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Boeing plans 737 plant in China, pledges no U.S. layoffs

Dennis Muilenburg speaks during the last day of the Reuters Aerospace and Defense Summit in Washington September 11, 2014. REUTERS/Larry Downing

By Alwyn Scott

SEATTLE (Reuters) - Boeing Co (BA.N) Chief Executive Dennis Muilenburg said on Tuesday he sees scope for additional 737 work going to China as the company continues to increase production rates of the single-aisle jetliner, though any changes would not come at the expense of U.S. jobs.

"As we ramp up capabilities in China, including additional 737-related work, the actions that we'll take are actions that will also allow us to grow jobs here in the U.S.," Muilenburg said at an aerospace conference in Seattle organized by SAE International.

In a memo to employees on Tuesday, Boeing Commercial Airplanes Chief Executive Ray Conner said the company was negotiating a strategic partnership and sales with China.

"These discussions are at a sensitive stage," Conner said in an internal memo seen by Reuters. "I hope (it) will be a win for Boeing, a win for the Puget Sound, and a win for our stakeholders. I want to assure you that agreements we may reach with our Chinese partners will not result in layoffs or reduce employment for the 737 program in Washington state."

Conner and Muilenburg did not discuss specifics of Boeing's proposed 737 finishing facility in China, a step expected to be announced during Chinese President Xi Jinping's visit to Seattle this week.

Boeing's plan to set up a facility in China that would paint, finish and deliver 737 jetliners built at its factory near Seattle has provoked its largest union, representing about 35,000 Boeing employees. The International Association of Machinists said Boeing has discussed its desire to expand collaboration with China but shared no details. "Any shift of aerospace jobs from our bargaining unit or Washington State causes grave concern," the union has said.

Muilenburg, who became CEO on July 1, said Boeing has had operations in China for 42 years and is continuing to invest to expand its capabilities there. Boeing is investing "in a way that allows us to grow jobs around the world," he said, in response to a question. "I think it's really important that as we think about that collaboration that it's seen as one that is beneficial to both countries."

In his prepared remarks, Muilenburg called Apple Inc (AAPL.O), Amazon.com Inc (AMZN.O), Facebook Inc (FB.O) and Google Inc (GOOGL.O) "nontraditional" aerospace and defense competitors for their efforts in space, satellites and drones.

Boeing already has partnered with Amazon Chief Executive Jeff Bezos' Blue Origin to build a manned space vehicle capable of reaching the International Space Station. Boeing is working on other partnerships, Muilenburg said.

"We see emerging competitors and collaborators," he said, and "need to be adept" at partnering with them.

Boeing, he said, "cannot compete unless we have a global-scale, global diversification strategy, a strategy that accounts for collaboration in all parts of the world ... We must continue to expand in that direction."

(Reporting by Alwyn Scott; Editing by James Dalgleish and Alan Crosby)