SEATTLE - Washington needs to invest more in workforce development and do a better job marketing itself - and more tax breaks wouldn't hurt either - aerospace industry leaders say.

A shortage of trained workers is "our biggest challenge," said John Theison, the CEO of Orion Industries of Federal Way, an aerospace parts supplier.

"It's not just engineers we're having problems with, it's the machinists as well," he told a recent meeting of the Aerospace Futures Alliance, a statewide industry group. "We need assistance in finding trades persons, and I don't just mean at the college level but at the high school level."

Rosemary Brester, the CEO of Hobart Machined Products, agreed.

"I can't compete on cost," she said. "I have to compete on quality and delivery and my deliveries are slipping because I can't find the workforce."

Brester and Theison were among some 60 business and legislative leaders who met last Wednesday at the Museum of Flight in Seattle to discuss the state's aerospace industry. Their goal was to come up with a legislative program that will ensure Washington never again has to compete to be the home of future Boeing aircraft programs, like it did with the 787.

"We're going to identify what those competitiveness issues are and we're going to get our message out," Alliance director Linda Lanham said. "We want to keep manufacturing jobs here, and we're going to do whatever it takes to do that."

Boeing's next big thing is likely to be a replacement for the 737, which isn't likely to fly until after 2015, said Mike Bair, the company's vice president of commercial business strategy and marketing.

But the state better get going now, if it wants a realistic chance at landing the 737 replacement, said Tom Captain, the leader of Deloitte's U.S. aerospace and defense group. Because, in his view, Washington kinda sucks.

"Everyone knows that we're not competitive," Captain said. "I'm working for aerospace companies now, and we're not in their top 10."

Captain had a ready list of Washington's problems: "Look at the wage rates, the cost of living, the traffic jams, look at the B&O taxes," he said. "This is the kind of stuff that matters."

Conventional wisdom holds that the state has a built-in advantage, given the long history of aircraft manufacturing and its deep and skilled workforce. But that advantage means less than it used to, Captain warned. New machine-tool technology makes it easier for anyone to be an aerospace manufacturer. "This is becoming a commodity business where even the semi-skilled laborers in Vietnam can make perfect parts."

Captain said he also thinks there's a sense of complacency in the state since the high-stakes effort to land the 787 in 2004. Washington has lost the last five campaigns to land big aerospace programs since then, he said. "I don't think Washington state pursued them like they had a gun to their head."

However, the weak dollar presents a "huge opportunity," Captain said. "That exchange rate is crushing Airbus," he said, and European manufacturers are eager to move work to the United States because "guess what - we're a low-cost country now."  

To capture some of that, the state needs to address its weaknesses, he said. There's not a lot that can be done to reduce living costs - and thus wages - but Washington's governments and education system can become "gap-closure weapons."

Captain advocated programs to provide free land for new companies, and further business and occupations tax cuts. (Many in aerospace complain that the $3.2 billion tax cut the Legislature approved for the industry during the 787 campaign was so narrowly drawn that many companies can't take advantage of it.)

He said the state should target defense contractors, who represent a far bigger market than commercial aerospace, and in particular it should look for ways to link them with the Washington software industry, to capture the fast-growing military electronics market.

Washington also needs to spend more on education and research, and put more money into the Department of Community, Trade and Economic Development - the state's main business recruitment agency, he said.

Even if it does all that, Washington may not be able to lure new companies, but the changes will go a long way toward making sure the companies here now will stick around, Captain said.

"You're providing government assistance to keep what you've got," he warned the legislators at the meeting. "It used to be you had to pay to play, now it's more you've got to play to stay."