Boeing Needs to Evade S.C. Politics

CHARLESTON, S.C. (TheStreet) -- Perhaps Boeing(BA) got more than it bargained for when it elected to put new 787 production in South Carolina.

The giant aerospace company, a Dow component, is battling a finding by the National Labor Relations Board's general counsel that it violated labor law by moving work on the 787 to North Charleston in relation for a strike by the International Association of Machinists. Labor law protects the right to strike.

South Carolina boasts strong universities, great beaches and, in Charleston, one of the most historic and charming cities in the country. State leaders have taken advantage of their principal asset, the 350-year-old Port of Charleston, to create an enviable manufacturing and exporting climate that lured a massive BMW plant, now the single biggest auto plant in the country.

As a result, South Carolina has emerged as the country's leading exporter of vehicles to non-NAFTA countries and the third-largest exporter of vehicles period, behind Michigan and California.

And all this came before Boeing, the biggest single U.S. exporter, began assembling 787 aircraft there.

Access to global airports, by the way, is one more South Carolina advantage. One international airport, in Charlotte, sits on South Carolina's border. Partly as a result of BMW's presence, it has flights to Germany on both US Airways(LCC) and Lufthansa. Meanwhile, the world's biggest airport, in Atlanta, is located in a neighboring state.

Influence of S.C. History on Boeing

But South Carolina's history, which never seems far below the surface, can be troubling. The state's politicians have periodically elected to drive the train off the tracks by asserting that federal law has no relevance to them.

This occurred most notably in a sequence of events between Dec. 20, 1860, and April 12, 1861, when South Carolina essentially declared war on the United States of America. A secession convention and an attack on Fort Sumter both occurred in Charleston.

Flash forward now to a hearing Friday in Charleston, where the U.S. House Committee on Oversight and Government Reform will conduct hearings on the NLRB's findings.

The hearing is to be entitled "Unionization Through Regulation: The NLRB's Holding Pattern on Free Enterprise." The chairman, Rep. Darrell Issa (R., Calif.), has written to NLRB's acting general counsel, Lafe Solomon, that "this hearing will focus on how your actions against Boeing could impact the thousands of Boeing employees at a non-union worksite in South Carolina.

"You assert that you do not seek to close Boeing's operations in South Carolina, yet the relief requested would have that exact effect," Issa continued.

Essentially, the hearing is intended to advocate the primacy of states' rights over federal labor law.

Most South Carolina politicians, including Gov. Nikki Haley, who will be questioned by the committee, have railed against the NLRB finding. While this is largely a reflection of the intense competition between states for manufacturing jobs, it also has taken a harsh, unprecedented, anti-Obama, anti-federal government tone.

Republican members of Congress "have engaged in a series of activities or conduct that one rarely if ever encounters during an adjudicatory proceeding," pressuring NLRB officials and seeking to amend the National Labor Relations Act to immunize Boeing's conduct, said Ohio State University law professor James Brudney, who spoke to reporters during a recent conference call arranged by the American Constitution Society for Law and Policy, a liberal policy institute.

It is certainly possible that the political hysteria surrounding the case may not be so good for Boeing.

Boeing is not just any company. Rather, it is a symbol of America in multiple ways: huge, historic, a leader in developing technologies that enable human potential to be realized. The company essentially has its own Congressional delegation, legislators from Washington and other key Boeing states who lobby intensely on the its behalf. Its relationship with the International Association of Machinists resembles nothing more than a long marriage, vitriolic at some times and loving at others, as when the IAM lobbied to ensure that Boeing, rather than Airbus, received the Air Force tanker project.

Boeing has been encouraged to compromise in this case by everyone from the NLRB general counsel to, on Monday, the administrative law judge now hearing its case against the NLRB in Seattle. "Settlement always needs to be considered, particularly when the parties have an ongoing relationship,'' Judge Clifford Anderson said Tuesday.

It is a good suggestion. This vast international company would have little to gain from getting dragged in one side of a legislative replay of the worst tragedy in U.S. history.

Boeing shares, which haven't yet been visibly impacted by the controversy, opened at $74.21 on April 20, the day the NLRB counsel's ruling was announced. They rose as high as $80.65 in May, then fell back as the market declined. At midday Wednesday, shares were hovering around $74.

-- Written by Ted Reed in Charlotte, N.C.