McDonnell Douglas to Reorganize, Cut More Jobs : Aerospace: Plants in Culver City and Ohio are slated to shut. The firm may also sell its helicopter business in Arizona.
McDonnell Douglas, the aerospace giant beset by a sliding defense market and problems in its commercial aircraft business, said Monday that it will consolidate its organization, shut down major parts plants in Ohio and Culver City, and possibly sell its helicopter business in Arizona.
The St. Louis-based company said it will consolidate six defense divisions into two groups, leaving its Douglas Aircraft commercial unit in Long Beach as the only autonomous operation. It also announced the creation of a new office of the chairman, made up of five company executives.
The announcement pushed McDonnell shares up $2.25 to $37.625 in New York Stock Exchange trading Monday, after the stock was pummeled last week when the firm reported a sharp drop in second-quarter profit and higher debt. McDonnell stock, worth a total of $1.4 billion, is trading at about one-third of its book value.
The company also disclosed in a lengthy announcement that it will close its Culver City parts manufacturing plant--apparently in 1994--which employs 900 workers. The company said the plant closure was announced previously, but did not elaborate. No record of such an announcement could be found by The Times.
The Culver City closure will follow the shutdown next year of the firm’s parts plant in Torrance, which will eliminate about 2,000 jobs. McDonnell has been aggressively cutting its presence in Southern California for more than two years.
Aerospace analysts said the reorganization is welcome news, though it remains unclear whether the executive reshuffling will solve the company’s long-term problems.
“We still don’t know yet whether this is a harbinger of bigger and better things or whether it is just another reshuffling of people,” said PaineWebber analyst Jack Modzelewski. “People are waiting to see if this is a fundamental shift of policy.”
The reorganization of its divisions into two groups “will lead to other staff consolidations on a regional basis as duplicated services are eliminated,” the company said, but executives declined to estimate the size of potential layoffs.
Aerospace analyst Wolfgang Demisch of UBS Securities, citing the roughly 30,000 job cuts made by McDonnell already, said he expects several thousand additional reductions as a result of the consolidation.
“Times are tough,” he noted.
The firm will close down its Columbus, Ohio, parts fabrication facility, which it took over from Rockwell International four years ago. The plant, owned by the Air Force, now employs 1,000 workers making parts for the C-17 cargo jet and the MD-11 and MD-80 passenger jets.
The firm is likely to transfer some of the production work from Columbus to its St. Louis operations and its large facility in Huntington Beach, said Kenneth A. Francis, president of McDonnell Douglas Space Systems Co. in Huntington Beach.
Company Chairman John McDonnell said the reorganization is part of a strategy to concentrate on businesses where it can be the market leader or second-ranking producer.
As part of that plan, the company said it will seek to sell of find a joint-venture partner for its helicopter business in Mesa, Ariz., saying it would take too much time and money to make it a leader. The unit makes the Army’s AH-64 Apache attack helicopter.
McDonnell acquired the operation, the former Hughes Helicopters Co., in 1984 for about $450 million. Demisch, the aerospace analyst, estimated the unit earns $60 million annually and might fetch $500 million to $600 million if sold.
The company said the commercial jetliner portions of its Douglas Aircraft unit are largely unaffected by the reorganization. But management of the C-17 program, historically part of Douglas Aircraft, will be shifted to a new manager in St. Louis.
Under the new corporate organization, one group will consist of jet fighter maker McDonnell Aircraft, McDonnell Douglas Missile Systems and McDonnell Douglas Helicopter Co. John Capellupo, current president of McDonnell Aircraft Co. in St. Louis, will head the group as executive vice president.
The other group will consolidate Space Systems Co., Electronic Systems Co., the company’s troubled C-17 military airlifter project and other military portions of Douglas Aircraft Co. It will be headed by Francis of McDonnell Douglas Space Systems.
The new office of chairman will include Capellupo, Francis, McDonnell, Chief Financial Officer Herbert Lanese and President Gerald Johnston. Douglas Aircraft President Robert Hood, who was not included in the office of chairman, will report directly to McDonnell and Johnston.
Several aerospace analysts have criticized the leadership and management of John McDonnell and speculated Monday that the new office of the chairman might be a response to those concerns. But another analyst noted that other companies have created offices of the chairman to strengthen management.
