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 Boeing on Wednesday acknowledged plans to cut about 4,000 jobs in
its commercial airplanes division by mid-year, and another 550 jobs
in a unit that conducts flight and lab testing.
Sources said the company's broad goal is to cut jobs by 10 percent
at its commercial airplane unit, which has about 80,000 employees.
Boeing said the 8,000 figure is hypothetical and that it does not
have a specific goal for job cuts.
"There is no employment reduction target," spokesman Doug Alder
said. "The more we can control costs as a whole, the less impact
there will be to employment."
Boeing said the job reductions are part of a broad cost-cutting
drive to keep the Chicago-based aerospace and defense company
competitive. But Boeing's stock posted the biggest decline in the
Dow Jones Industrial Average on Wednesday, falling 1.88 percent to
$128.58.
Boeing is enjoying the biggest peacetime boom in its 100-year
history, increasing jetliner output to historic levels.
But it is using fewer workers than in the past, and cutting other
costs to compete with Airbus.
The savings are necessary to "win in the market, fund our growth and
operate as a healthy business," Ray Conner, chief executive of the
airplane business, told employees last month.
Boeing booked 70 new plane orders through February compared with 18
for Airbus, but the tally included 40 discounted 737s to United
Airlines.
On Wednesday investors said they saw the large job cuts as a harried
response to a slowing business cycle and tough competition from
Airbus, rather than a part of an orderly plan to adjust labor to
match output.
"It sounds reactive, not proactive," said a fund manager with a
large stake in Boeing.
Some analysts said investors unfairly penalized Boeing for adjusting
employment to reality. Boeing has been upfront about plans to ship
fewer planes this year as it slows the 747 line and brings its 737
MAX into production. It will cut 777 production by 15 percent in
2017. But it also has taken steps to boost output of 737s and 787s
in later years, and its assembly lines are more efficient thanks in
part to robots.
"They're building a better product and building it faster," said
Howard Rubel, an analyst at Jefferies. "Some of that success means
you have to cut jobs."
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A reduction of 8,000 jobs, including managers and executives, could
save the company $1 billion in labor costs, said Peter Arment,
analyst at Sterne Agee CRT. The airplane unit "is targeting
'billions' of cost reduction by year-end," which will help the
company remain competitive, he said.
The 4,000 job cuts in the commercial airplanes division by mid-year
will include about 1,600 through voluntary layoffs and 2,400 by
leaving open positions unfilled, Alder said. The company doesn't
plan involuntary layoffs, he added.
The numbers disclosed on Wednesday caught the company's unions by
surprise. "We have not been notified of these types of reduction
numbers," said Jon Holden, president of the International
Association of Machinists District 751. The union said more than
1,000 members applied for voluntary layoffs.
Boeing's other major union, the Society of Professional Engineering
Employees in Aerospace, said some members had been told they might
be eligible for buyouts but none were approved.
Both unions said job reductions showed the need for Washington state
lawmakers to enact measures to ensure Boeing maintains or increases
its workforce in the state in exchange for $8.7 billion in tax
incentives granted in 2013.
Reuters reported last month that Boeing was considering offering
voluntary layoffs to its professional engineers and technical
workers. The Seattle Times first reported Boeing's job cuts could
reach 8,000 this year.
(Reporting by Alwyn Scott and Bhanu Pratap; Editing by Dan Grebler
and Andrew Hay)
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