After reducing its Washington state workforce by 8 percent in the course of a year, Boeing is planning to cut even more jobs in 2017.
The cuts are expected to come mostly through attrition, not filling open positions and a series of voluntary buyouts, according to an internal message from Boeing’s Commercial Airplanes unit to employees.
But Boeing Vice Chairman Ray Conner and Boeing Commercial Airplanes President and CEO Kevin McAllister warned in the message, obtained by GeekWire, that “involuntary layoffs may occur in some instances.”
This is rough news from the aviation giant, but not entirely unexpected. Last week, Boeing announced plans to cut production of its wide-body 777 jet, which is assembled at its plant in Everett, Wash. At the time, Boeing told employees in a message to expect job reductions next year.
The planned cutback in 777 production from the current 8.3 jets per month to five per month next August points to a dramatic softening in the market for twin-aisle, wide-body jets. Production of Boeing’s 747 jumbo jets has been reduced as well.
“The recent 777 rate-reduction announcement is the latest sign that the market is signaling near-term hesitation for twin-aisle aircraft in certain regions,” Conner and McAllister said in their message. “But it also illustrates the dynamic business climate in which we currently operate, an environment characterized by fewer sales opportunities and tough competition.”
In March, Boeing signaled that it would reduce its workforce by thousands of jobs to make itself more competitive with its European rival, Airbus. The company’s current employment figures bear that out. The largest division, Boeing Commercial Airplanes, trimmed its numbers by 7.6 percent to 77,393 workers between November 2015 and November 2016. The Washington state workforce was reduced 8.4 percent to 72,593.
Conner and McAllister said they expected the January-to-January job reduction in Boeing Commercial Airplanes to amount to 8 percent, including a 10 percent thinning in the ranks of executives and managers.
The bad news was distributed just before the holidays because now is the time when Boeing team leaders are analyzing their budgets and staffing needs.
“We believe it is important to let you know the situation up front so you are aware as you make plans and decisions for the coming year,” Conner and McAllister said.
The grim outlook focuses on sales of twin-aisle, wide-body jet sales, which have been lagging. The prospects are sunnier for single-aisle 737 jets, which are built at Boeing’s Renton plant. Although the single-aisle jets are more popular, they’re less profitable for Boeing.
Earlier this month, Boeing and Iran Air announced a $16.6 billion sale agreement for 50 Boeing 737 MAX jets, 15 wide-body 777 jets and 15 of the 777X jets that have yet to enter production. (Today, Iran Air said it would buy 100 Airbus jets valued at $10 billion, but take a pass on Airbus’ superjumbo A380 planes.)
In today’s message to employees, the executives touted Boeing’s product lineup and said “we have achieved a healthy backlog that currently sustains us.”
“But to successfully compete and win new orders that will fund future product development and growth requires us to achieve much better performance,” they said.
Last week, Boeing CEO Dennis Muilenburg touted the order backlog and increased efficiency as factors behind the board of directors’ decision to increase the company’s quarterly dividend for shareholders.
Trimming back the job count while keeping Boeing competitive in the commercial jet market will serve as a baptism by fire for McAllister, a veteran aerospace executive who joined the company just last month as Conner’s successor.
Here is the full internal message from Conner and McAllister:
“Earlier this year, we committed to competitiveness initiatives to better position Boeing Commercial Airplanes in the marketplace. We believe it is important to be accountable to you concerning the 2016 results, and to let you know we will continue these efforts in 2017 so we remain the true industry leader next year and in the future.
“The recent 777 rate-reduction announcement is the latest sign that the market is signaling near-term hesitation for twin-aisle aircraft in certain regions. But it also illustrates the dynamic business climate in which we currently operate; an environment characterized by fewer sales opportunities and tough competition.
“We continue to follow our plan announced earlier this year to make fundamental changes to win in the market, fund our growth and operate as a healthy business. Teams across Commercial Airplanes have been focusing on the Keys to Winning to improve first-time quality, productivity and safety, and reduce waste. We reduced total employment this year mostly through attrition, not backfilling open positions, and voluntary layoffs (VLOs). We achieved further supply chain savings, sought ways to more efficiently manage use of our facilities and cut discretionary spending, including travel and other non-production costs.
“While we have made progress in reducing costs and improving affordability, we will need to do more in 2017. This means we will continue working aggressively across BCA to reduce non-labor costs.
“It also means we will need to continue to reduce the size of our workforce next year. By the end of this year, we anticipate a reduction of 8 percent in total BCA employment since January. This includes a 10-percent reduction of executives and managers. In 2017, we will continue to focus efforts on matching employment levels to business and market requirements.
“Once again, we will accomplish these reductions through a combination of attrition, leaving open positions unfilled where appropriate, and offering a VLO program in early 2017. Where needed and in some circumstances, we may also need to use involuntary layoffs.
“Right now, each BCA organization is analyzing its 2017 budget and staffing plans. The leaders of your respective organizations will share more information on staffing plans and the specific skills offering VLOs or other employment actions soon. We believe it is important to let you know the situation up front so you are aware as you make plans and decisions for the coming year.
“Our product lineup is the best in the industry and we have achieved a healthy backlog that currently sustains us. There are tremendous opportunities ahead. But to successfully compete and win new orders that will fund future product development and growth requires us to achieve much better performance. Continuing the actions to fundamentally improve our overall competitiveness will ensure our future leadership in the marketplace.”
GeekWire’s aerospace and science editor, Alan Boyle, contributed to this report.
