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Boeing expands job cuts
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March 20, 1998: 6:00 p.m. ET
8,200 positions being dropped as part of plan to discontinue MD-80, MD-90
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NEW YORK (CNNfn) - Boeing Co., the world's largest aircraft maker, will cut an additional 8,200 jobs as part of a previously announced plan to streamline operations in the wake of its acquisitions of McDonnell Douglas Corp. and Rockwell International Corp.'s defense operations.
The cuts, which represent about 3.4 percent of the combined company's work force of 238,000, come as part of its November 1997 decision to discontinue the MD-80 and MD-90 jetliner programs.
Boeing noted the latest decisions won't require an additional one-time charge against earnings. Boeing already had disclosed in January that discontinuing the MD-80 and MD-90 programs would result in pretax inventory write-offs of $1.4 billion.
The layoffs come on top of the 12,000 positions to be cut in the commercial airplane business by the second half of 1998, as announced in December.
In addition, Boeing expects its restructuring to reduce its facilities by about 18 million square feet, or more than 15 percent, by the end of the year 2000.
"As a result of the merger with McDonnell Douglas and acquisition of Rockwell's aerospace and defense operations, we are strategically realigning the use of our facilities to provide better value to our customers and shareholders," said Phil Condit, Boeing chairman and chief executive.
"These actions are in addition to ongoing initiatives to improve productivity and reduce costs," Condit said in a prepared statement.
Boeing acquired the aerospace and defense operations of Rockwell in December 1996 and bought McDonnell Douglas on Aug. 1, 1997.
Investors cheered the decision, sending Boeing's stock (BA) 2 points higher to 53-7/16 on the New York Stock Exchange. Analysts considered the actions necessary to make the behemoth more nimble.
"Boeing is going through a period of record growth in their commercial airline build rates and they have an awful lot on their plate. And so I think it's great that they've finally got around to making these decisions, getting past them and moving on," said Jon Kutler, analyst at Quarterdeck Investments.
Just two years ago, Boeing scrambled to double its monthly production to 40 aircraft. The company lost many highly skilled workers in the early part of the decade during a lull in the business cycle. In addition, assembly lines were slowed by parts shortages.
Now, not even the economic woes of Asia are having a material impact on the production rates, with orders from North America and Europe picking up the slack.
"I think this is good news for Boeing in terms of what's going on in Asia. Boeing cannot get airplanes out the door fast enough to service the domestic market," Kutler said.
"Frankly, if there are any cancellations from Asian customers, what it will help do is to flatten out the cycle, prolong it for a longer period of time, allowing Boeing to be more profitable," he said.
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Boeing
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