Boeing Reorganizing Commercial Airplane Unit: As part of a broader effort to cut costs, the company is consolidating its 747 and 767 jet programs

The Wall Street Journal
By Jon Ostrower
March 15, 2016 3:55 p.m. ET


Boeing Co. said Tuesday it is consolidating portions of its commercial jet unit in a bid to reduce its overhead costs.

As part of the reorganization, Boeing’s newly-elevated senior vice president of Airplane Programs, Pat Shanahan, won’t be replaced after he joins Chief Executive Dennis Muilenburg’s executive council on April 4, overseeing companywide supply chain and operations.

Boeing has been under fierce competitive pressure from European rival Airbus Group SE for decades, which has slowly eroded its market share and forced jet prices lower.

The company in February announced it was moving to cut costs and has sought to eliminate layers of executive management “to lean out our structure from the top down while continuing to perform on our development programs and keep our delivery commitments to customers,” Boeing Commercial Airplane Chief Executive Ray Conner wrote in a note to employees on Tuesday.

Boeing is also working to offset the high development and production costs of the 787 Dreamliner and maintain its forecast goal of recovering nearly $30 billion in deferred expenses from building its first several hundred aircraft.

“Given the competitive environment we face, it makes sense to realign our leadership in a big-picture way instead of making piecemeal adjustments,” said Mr. Conner.

The moves follow last week’s announcement of the retirement of Chief Technology Officer John Tracy and broader management changes that elevate four executives, including Mr. Shanahan, to Mr. Muilenburg’s executive advisory group.

The shift eliminates a dedicated executive link between the chief executive of Boeing’s commercial unit and the production operations of its five commercial jet programs. Boeing’s commercial program general managers will now report directly to Mr. Conner to “strengthen ties between the manufacturing and operations parts of the business,” he wrote.

The effort also takes Boeing’s two oldest and lowest volume twin-aisle jet programs, the 767 and 747 jumbo jet, and consolidates them under the oversight of Elizabeth Lund, the site leader for the company’s Everett, Wash., jet factory. Ms. Lund is currently vice president and general manager of the long-range 777 program.

Mr. Conner announced that its current 767 general manager, Brad Zaback, will serve as Ms. Lund’s deputy on the 777 program and Bruce Dickinson, who currently runs the 747 jumbo jet program, will oversee the newly-consolidated 747 and 767 programs.

The 747 and 767, closely located in Boeing’s sprawling factory, are almost entirely produced today as freighter aircraft, or—in the case of the 767—as the U.S. Air Force’s new aerial refueling tanker. Boeing in January announced plans to cut production of the aging jumbo jet to just six annually starting in September.

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