Wednesday, March 30, 2016

Boeing to Cut More Than 4,500 Jobs: Customers are asking for less-expensive jets

The Wall Street Journal

By Jon Ostrower
March 30, 2016 12:44 a.m. ET

Boeing Co. on Tuesday said it planned to cut more than 4,500 jobs by June, as the company accelerates cost-cutting efforts in an effort to keep pace with customers demanding less expensive jetliners.

The cuts come even as Boeing has booked record orders for its jets and is increasing production of its single-aisle and twin-aisle aircraft. But the company has been losing market share to rival Airbus Group SE.

Boeing’s commercial unit expects to cut about 2,400 positions by attrition and around 1,600 through voluntary layoffs, a company spokesman said. This includes the culling of “hundreds” of managers and executives, some through involuntary layoffs.

The company will also reduce its flight testing unit, which is part of a separate unit, by about 10% of the approximately 5,700 positions, a company spokeswoman said.

The reductions will reduce Boeing’s workforce, which stood at 161,000 people at Dec. 31, by about 2.8%, Boeing has already cut 1,200 from its commercial jet unit this year, and the additional reductions total about 5% of its 82,000-person commercial business. Most of these people are based in Washington state.

Boeing is seeking to calm investor nerves over falling jet prices that could dent profits. The company also faces pressure to deliver on its closely watched cash flow pledges as it tries to recover nearly $30 billion in deferred costs that were accumulated building the 787 Dreamliner.

A company spokesman said any involuntary layoffs of unionized staff “would only be used as a last resort.”

Boeing’s commercial unit chief executive, Ray Conner, said last month during a companywide webcast that it was under increasing pressure from airlines to offer less-expensive jetliners, and was having to offer steep price cuts to win deals. Mr. Conner this month said Boeing was reorganizing its commercial unit by consolidating its older 747 and 767 jet programs..

“We need enough flexibility to win critical campaigns and still have enough margin to invest in new airplanes and services,” Mr. Conner said in an internal message to employees last week.

The spokesman said the company has a dollar-based target for its cost reductions, and is also focusing on improving productivity, manufacturing quality, reducing inventory and cutting back significantly on business travel.

Original article can be found here:

VIDEO - Raw interviews with Boeing employees:


Late Tuesday Boeing confirmed it was in the process of shedding 4,000 jobs by June.  The company employs about 78,000 in Washington state.

“It’s Garbage,” exclaimed assembly electrician Vince Popich outside the Renton 737 plant.

Popich is especially upset because the state of Washington gave his employer $8.7 Billion in tax breaks to ensure new 777X jobs will be created here.

“We're bending over backwards paying for it, and here they are laying off American workers, outsourcing our jobs,” Popich said.

Other Boeing workers like Dean Chinn were less worried.

“I'm not concerned,” Chinn casually said.  “I have 30 something years with the company.”

According to a memo, obtained by the Seattle Times there could ultimately be up to 8,000 cuts by the end of the year.

Boeing released a statement Tuesday night:

"We continue to follow our plan announced last month to make fundamental changes for the long term to win in the market, fund our growth and operate as a healthy business. That involves a combination of non-labor cost savings, supply chain savings, and reduced staffing levels. While there is no employment reduction target, the more we can control costs as a whole-- the less impact there will be to employment. Staffing reductions through mid-year, including hundreds of executives and managers, are projected to total approximately 4,000 positions -- none of which involve involuntary layoffs. We’ve been able to reduce staffing levels through attrition, leaving open positions unfilled, and voluntary layoffs. We’ll only use involuntary layoffs as a last resort.

Boeing's CEO recently told workers in a company-wide address any cuts would part of an overall plan to cut cost and keep up with competitor Airbus.  Renton worker Mark Childress says he understand that argument.

“We are pedaling as hard as we can to stay in front of Airbus,” Childress said, adding that he thinks the jobs will be ultimately needed again once Boeing is done adjusting its business model.  “As the 777X and the new 737 Max gets into full production, within two years, the jobs will all come back.”

Story and video: 

Boeing to Cut Production of 747s: Airplane maker cites slowing recovery in air cargo market

The Wall Street Journal
By Jon Ostrower
Updated Jan. 21, 2016 8:39 p.m. ET

Boeing Co. said it plans to halve production rates of its 747-8 plane later this year, the latest step in the decline of the iconic jumbo jet and a fresh signal of persistent weakness in the global air-freight market.

The aerospace giant on Thursday said that it would shift in September to producing the jet at a rate of just six a year. As a result of the change, it will recognize an after-tax charge of $569 million against its fourth-quarter results, which it is scheduled to report on Wednesday.

Nicknamed the “queen of the skies,” the 747 has been in continuous production since the mid-1960s in various models. But the four-engine 747 has long since fallen out of favor among buyers of new jets for passenger travel, which prefer smaller, more fuel-efficient two-engine aircraft. That has left Boeing heavily reliant on the air-cargo market, which has struggled to escape a slump in recent years in part because of sluggish growth in international trade.

Global air-freight yields, measuring dollars generated for a given carried weight, are currently at levels below those in 2009 during the global economic downturn, according to the International Air Transport Association. Boeing said air freight contracted during November, with volumes declining by 1.2% compared with the same period a year earlier. Global passenger air travel, by contrast, the company noted, grew at 5.9% during the same period.

“Global air passenger traffic growth and airplane demand remain strong, but the air cargo market recovery that began in late 2013 has stalled in recent months and slowed demand for the 747-8 freighter,” Ray Conner, head of Boeing’s commercial airplanes division, said in a statement.

The 747-8 version, which has passenger and freighter versions, boasts updated aerodynamics, a new engine and a longer body than previous versions to hold more passengers and cargo. Boeing introduced the 747-8 freighter into service in 2011, after a development plagued by design changes and other problems that forced Boeing to record charges totaling more than $2 billion on the program.

The dearth of new orders, though, left the company with just 20 remaining orders for the plane as of Dec. 31. The U.S. Defense Department said it had selected the 747-8 as part of an initial plan to replace a pair of heavily-modified 747-200 jets that are used as the presidential transport known as Air Force One. The Pentagon has yet to confirm its order with Boeing.

The company was left with unclaimed 747 passenger jets in 2015 after No. 2 Russian airline Transaero ceased operations, leaving unpainted jumbos left in long-term storage on Boeing property in Everett, Wash. The airline had four on order. Rival Airbus Group SE has faced similar slack demand for its biggest jetliner, the Airbus A380.

Boeing was producing two 747s a month after the plane’s introduction, but later cut that to 1.75 a month, then 1.5, then, in September, 1.3. It previously had said the rate would fall to one a month starting in March. The latest move will take the rate to 0.5 a month six months later.

Boeing has sought to streamline operations at its Washington state factories, reducing the amount of time and cost it takes to build each 747 airplane. Boeing executives last year said it was able to profitably produce the jumbo at a rate of one each month. The latest reduction and charge to its earnings recognized that the company could no longer build the 747 profitably at its newly revised rate.

The new charge for the 747, which amounts to $885 million on a pretax basis, is accounted for as part the operating profit of its commercial airplanes unit. The company said the charge would have no effect on 2015 revenue or cash.

Original article can be found here:

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