Since Boeing Commercial Airplanes CEO Ray Conner announced a drive to cut the workforce six weeks ago, his team has taken steps expected to eliminate 4,000 jobs by June — and that may be only halfway towards the total cuts this year.
An internal Boeing document obtained by the Seattle Times reveals that at least one company unit is targeting a 10 percent workforce reduction overall.
And people with knowledge of what’s planned say that’s roughly the percentage of jobs expected to be cut statewide. That would translate to as many as 8,000 jobs being eliminated.
Asked about the plans, Boeing said Tuesday the initial jobs eliminated include “hundreds of executives and managers” and that the 4,000 figure will be achieved through normal attrition and a voluntary buyout package for about 1,600 employees.
The workforce reduction is part of a major cost-saving push that also involves squeezing supplier costs, increasing productivity, shrinking inventory and cutting travel, overtime, services and contractor expenses — an effort that Boeing said “involves taking out billions of dollars in cost by the end of 2016.”
If enough savings cannot be found elsewhere and more job cuts are required, layoffs would come later in the year, Boeing said.
Boeing Commercial Airplanes (BCA) vice president of communications Sean McCormack said Tuesday that “our targets are dollar-based.”
“The more we reduce non-labor costs, the less impact there will be to jobs,” he said.
One Boeing unit in the Puget Sound area — the Test & Evaluation division that conducts flight, ground and lab tests — recently outlined very precise job-cut targets in an internal guidance document telling managers what to expect.
It begins: “We anticipate the need to reduce staffing levels about 10 percent before the end of the year.”
BCA chief executive Ray Conner first announced that job cuts were coming last month in an internal webcast to all Commercial Airplanes employees, a precise account of which has not previously been made public.
According to a Boeing transcript of that webcast, Conner said the company needed to drastically reduce costs — and thus airplane pricing — because of fierce sales competition from Airbus.
“Their biggest weapon that they’re using in the competitions today is price,” Conner told employees. “They are attacking us with price in every single campaign. And as a result of that, you know, we’re being pushed to the wall.”
Danger for Boeing
Adam Pilarksi, senior vice president with Chantilly, Va.-based aviation consultancy Avitas, said saving billions of dollars through cutting supplier costs and increasing productivity can only be a long-term goal.
“In a few years, yes, things can change. By the end of the year, are you kidding me?” he said. “The only way you quickly can reduce costs is by laying people off. There’s no magic about it.”
But Pilarski said there is a danger for Boeing in cutting too many jobs, especially as it plans to match Airbus by revving up 737 production to 57 jets per month and 787 Dreamliner production to 14 jets per month.
“I cannot see how you cut employment 10 percent and keep production levels increasing,” Pilarski said. “The two don’t go together. Something has to give.”
Many older, highly experienced blue-collar workers will be leaving the company as part of the cuts.
A person familiar with the figures said more than 1,000 Machinists applied for the buyout when it was offered this month, though Boeing may reject some of those because they have skills that cannot be let go.
The severance package, designed to appeal to those already intending to retire soon, advances full pension eligibility and also offers a week of pay for every year of service up to a maximum of 26 weeks.
Jon Holden, District 751 president of the International Association of Machinists (IAM) union, expressed surprise when informed of the potential scale of the job cuts.
“We have not been notified of these types of reduction numbers,” Holden said.
He said the coming cuts highlight a lack of accountablity for the $8.7 billion in aerospace tax breaks extended to Boeing in 2013 to make sure Boeing built the 777X here.
“This should make it clear to the Legislature why it is important to tie guaranteed job numbers to tax incentives like the other states have done,” Holden said.
Likewise, Ray Goforth, executive director of the Society of Professional Engineering Employees in Aerospace (SPEEA), is exasperated that “we’re the only state that’s not attaching accountability requirements” to corporate tax breaks.
More than 9,000 Boeing jobs here have been eliminated since the fall of 2012, many of them through transfering engineering work to Boeing sites in other states.
“Now we are losing thousands more jobs,” said Goforth.
“That’s our reality, guys”
In justifying the anticipated cuts to employees in last month’s internal webcast, Conner was unusually frank as he invoked a dire threat from Airbus.
