Boeing Runs Into Some Turbulence : Economy: The recession has spared much of the Seattle area. But with some cutbacks at the aerospace giant, Puget Sound may again find its fortunes tied a bit too tightly to Big Daddy’s.

The first signs of a slowdown at Boeing Co. are stirring some anxious memories around Puget Sound.

Longtime residents are recalling the great Boeing Bust of the late 1960s.

The aircraft maker’s Seattle-area payroll had hit a record high on the strength of orders for its new 747 jumbo jet and government-backed research for a Supersonic Transport.

But then the Tarmac gave way as the SST got the ax and airlines, sliding into recession, began canceling 747 orders. Boeing slashed employment, and the decimated Seattle area vowed never again to be so dependent on a single paymaster.

And now, 20-some years later--with recession again snuffing out a years-long boom--Boeing once again is hitting some bumps.

Rocked by a languishing stock price, competitive threats, cuts in defense spending and delays in commercial orders from United and American airlines, Boeing says it may have to eliminate 6,500 jobs in Washington by year-end.

This time, the Seattle area’s economy is more diversified and--at least until a major retailer recently began a going-out-of-business sale--had managed to stave off most of the recession’s pain. But Boeing has had so much success until lately that Puget Sound again finds its fortunes tied perhaps a bit too tightly to Big Daddy’s.

As a result, Seattle--which feels the heartburn whenever Boeing burps--is having a few Maalox moments.

“With the U.S. recession finally making some inroads into the Pacific Northwest, it’s a bad time for Boeing’s customers to start to cry uncle,” says Michael J. Parks, a longtime observer of Boeing who edits Marple’s Business Newsletter in Seattle.

Seattle and Washington state aren’t the only ones that stand to suffer if Boeing falters. The world’s leading maker of jetliners--accounting for nearly 60% of the free world’s market for airplanes--Boeing is also the United States’ leading exporter, responsible for an estimated $17 billion of the nation’s $43 billion in aerospace exports last year.

Boeing executives, for their part, say they’re prepared to deal with the turbulence.

“The company has weathered some difficult months and (is) pretty well postured to ride out what’s ahead of us,” Chairman and Chief Executive Frank Shrontz said in a recent interview at Boeing’s Seattle headquarters.

Indeed, it isn’t as though Boeing is in danger of doing a belly-flop.

Optimists note that the company has an enormous 1,643-plane backlog of orders worth nearly $100 billion stretching out till the turn of the century. In addition, Boeing’s formerly money-losing defense side has been slimmed down and turned around. And hefty expenses for development of the company’s newest wide-body transport--the 777, due in 1995--should head down in a year or so, paving the way for improved profits.

Nonetheless, the clouds that recently have blotted Boeing’s horizon suggest to some industry analysts that the top dog in this high-stakes cyclical industry faces at least a couple of years of rough going. How firm, bearish observers wonder, can Boeing’s backlog be with the airlines losing billions of dollars?

“This year we’re seeing peak demand” and earnings for Boeing, said George D. Shapiro, an aerospace analyst with Salomon Bros., the New York investment firm. “I basically think production rates will continue to come down.”

In January, Boeing reported record earnings of $1.57 billion for 1991 on sales of $29.31 billion. That was up from profits of $1.385 billion on sales of $27.595 billion in 1990. But the company warned of an uncertain outlook for airlines and of likely defense-program cuts.

The bad news began piling up last fall.

First, loss-plagued AMR Corp.--parent of the nation’s largest carrier, American Airlines--applied the brakes to its fast-growth strategy, announcing in September that it would cut back on jet purchases. Boeing’s share price fell on the news.

American is deferring--or passing on--most of its options to purchase aircraft in 1993, 1994 and 1995, including 45 options on Boeing 767s and 757s. An American spokesman said the company has 62 firm orders for Boeing jets still on target for delivery by the end of 1993.

In October, after Boeing heard from the Pentagon that its work in three major defense programs would be ended, the company instituted a companywide hiring freeze.

In December, Shrontz told reporters that if the airplane business did not improve by early 1992, “we could end up with a significant problem.” Viewed as a warning of possible disruptions in Boeing’s manufacturing, that sent the company’s stock nose-diving $3.125 a share to $41.375.

(The shares closed Friday on the New York Stock Exchange at $46.25, well below the $60-$65 range that aerospace analyst Michael S. Rosen of Smith Barney in New York considers to be “fair value.”)

The next day, the company took the unusual step of clarifying Shrontz’s remarks, noting that they were “broad and directed at the overall health of the airline industry and the U.S. economy, not specifically to Boeing and its near-term outlook.”

