Douglas Stock Tumbles 10% on News of More Cutbacks

McDonnell Douglas stock was battered Thursday following the previous day’s announcement that it will attempt to cut $700 million in annual costs, which will force an estimated 10,000 additional layoffs on top of 7,000 previously announced.

McDonnell stock was knocked down more than 10% in one day, closing trading Thursday at $35.75, off $3.75 per share. And Moody’s Investors Service said it has placed under review the ratings of McDonnell’s senior debt and its commercial paper.

McDonnell’s debt has already been downgraded twice in the past year and is currently at the lower end of investment grade securities. The company’s debt is rapidly mounting and many experts are worried that it could face a cash squeeze by the end of this year.

“Given some of the statements I see from financial analysts, I would have thought our stock would have held up a little better today,” said McDonnell Douglas spokesman Michael Burch. He was referring to analysts’ comments suggesting that the cost-cutting move was badly needed by the company.

Separately, Burch said that a newspaper advertisement appearing in the Los Angeles Times Wednesday, in which the company was seeking applicants at its Douglas Aircraft unit in Long Beach, was not in accordance with the decision to freeze hiring as part of the cost-cutting program.

“The advertising people did not know about the cost-cutting exercise,” Burch said. He added that the delay between ordering an ad and the appearance of the ad contributed to the problem.