He said that Airbus winning 63 percent of single-aisle sales last year with its A320 jets going against Boeing’s 737 jets was “alarming … because the 737 is the biggest contributor to the earnings of the Boeing Company.”
While the 737s had once been much better than the A320s, Airbus has narrowed the gap and the A321neo is now “a very competitive machine against the MAX 9,” Conner acknowledged
He gave the example of Korean Air, previously an all-Boeing 737 operator, which last year split a new order for 60 jets between the 737 MAX 8 and the A321neo.
Even in the market for bigger twin-aisle aircraft, Conner said, “We’ve ceded ground to Airbus.”
He cited another sales campaign last year, when longtime all-Boeing customer EVA Air of Taiwan bought 18 of the largest 787-10 Dreamliners, despite intense pricing pressure from the competing Airbus A350-900.
Boeing had to dig deep to close a large price gap, “not all the way but just enough so we were able to win,” Conner said.
Combining single-aisle and twin-aisle sales, he said Boeing now has 46 percent of the total backlog. Airbus is “trying to drive us to 40 percent,” which he said would anoint the European jetmaker as the securely dominant player.
“That’s our reality, guys. That’s what we’re dealing with,” Conner told employees. “And with the market kind of stabilizing here and not seeing the kind of growth or the opportunities for more campaigns, I think we’re going to be in an even tougher fight as we move into 2016 and beyond.”
With that bracing rationale, Conner then laid out bad news of the coming job cuts.
“These reductions apply everywhere, to every work group,” Conner said.
He said he didn’t know how many jobs would be cut, “because a lot of it depends on how efficient we can get … and how much cost we can actually get out.”
“We’re going to start at the executive level and at the management teams. And then we’re going to look at attrition and we’re going to look at voluntary layoffs,” Conner said.
Moving beyond buyouts to involuntary layoffs is “the last thing we want to do,” he said.
Some parts of BCA will be affected more than others by the cost-cutting.
North Charleston, S.C., seems relatively safe. Last month, Boeing South Carolina vice president Beverly Wyse said she expects employment there to be stable for the next few years.
“I don’t anticipate any layoffs,” she said.
Elsewhere, offers of voluntary layoffs have already gone out to units around the company, including to the Southern California customer support group that Boeing moved from Washington state over the past three years.
Boeing’s workforce in Washington state, including commercial airplanes, defense and corporate units, stood at just over 79,200 at the beginning of the year.
At that time, total BCA employment companywide stood at 83,500.
BCA’s projected tally of 4,000 jobs eliminated by June gets Boeing almost halfway to 10 percent.
If it comes down to getting another 4,000 in the second half of the year, that will certainly be more painful.
Barely three years after making its debut in the Indian defence market, Boeing is now aiming at doubling its sourcing from India by 2020.
The company at present has a sourcing of half a billion dollars a year from India.
Speaking exclusively to ‘The Navhind Times,’ vice president of Boeing Defence, Space and Security-India Denis Swanson said the company is targeting at doubling its sourcing from India from the present half a billion dollars to $1 billion by 2020.
Swanson said that the company has already doubled its sourcing since 2014 and will further double it by 2020. Stating that the company has 30 direct suppliers and 120 indirect suppliers, he said that Boeing was excited with the business prospect with India in the backdrop of the incentives provided by the government.
The first Boeing C-17 Globemaster arrived in India in 2013 and the aircraft supported a mission to carry equipment to an airbase in Andaman and Nicobar Islands.
In September 2015, the Defence Ministry finalised its order with Boeing for production, training and support of Apache and Chinook helicopters to enhance capabilities of the 22 AH-64E Apache attack helicopters and 15 CH-47F Chinook heavy-lift helicopters.
Swanson said that the company has signed a joint venture with Tata Advance Systems Ltd and is working on F/A-18 Super Hornet fighter aircraft, while the parts of Apache helicopter for worldwide use are made in India.
Replying to a question on foreign direct investment (FDI) in defence sector, he said the company welcomes the flexibility shown by the Indian government to consider FDI above 49 per cent on a case to case basis.
Original article can be found here: http://www.navhindtimes.in
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: http://www.wsj.com
VIDEO - Raw interviews with Boeing employees: http://www.kiro7.com
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: http://www.kiro7.com
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: http://www.wsj.com