
Phantom Works originated under the banner of McDonnell Douglas Corp., which Boeing purchased in 1997.
Two years after the acquisition, Boeing moved the unit from McDonnell Douglas’ home base in St. Louis to Seattle.
When Phantom Works’ headquarters moves to Seal Beach in early July, George Muellner, Phantom Works’ vice president and general manager, will take over as unit president. David Swain, who will continue as Boeing’s chief technology officer and will join other top company officials in their move to Chicago, now holds the post.
Even before his promotion, Muellner, who already is based in Long Beach, was seen as a co-leader of the unit, overseeing research and development on space communications, military aircraft and missiles projects, while Swain focuses on commercial aircraft development. n
Greenberg is a staff writer with the Los Angeles Business Journal.
