Thursday, February 28, 2013

Boeing Pares Dreamliner Workforce

February 28, 2013, 5:52 p.m. ET

By JON OSTROWER
The Wall Street Journal


Boeing Co. plans to cut 100s of workers at a South Carolina factory where it builds 787 Dreamliners, part of a cost-reduction initiative set in motion before battery problems caused the grounding of the company's flagship jetliner, according to a person familiar with the plan.

The cuts, which started recently and are expected to be implemented over the course of 2013, could reduce staffing levels by up to 20%—at least for certain key teams—at its North Charleston, S.C., campus, which Boeing says has at least 6,000 employees.

The cuts primarily target workers employed at the plant through outside contractors, although Boeing also would reduce internal staff positions by not replacing some workers who leave or are promoted, the person said.

Such reductions aren't uncommon as assembly lines improve productivity, but the cuts come at a crucial time for the company. Boeing is trying to double monthly output of 787s at the South Carolina factory and another plant in Washington state by year's end. The South Carolina plant also is assembling major sections of a new Dreamliner model, the longer 787-9. It wasn't clear how the cuts might affect those efforts.

Boeing spokesman Marc Birtel declined to discuss any specific job cuts at the South Carolina facility. "As we progress in improving efficiencies in our processes, training our entry-level employees, and growing the experience of our team in South Carolina, we expect to continue to reduce reliance" on contract labor in order "to meet our production objectives," he said in an email.

Overall, Mr. Birtel said, Boeing expects to hire between 8,000 and 10,000 people in 2013, including at its defense division, which would keep its overall employment levels at "flat or slightly down" at year's end. "This includes hiring in some areas and reductions in others," he said. Boeing employed 173,781 workers at the end of January.

The South Carolina job cuts were initiated late last year, the person said, before overheating problems with the lithium-ion batteries on two Dreamliners prompted the world-wide grounding of the fleet in January. The grounding prohibited Boeing from delivering any new 787s to customers, but Boeing has said the move hasn't affected its production. The company last week proposed to U.S. regulators a package of modifications to the battery system that it hopes will allow the jets to return to commercial service as early as April, according to government and industry officials.

The actions in North Charleston appear to be part of a broader effort to reduce the costs to build the 787, which was introduced 18 months ago after years of expensive delays. Boeing has staked much of its financial future on the plane and on its ability to build it more efficiently over time. The company says the 787 program is currently profitable based on an accounting measure that average its costs out over the more than 1,000 planes it expects to build during the next decade. However, analysts estimate that Boeing currently spends about $100 million more to make each 787 than the jet brings in revenue.

The South Carolina plant has been an important element of Boeing's 787 strategy. Because it has a nonunion workforce, the facility has had flexibility to bring in temporary mechanics through outside contractors. Especially in its early years, the South Carolina facilities made extensive use of such contract labor, which tended to be more-expensive but also initially more experienced than the new workforce it hired locally.

Mr. Birtel said the use of contract labor to "supplement [Boeing's] workforce during surge activities and on development programs" is standard practice for the aerospace industry.

Boeing confirms that some contractors have been offered positions as direct employees, but a person familiar with the offers say many have declined offers, citing the comparatively lower compensation of direct, rather than contract, employment.

Boeing plans to either end early or not renew contractors at the South Carolina facility and two smaller facilities that make the mid- and aft-body of the Dreamliner. The two smaller factories predate Boeing's presence in South Carolina, when the facilities were set up by 787 suppliers in the early years of the program.

The factories struggled and in 2008 and 2009 Boeing was forced to purchase both, giving the company its first industrial footprint in the state. In October 2009, Boeing announced it would build a second 787 final assembly line on the Charleston campus, marking its first such site outside of its traditional commercial base on the west coast. The site delivered its first 787 to Air India last September.


Source:  http://online.wsj.com

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