Then last month, Boeing’s biggest U.S. customer, United Airlines, issued a muddled statement about plans to reduce capital spending by $6.7 billion by holding off on the purchases of 122 planes over the next three years. The airline specified that 104 of the delays would be in orders for Boeing 737s and 757s, leaving uncertain how the additional 18 cuts would be accomplished.

Two days later, without alerting Boeing, as would be the normal practice, United disclosed to securities analysts that it was reducing to five from 11 the number of Boeing 777s that it would accept in 1995, the year the first of the new jets are to be delivered.

Boeing officials maintain that they have had no discussions with United about delaying any 777s. “We expect them to take delivery of 11,” said Richard R. Albrecht, executive vice president in charge of sales and marketing for Boeing Commercial Airplane Group.

Investment analysts speculate that the drastic steps by American and United could signify a fundamental change in the way airplane deals get made in the future. Some suggest that United, which in January reported a loss of $252.6 million for the fourth quarter, might have had a motive in releasing its bombshell in the way it did.

“I think what’s going on here is that United was making a show so that it won’t have its credit rating lowered,” said William Whitlow, with Pacific Crest Securities in Seattle.

Soon after, Boeing’s annual payroll prognosis put Seattle on notice that planned cuts in Pentagon spending on the B-2 Stealth bomber and some missile programs, along with the slowing demand for commercial aircraft, could mean elimination this year of 6,500 jobs in Washington--and 1,500 more elsewhere--through layoffs and attrition.

Most of the job losses, the company said, would result from reduction in the 737 production rate to 14 airliners per month from 21, a reflection of the slow domestic market.

Meanwhile, as the domestic airline industry struggles with steep losses, bankruptcy reorganizations, liquidations, the travel slump and gross overcapacity, competition for Boeing looms in the market for jumbo, long-haul jets.

That niche--which has been a highly profitable monopoly for Boeing’s 747--faces invasion by McDonnell Douglas and Airbus Industrie, the jet-making consortium supported by four European governments.

McDonnell plans to join forces with Taiwan Aerospace Corp. to build its MD-12, designed to carry about 375 passengers and be a cost-efficient alternative to Boeing’s 747-400. It is scheduled for delivery in 1997, though the Taiwan deal is moving ahead more slowly than expected.

Airbus--with which the United States has fought a running trade war--will begin delivering two somewhat smaller jets in 1993. Just two decades old, Airbus managed last year to command a formidable 28% of the orders for commercial jets, according to Aviation Data Service in Wichita, Kan.

Airbus also claims to be well along in developing a super-jumbo plane, still several years away, that would carry 600 to 650 people, to compete with a 650-seat model for which Boeing is drafting plans. The planes would serve the burgeoning Asia-Pacific routes.

At a congressional hearing Thursday in Washington, a Boeing official reiterated the company’s concerns that a Taiwanese partnership with McDonnell would create another subsidized airplane manufacturer. Taiwan Aerospace, a fledgling venture backed by Taiwan’s private sector and government, has tentatively agreed to buy as much as 40% of Douglas Aircraft, McDonnell’s struggling commercial jetliner business, though an executive said Friday the investment could be scaled back to a 25% stake.

Creation of an “Asian Airbus” would leave Boeing as the only major civil aircraft maker subject to open-market forces, testified Larry Clarkson, Boeing’s vice president for planning and international development.

John Thom, a spokesman for McDonnell’s Douglas Aircraft unit in Long Beach, responded: “The notion that we’re going to be subsidized is wrong. We will finance operations through returns on ongoing operations . . . and future programs.”

David Venz, a U.S. spokesman for Airbus, said the consortium’s European partners “would never deny that it has been the recipient of government support.” But that support, he noted, has been in the form of loans. Boeing itself, he contended, has benefited indirectly from Pentagon support, given that some of its jet programs--including the 747--had their roots in military projects.

Despite the current slowdown, signs of cautious optimism exist at Boeing.

At the company’s vast 747 factory north of Seattle in Everett--already the world’s largest building--construction workers are rapidly adding more than 6 million square feet of space to house 777 production.

Meantime, western Washingtonians keep a close eye out for evidence of the recession that so far has skirted them, thanks in large part to Big Daddy Boeing.

Boeing routinely lags the general economy by several months, and some fear that Seattle could be in for a strong dose of downturn. One troubling sign is that Boeing’s aircraft orders slowed in 1991 to 257, down from the heady levels of 1989 and ‘90, when customers ordered 875 and 543 jets, respectively.

“Boeing is so unpredictable,” said Dick Conway, a Seattle economist. “It didn’t anticipate the growth it had in the ‘80s. It historically has not . . . grasped the magnitude of previous downturns. So everybody sits here with fingers crossed, hoping we don’t have another recession.”

Times staff writer Ralph Vartabedian in Los Angeles contributed to this story.