Proposal: Move Headquarters From Ccy

[700UW]

Boeing moves corporate headquarters to Chicago on September 4, 2001.


On September 4, 2001, The Boeing Co. moves its world headquarters from Seattle to Chicago. The move is announced on March 21, 2001, and involves about 1,000 jobs. Chicago is chosen because it is "a location central to our operating units, customers and the financial community -- but separate from our existing operations" (Seattle P-I), according to Chief Executive Officer Phil Condit. Seattle had been Boeing's home since its founding in 1916.

When the move was announced, Boeing embarked on a search for a location that would suit the firm, which in the preceding years had acquired other aerospace giants such as McDonnell Douglas. New York and Dallas were considered. On May 10, 2001, the company picked Chicago and rented a 36-story building on Riverside Drive in the downtown area. CEO Condit stated that the decision was not related to the recent power crisis or to an earthquake that struck the Northwest on February 28, 2001.

 

[E-TRONS]

CH.12:

I don't dispute the rationale of your post. However, UAIR has bigger fish to fry at the present time....mainly doing something that proves the management intends to keep the company operating thru re-invention.

If CCY moved to CLT, I would not expect their pay to be reduced because the cost of living is cheaper here. Would you move for a pay cut?? Neither would those employees...not all of them that is.

I think CCY relocating is long overdue.....it was spoken of by Seth Schofield way back when. So why did they never do squat about it?? Let me think......

Too busy trying to sell the company instead of managing it properly. Nothing ever proactive.....only reactive.

Keep your head up.....it will get worse.

 

[ITRADE]

When the move was announced, Boeing embarked on a search for a location that would suit the firm, which in the preceding years had acquired other aerospace giants such as McDonnell Douglas. New York and Dallas were considered. On May 10, 2001, the company picked Chicago and rented a 36-story building on Riverside Drive in the downtown area. CEO Condit stated that the decision was not related to the recent power crisis or to an earthquake that struck the Northwest on February 28, 2001.

36-story building on Riverside Drive... That, my friends, is expensive real estate.

 

[diogenes]

This question was posed to Schofield when U first started nosing down in the early 90's.

The question was in the context of major layoffs and freezing agent pensions (sound familiar, anyone?).

He allowed as how it was a sensible thing to do, and eventually, U would get around to it.

The Palace is NOT giving up their perks - jeez, how clear can THAT be?

They are NOT moving to Jerkwater, AL. You - maybe. Them - NOT!

 

[funguy2]

I agree that CCY should be moved to CLT. It is long overdue and I think many folks would move... Especially if management can convince people that, yes your $100K job will become a $75K job, but due to the cost of living differences, it would only take $50K/year in CLT to live like $100K in DC, thus its a win-win. (Note: Fictional numbers to illustrate a point)

However, I think that this should have been done in BK. It is unlikely to occur now, during a major transformation. Also, I read on here that management recently decided to consolidate Revenue management at CCY, formerly split between CCY and INT. That tells me that managment is not focused on the "little" costs, even if in aggregate, all the "little" costs add up to a big number.

 

[OldpropGuy]

Relocation to a cheaper city can be financially beneficial, but the idea isn't just to find a cheap city. There still has to be a large talent pool or the ability to draw outside talent to the area..............

The available talent in the CCY area sure doesn't have a very good track record, considering the current position the company is in! First year business students from Hayseed Community College could not have done much worse.

A relocation to a cheaper city would be a nice touch, but at this point, I don't think it will make any difference. All indications show it's a little too late and the end is near.

Years ago, I promised that if I ever got my money back, I would never own USAir stock again, and I sure glad I kept my promise!

 

[OldGuyinPA]

The Palace is filled with.....

VP's making more than the new CEO. I wonder how long that will last. The changes are to late to matter. It's only a matter of when and how it will end.

Oh well...Sorry to be so encouraging.

 

[TheLarkAscending]

Should jetBlue move away from New York City?

JetBlue is in Queens, NY -- not exactly the same thing.

 

[funguy2]

JetBlue is in Queens, NY -- not exactly the same thing.

They also have Melbourne, FL and Darien, CT listed under Job Listings on their websites... Not sure what those places are like in terms of real estate pricing, but I am sure none of those come with a view of the White House and Capitol.

 

[Cosmo]

JetBlue is in Queens, NY -- not exactly the same thing.

Actually, Lark, the comparison might be closer than you think, i.e., Arlington is to downtown DC as Queens is to Manhattan, at least on the basis of building costs.

And IIRC, US Airways got a pretty good lease deal on its CCY headquarters when it was in bankruptcy because, among other things, the U.S. Navy vacated roughly 2 million square feet of office space in Crystal City at about the same time (as it consolidated many of its offices elsewhere). So I'm not sure there would be a meaningful savings if US Airways' HQ was moved to CLT or somewhere else, especially since I also recall that the renegotiated deal was for a 5-year term (with something less than 4 years now remaining). Thus, unless US Airways returns to bankruptcy, it would likely be required to pay for the CCY office space whether or not it was used -- or be sued for breach of contract.

