Boeing plans to cut 8,200 more jobs Most of them in plants of McDonnell Douglas in Southern California

Total cuts to reach 20,000

Aerospace

March 21, 1998|By Greg Schneider | Greg Schneider,SUN STAFF

Boeing Co. outlined a streamlining plan yesterday that cuts 8,200 jobs over the next two years, mostly at former McDonnell Douglas factories in Southern California.

The announcement means the world's largest aerospace company will lop off 20,000 jobs by the year 2000, including 12,000 commercial aircraft job cuts Boeing announced in December.

The Seattle company's work force has swollen to 238,000 because of last August's acquisition of McDonnell Douglas and through the rapid hiring of about 20,000 employees for a serious backlog of airline orders.

"These planned actions will help keep the company competitive for new business opportunities," said Phil Condit, Boeing's chairman and chief executive officer. Condit added that the company will not suffer any charges to earnings from the restructuring.

Experts had been waiting for yesterday's cuts as part of the routine fallout from a major defense industry consolidation. In addition to swallowing McDonnell Douglas, Boeing bought the aerospace and defense operations of Rockwell International Corp. in 1996.

"It's all in accordance with the plans that the company had right at the outset, that the merger will save about $1 billion a year. The action taken today plus what they have previously taken will probably achieve that," said financial analyst Paul Nisbet of JSA Research Inc.

Even so, some analysts couldn't resist pointing out that the total cuts seem unduly large for a company that just a few months ago couldn't hire workers fast enough to keep up with commercial aircraft orders.

"It surprises me that they are cutting this deeply. McDonnell Douglas was already pretty lean," said Stuart McCutchan, who edits the industry newsletter Defense Mergers & Acquisitions.

The biggest single victim of the restructuring is the former

Douglas Aircraft Co. in Long Beach, Calif., where production of the MD-80 and MD-90 commercial jetliners is being halted. That alone represents 3,200 job cuts; another 1,800 jobs at the plant are also being eliminated or transferred.

35,000 jobs lost since '90

When those changes are complete, what's now the Douglas Products Division of Boeing will employ about 15,000, down from 50,000 as recently as 1990.

Most of the jobs will be eliminated through attrition, a spokesman said, and some workers will be reassigned to other parts of the company.

Long Beach had at least some reason for optimism: Boeing committed to continuing production there of the MD-11 jetliner -- as long as it finds customers -- and also kept assembly of the new Boeing 717 aircraft at the plant. Prospects for both of those decisions had been unclear.

Workers in the former McDonnell Douglas military aircraft operations in St. Louis also felt relief yesterday after worrying several weeks about a rumored shutdown. Boeing's plan calls for only token cuts there of about 300 from a total of 22,800 jobs.

The Boeing helicopter facility outside Philadelphia, which employs 6,500, also escaped a rumored deathblow, losing about 900 positions in transfers to other locations.

The plan calls for consolidation of a whole menu of corporate facilities, abandoning about 18 million square feet, or 15 percent of overall factory space.

In addition, the company is taking several steps to unify its newly acquired empire. It will consolidate 10 data centers into three, for instance, and make a single voice and video network out of three separate ones.

The company also will devise common desktop computing standards, as well as company-wide timekeeping, job application and payroll processes.

Boeing struggled last year to juggle both its complex new makeup and a deluge of aircraft orders. It took a one-time charge of $1.4 billion last year to cover costs of the McDonnell Douglas merger, and finished the year with a loss of $178 million.

Stock rises $2

Wall Street rewarded yesterday's restructuring plan by sending Boeing stock up $2 a share to $53.4375.

Analysts said the plan's job and factory cuts could have gone even further if Boeing and McDonnell Douglas had not been such a good fit. Their marriage was a "horizontal" merger, grafting a military aircraft company onto a commercial aircraft company. As a result, there was little overlap and relatively little opportunity to cut personnel.

Lockheed Martin Corp.'s pending purchase of Northrop

Grumman Corp. is running into regulatory trouble because it is just the opposite -- a "vertical" takeover with lots of overlap and the potential for even bigger job cuts, analysts said.

Boeing's announcement "may be the last of the big layoffs," McCutchan said. "The big layoffs have been geared to the mega-mergers, and I don't think we're going to see any more of those after what the Justice Department is doing to Lockheed Martin."

Pub Date: 3/21/98

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