Boeing cuts as growth slows

As Boeing announced another dose of bad news at the end of 1998 - more job cuts and a slowing down of production - it heads into the New Year hoping to convince Wall Street that these measures will finally put the company ahead of the worldwide economic downturn.

Boeing president Harry Stonecipher says the layoffs and production cuts are necessary because the company sees no market growth in the next few years. "The growth rate has dropped from under us," he says. The Asian situation, he adds, "is not improving. This is about the future. It's our way to try and get ahead of this picture. We think the Asian situation could take another two to five years to recover. We hope it's three."

While Boeing admits that actual numbers of cancellations and deferrals to Asian customers have been "small", and that the number of unsold aircraft originally destined for Asia but now in storage had fallen from 36 to 24 by the end of November, management is concerned about the longer-term outlook.

In 2000 the company plans to build just 490 aircraft, with the axe falling heavily on the Boeing 747 down to just one a month by 2000 (see table). Of the 620 aircraft Boeing plans to deliver in 1999, only 84 are bound for Asia.

Boeing chairman Phil Condit says the company's view now is that the Asian problem is "much deeper and more prolonged than we had first estimated."

A further 20,000 people will lose their jobs at Boeing this year and next, on top of the 28,000 job cuts already announced. This will reduce the workforce from 232,600 to around 185-195,000. "People should be asking why we are spending 20-30% more hours to assemble an aircraft today than we did in 1992-4," says Stonecipher. "Getting back down that curve to the way we were before we got out of control is why we can produce more aircraft with fewer people. But we are not going to do anything stupid. It will be done in a methodical way."

That is a message Wall Street hopes Boeing will be able to deliver.

Boeing production rate forecasts/estimates

Source: Airline Business