Finally, I doubt that many current CCY employees would make such a move to CLT, MOB or anywhere else, especially to take a pay cut of as much as 50%. There are several reasons why I believe this:

1. The local school systems in Northern Virginia, where I suspect most CCY employees live, are generally very good;
2. Most families in the DC area consist of two working spouses, meaning that the average CCY employee's spouse would probably also need to find a new job;
3. The desire of most CCY employees not to uproot their families given the current unpredictable future of US Airways;
4. The immediate reality of a 50% pay cut vs. the longer-term nature of realizing a lower cost of living; and
5. Believe it or not, the DC area is really a nice place to live.

Thus, a move of the airline's HQ at this time could result in a massive "brain drain" with a concommitant loss of "institutional memory" at precisely the wrong time. And while I understand the argument made by some posters that "anybody could be better than the mismanagement that US Airways has seen in recent years", that's not necessarily true in the real world and I'm not really sure that this is the time to be taking such a risk.

 

[Cosmo]

They also have Melbourne, FL and Darien, CT listed under Job Listings on their websites... Not sure what those places are like in terms of real estate pricing, but I am sure none of those come with a view of the White House and Capitol.

funguy2:

I'm not sure about Melbourne, but Darien is about 20 miles northeast of LGA and is in the "high-rent" area of southwest Connecticut. Neeleman and several other JetBlue executives are based there.

You are correct, however, that those two locales do not "come with a view of the White House and Capitol."

 

[OldGuyinPA]

Brain drain from the Crystal Palace..

There has to be brain's to drain. Give us..US..a break. It's to late, I suspect BK filing before September.

 

[Ch. 12]

Yep, Boeing moved to more expensive territory to be closer to DC.

Does anybody have ANY idea what kind of savings could actually be had and at what cost? Again, Crystal City, isn't exactly PA Ave. I think this is mostly resentment. Should jetBlue move away from New York City? Feel free to be pissed off. It's a free country, but I'm not buying the 'logic.'

Firs off, let me qualify myself by saying that I don't have "resentment" and am not "pissed off". No...in fact...if you have read any of my other posts, I have often advocated for mgmt. I like to think I'm middle of the road, however, as I am not directly involved.

No...my arguement is a strictly objective one that is strong in that it would be a significant reduction of expenses. And I am not speaking of corporate real-estate or rent...I am speaking of wages that are the main crux of U's cost woes (excluding insanely inflated fuel prices).

And you are incorrect in saying the Boeing moved to more expensive territory...just an assumption, I'm guessing. No, in fact, SEA's costs are up there with the best of them (almost as high as DC) as much technology has moved there. Please see the figures below from Sperling's cost of living comparisons:

Overall Cost Index:
SEA: 115.0 (100 = national avg)
vs. CHI: 105.3

DC: 123.0
vs. CLT: 100.1

Median House Cost:
SEA: $221k
vs. CHI: $170k

DC: $176k
vs. CLT: $139k

So like I said...I have no resentment at all...I'm as impartial as you'll find on this board. AND...I want to reiterate that the cost savings is not in what HDQ saves on payment of one building per month, but on the salary savings of it's mgmt employees (and at no cost to their quality of living b/c their dollars would stretch much farther).

And Funguy...your ficitional numbers appear to be right on in that DC is 23% more expensive so a 100k salary could easily be cut to 75k with no disruption to quality of living. Nice guess!

 

[ITRADE]

And you are incorrect in saying the Boeing moved to more expensive territory...just an assumption, I'm guessing. No, in fact, SEA's costs are up there with the best of them (almost as high as DC) as much technology has moved there. Please see the figures below from Sperling's cost of living comparisons:

The general cost of living in Seattle may very well be higher, but when you move from your low-rise building right on the edge of Boeing Field in Tuckwila, Washington to Riverside Drive in downtown Chicago, I will guarantee you that you've seen an increase in corporate expenses.

 

[Ch. 12]

The general cost of living in Seattle may very well be higher, but when you move from your low-rise building right on the edge of Boeing Field in Tuckwila, Washington to Riverside Drive in downtown Chicago, I will guarantee you that you've seen an increase in corporate expenses.

And that's why I tried to point out the root of my statements. As I stated at the end of my post, the cost savings of relocating HDQ is not in the lease of the HDQ building but rather in the much reduced cost of mgmt salaries. If the managers pay much less to live in an area, they can be paid much less and feel little ill effect. This is much better than taking 1/2 of a rampers pay when they are still paying the same towards living expenses.

So you pay an extra $200k per year for lease/taxes of HDQ, compare that to saving $25k per mgmt employee times however many scores there are. It only takes 8 employees to make the move break even.

But that is Boeing and this thread is U where HDQ would most likely save $$ on lease/taxes of HDQ AND save the $25k per mgmt employee. Substantial savings if you ask me.

(**all dollar values in this particular post are fictional to illustrate the point.**)