McDonnell Douglas to Trim 17,000 Jobs : Troubled Aircraft Maker Hopes for $700 Million in Cuts

McDonnell Douglas Corp. said today it will cut up to 11% of its work force or 17,000 jobs by the end of the year, including 9,000 in Southern California, under a plan by the troubled aerospace giant to reduce costs by more than $700 million.

“We tried to do everything else,” John F. McDonnell, chairman and chief executive officer, told a news conference. “But in the final analysis we had to come to this.”

The layoffs will affect salaried and hourly jobs at all of McDonnell Douglas’ companies and facilities.

The news release said 4,500 jobs in St. Louis would be lost. In California alone, about 9,000 jobs will be lost, including about 8,000 at the Douglas Aircraft Co. commercial airplane facility in Long Beach. A large portion of the Long Beach cutback had been announced earlier.

In addition, 800 people will be laid off at a helicopter operation in Mesa, Ariz., and another 1,000 jobs will be eliminated elsewhere in the country, the company said. With attrition, job eliminations and layoffs, the company said, up to 17,000 positions could be trimmed.

The cost-cutting plan also includes reduced capital budgets, significant cuts in budgets for travel, consultants, advertising and other support activities, restrictions on overtime and a 50% reduction in company contributions to the salaried savings plans.

In announcing the plan to employees, McDonnell said he “deeply regretted the pain and hardship these cuts will cause to thousands of people who have (been) valued and dedicated employees.”

McDonnell said job fairs, resume services and counseling would be offered to help laid-off workers find new jobs.

The cuts have been expected for several weeks, since the company announced plans for significant layoffs in an effort to cut expenses and bolster its sagging financial performance.

McDonnell Douglas has been struggling financially due to cutbacks in the defense industry and costly development problems in both military and commercial aircraft projects.

The company’s stock was down $1.50 a share at $43.37 1/2 in midday trading on the New York Stock Exchange.

“I believe that we can make these cuts so that they will not jeopardize our technological capability or undermine our ability to deliver quality products on time,” McDonnell said. “What they will do is give us a more competitive cost structure--one that will improve our financial strength and increase our ability to satisfy our customers.”

McDonnell Douglas earned $2 million during its first quarter, down 98% from a year earlier. The drop stemmed mainly from huge losses at Douglas Aircraft, which primarily builds commercial jets.

The company, the nation’s biggest defense contractor, also faces an uncertain future in the defense business as the Pentagon slashes spending.

The Senate Armed Service Committee on Friday approved a $289-billion defense authorization bill that would slash the Pentagon’s proposed budget further and cloud the future of several major aircraft programs.

The company faces serious cost problems on three military programs, the C-17 cargo plane, the A-12 advanced tactical aircraft and the T-45 Goshawk trainer.

It also faces large investment costs in its not-yet-certified MD-11 commercial jumbo jet.