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Boeing to clip 12,000 jobs
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December 16, 1997: 4:42 p.m. ET
Job cuts come as aircraft giant sees signs of getting back on track
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NEW YORK (CNNfn) - Boeing Co. Tuesday said it expects to trim as many as 12,000 jobs next year as part of an ongoing effort to improve efficiency.
Boeing, the world's largest aerospace company, said the reductions would not begin until the second half of 1998, and the overall number of job cuts would depend on Boeing's ability to resolve ongoing production problems.
Boeing has been struggling for the past few months with parts shortages and other delays as it tries to meet a surge in aircraft demand.
Last month, the company took a $1.6 billion charge against third-quarter earnings to account for cost overruns and penalties and said it plans to take another $1 billion in charges over the next year.
"I think we've been about as inefficient as you possibly could be this year, and that's why we had to take a huge charge," Boeing President Harry Stonecipher told reporters in a conference call. "So when we get to an efficient position we really ought to be able to reduce employment."
Company officials said "natural attrition" - and not layoffs - would account for most of the reduction in the airplane maker's 118,000-strong Commercial Airplane Group.
That is a fraction of the Boeing's 236,000 employees worldwide. Boeing did not specify exactly where the cuts will come from but the company said none of the more than 100,000 workers in the company's sprawling Information, Space and Defense Systems division, would be affected.
Boeing spokeswoman Susan Bradley said the reduction reflected hopes of renewed vigor in the company's floundering production lines. She said the company is gradually finding a new equilibrium after a turbulent past few months marked by acute parts shortages and production problems that delayed deliveries of its most popular 7-series aircraft.
"All of these common factors are coming together at one time, and that time is a period of intense rack-up and demand for our product," Bradley said. "So all of these things are making things very difficult for us."
She added, "We don't think we have to take any extraordinary measures…but we think we'll continue to see these challenges well into next year before our factories are 100 percent healthy. But we're beginning to see progress."
Other analysts were similarly sanguine, saying that barring a glitch in the recovery, the job reductions would bolster the company.
"Assuming a leveling off of production…as the production process gets to be more routine and less frenetic, so parts come in on time, clearly that's going to free up a whole lot of manpower," said Wolfgang Demisch of BT Alex Brown.
Among the measures Boeing has taken to ease the production crisis was an earlier 20-day shutdown of parts of its 747 production line in Everett, Wash., and a temporary idling of its Next Generation 737 line in Renton, Wash.
Both the Everett and Renton lines are now off the special regimens, Bradley said.
Boeing's production woes have been in evidence for several months. In October, the company reported a third-quarterly loss of $696 million - or 72 cents a share - on revenues of 11.3 billion.
During the third quarter, Boeing delivered 89 jets, up from 65 in the same period a year earlier.
The company said Tuesday it expects to finish this year with 335 deliveries of its 7-series airplanes.
Bob Dryden, Boeing's executive vice president for airplane production, said Boeing has "an aggressive" delivery schedule for the second half of December.
"Boeing plans to tender for delivery an additional 36 commercial airplanes by the end of the month," he said. He said 17 of those planes will be delivered in the week after Christmas, a time "when Boeing is traditionally on vacation."
The renewed vigor is also aimed at rousing the airline from the revenue doldrums. In the first nine months of this year, Boeing earned $349 million, or 35 cents a share, on revenues of 34.1 billion. That was down from $1.37 billion, or $1.41 a share, on revenues of $25.5 billion for the same period in 1996.
Boeing stock was trading Tuesday at 50 5/8, up 1-11/16 from its previous day's close.
In a related development, Asiana Airlines said the South Korean carrier would defer delivery of a Boeing 777-200 until 1999, amid signs that aerospace was not immune to turmoil in the Asian markets.
Asian air traffic, Boeing said, is expected to account for 24 percent of all aircraft deliveries by 2006.
Howard Rubell, an equity analyst with Goldman Sachs, in New York, said the reduction of jobs in Boeing's commercial jet operations was part of a systemic overhaul.
"While there's clearly going to be a focus on these 12,000 jobs, it's a function of the completion of development programs, it's a function of productivity, and it's a function of reaching a steady state in production," he said.
Saying investors were "growing accustomed" to such production problems, he added of Boeing: "They are making progress but they are on the new trend line."
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