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Boeing warns Seattle could lose 777X if deal rejected

A man looks at a scale model of Boeing's 787 dreamliner at their booth at the Singapore Air Show in Singapore February 19, 2008. REUTERS/Vivek Prakash

By Tim Hepher and Dominique Vidalon

(Reuters) - Boeing (BA) said on Friday it was ready to re-examine alternative sites for its newest jet if assembly workers and local politicians do not ratify plans to build it in the Seattle area, its traditional manufacturing base.

The U.S. planemaker issued the warning hours after senior members of the International Association of Machinists union were reported to voice opposition to a proposed labor contract that is due to go to a membership vote next Wednesday.

Boeing's latest jet - the 777X, a successor to its most profitable long-haul aircraft - would secure thousands of jobs in the Seattle area, which is competing with non-unionized workers in southern U.S. states where wages are lower.

After confidential and exclusive talks first reported by Reuters, Boeing and its main union reached a preliminary deal this week that calls for the wings and fuselage of the 777X long-haul jet to be built in the Puget Sound area.

The deal calls for lower healthcare benefits and a new retirement plan and a separate draft agreement with state officials would provide for tax and other incentives.

The Seattle Times reported that a senior local union official tore up a copy of Boeing's contract offer and described it as "crap," before telling a noisy meeting of disgruntled machinists that he would try to have it withdrawn.

The newspaper also reported that hundreds of assembly workers marched in the aisles of Boeing's huge Everett plant, where nearly all its wide-body jets are currently built, and chanted slogans calling for the contract to be rejected.

In an emailed statement, Boeing said that barring a 'yes' vote it would begin talking to other potential locations.

"All of our options are still on the table, including those within Boeing and interest we have received from outside," a Boeing spokesman said in an emailed statement.

"We chose to engage in Puget Sound first, but without full acceptance by the union and legislature, we will be left with no choice but to open up the process competitively and pursue other options for locating the 777X work," he said.

"And if not ratified per the scheduled vote on November 13, we will begin taking the next steps."

Union officials were not immediately available for comment.

Industry reports say Washington state faces competition for from states including South Carolina, where Boeing assembles some of its 787 Dreamliners, as well as Texas and Utah.

Japan, whose heavy industry builds wings for the Dreamliner, is seen a rival contender to build the wings for the 777X, the longest wings designed for a Boeing jetliner.

The new standoff comes as Boeing prepares to launch the 777X with potentially record orders at the Dubai Airshow, but is not expected to derail those plans, industry sources said.

The head of European group IAG (IAG.L) said on Friday it was interested in the 777X for Iberia and British Airways.

(Reporting by Tim Hepher, Dominique Vidalon, Jonathan Kaminsky; Editing by Mark Potter)