As Boeing begins its second century, the Seattle-born company is facing a slew of daunting challenges. But 2017 isn’t like the 1970s, when the Boeing Bust prompted a pair of real-estate salesmen to put up a billboard reading “Will the Last Person Leaving Seattle Turn Out the Lights?”
There’s still plenty of business to keep the lights on at Boeing’s plants in Everett and Renton. The challenges have more to do with how brightly they’ll burn in the years ahead, and whether Boeing’s historical role as Puget Sound’s biggest employer will be overshadowed by other companies.
2017 is shaping up as a key year for several reasons:
- President-elect Donald Trump already has stirred up a debate over the federal government’s aerospace spending, focusing on the Boeing-built 747 jets that are due to replace Air Force One within the next few years, as well as Lockheed Martin’s even costlier F-35 fighter jet program. Trump seems to have come to a meeting of the minds with Boeing CEO Dennis Muilenburg – a “terrific guy,” in the words of the president-elect. Nevertheless, Boeing’s military programs, such as the KC-46 tanker project, are likely to come under closer scrutiny.
- Other issues could complicate the lives of Boeing executives during the Trump administration, including the company’s recent multibillion-dollar sale to Iran Air, the fate of the Export-Import Bank, and the status of Boeing’s completion and delivery center in China.
- Boeing’s commercial airplane division is just coming off a year during which it’s had to reduce its workforce by 8 percent, and further job cuts lie ahead. The market for wide-body airplanes is much softer than expected, as pointed up by Delta’s cancellation of a decade-old Northwest order for 18 twin-aisle 787 Dreamliner jets. Boeing has had to reduce production on its 747 and 777 lines, and is having to cut costs to stay competitive with its European rival, Airbus.
- Boeing and Airbus are at the center of two rulings rendered by the World Trade Organization this year, accusing both companies of benefiting from unfair trade practices. It’ll be up to European and U.S. negotiators to work out a compromise – but that’s likely to take well more than a year, and Trump’s “America First” stance on trade and tariffs could make the job more complex.
All this is a tall enough order for Muilenburg, who became Boeing’s CEO less than 18 months ago. But Boeing has another important transition to deal with in its own ranks: The longtime head of Boeing Commercial Airplanes, Ray Conner, is handing over the reins to an outsider, Kevin McAllister. At the same time, Boeing is revving up a newly created division devoted to aviation services.
In the long run, maintenance services is slated to become a significant profit center, contributing $50 billion a year to Boeing’s balance sheet. But in the short run, the organizational chart and will be going through significant changes.
The focus on short-term challenges and long-term prospects applies to Boeing more broadly as well. The company says it has built up a production backlog that’s hefty enough to see it through the next few years, and it’s looking ahead to Boeing’s next big things: the single-aisle 737 MAX, the next-generation 777X and a yet-to-be-revealed airplane to serve the “middle of the market.”
“Ultimately, Boeing is in the plane-building basis, and not the plane-not-building business,” Rich Smith says today on The Motley Fool’s website. “As soon as market demand justifies it, we’ll see that 777X production line spin right up. And with any luck, that will pull Boeing’s profits right up with it.”
A little perspective is also in order: Back in the 1970s, Boeing had to cut its workforce from 80,000 to 32,500. That’s way more drastic than anything envisioned in the worst-case scenarios for the years ahead.
Also, the Seattle region’s job market is way more diverse today. Although Boeing is still the biggest employer, with roughly 72,000 workers in Washington state, the region’s high-tech industry has two homegrown titans that didn’t exist 50 years ago: Microsoft (with 43,000 full-time employees in the state) and Amazon (with 30,000).
Add in all the other tech companies that have taken root in the Seattle area, and you’ve got enough activity to keep the lights on day and night. That’s not to say Boeing is a dim bulb. In fact, you could argue that the engineering expertise fostered by Boeing helped lay the groundwork for Seattle’s status as the Cloud City as well as the Jet City. That should provide an extra glow of optimism as we head into a challenging year.