Military

Boeing Could Cut 8,000 Jobs in Washington

courtesy of Boeing Co.

Boeing Co. (NYSE: BA) had already let it be known that it planned to cut about 4,000 jobs in Washington state, but new documents indicate that the cuts could be up to twice that number. The company faces stiffer competition on price from rival framemaker Airbus, and Boeing has said it needs to cut costs by billions of dollars by the end of 2016.

The 4,000 announced job cuts include attrition of 2,400 jobs and voluntary buyouts of another 1,600. The company said the cuts include hundreds of managers and executives. According to a document obtained by the Seattle Times, one of the company’s units is targeting a 10% staffing cut, and if 10% is the company’s target for its operations in Washington, that translates to as many as 8,000 jobs in the state.

Boeing received $8.7 billion in tax breaks  from the state in 2013 to keep manufacturing of the new 777X in Washington. Those breaks included no requirement that Boeing maintain certain employment levels in the state. Washington has lost about 9,000 jobs since late 2012, many of which involved transferring work to other Boeing locations, according to the Seattle Times.

In an internal Boeing webcast to employees last month, Ray Conner, CEO of the commercial aircraft division, basically said that Airbus is eating Boeing’s lunch, having reduced Boeing’s share of the total backlog to 46% and a desire to push that total to just 40%.


Boeing has long claimed that deliveries not backlog totals are more important, and it leads Airbus by a substantial margin there. That’s important to Boeing because it is deliveries that generate cash flow, and Boeing has promised huge free cash flow to investors for years. That pile of dollars can be parceled out to shareholders as higher dividends and more stock buybacks. Any threat to cash flow is very bad for Boeing.

But if the company is serious about cutting billions from the budget to improve cash flow by the end of 2016, the only way to do that is to cut jobs.

So how does Boeing plan to build more airplanes with fewer people? The company is revving up production of the 737 from 48 to 57 per month, raising 787 production from 12 to 14 per month and tooling up for the 777X. The Wall Street Journal cites a company spokesman who said that involuntary layoffs of union workers “would only be used as a last resort.”

Something will have to give. If the past is any guide, layoffs are going to increase until Boeing believes its cash flow is assured. And those layoffs most likely will occur in Washington, where Boeing’s labor costs are high.

Boeing’s stock closed down about 0.3% on Tuesday, at $130.86 in a 52-week range of $102.10 to $155.50. Shares were up fractionally in Wednesday’s premarket session.

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