Jet Deal Likely to Preserve Jobs in Long Beach

Saudi Arabia’s plan to buy about $6 billion worth of jetliners from McDonnell Douglas Corp. and Boeing Co. is likely to save the 11,000 remaining jobs at McDonnell’s struggling Douglas Aircraft Co. division in Long Beach--and perhaps prevent Douglas from failing, industry experts said.

The Saudi order announced Wednesday will help staunch the erosion of aerospace jobs not only at Douglas but also at dozens of Southern California aircraft-component makers--including Northrop Corp., Rohr Inc. and AlliedSignal Inc.--that supply both Douglas and Boeing.

All of those companies have been battered in recent years--forcing layoffs of more than 100,000 workers in California--because of a severe slump in the commercial aircraft industry and ongoing cuts in defense spending.

Although the Saudis have yet to specify which aircraft they want for their national carrier, Saudia Airlines, the order is expected to total between 50 and 65 planes, with Douglas getting at least a third of the order. Douglas also expects Saudi Arabia to buy both Douglas’ MD-11 wide-body and MD-80 or MD-90 single-aisle jetliners.

The orders would be a major boost for Douglas’ future. Having already dropped to a distant third in market share behind Boeing and the European consortium Airbus Industrie--which was shut out of the Saudi plans--Douglas has struggled to sell new aircraft in recent years.

It ended 1993 with two fewer orders than when the year began, after subtracting earlier contracts that were then canceled.

While Douglas is currently profitable, and its backlog of 203 firm orders will keep its assembly line running through most of the decade, the company’s lack of new orders had sustained speculation that Douglas might eventually be folded by its St. Louis-based parent company, which is also one of the nation’s largest defense contractors.

Now, however, the Saudi order should stabilize Douglas’ employment and perhaps even add to it later in the decade, particularly if Saudi Arabia’s purchase spurs other airlines to give Douglas’ jets another look, said Douglas spokeswoman Renee Handler.

“This is not going to immediately translate into vast increases of employment, but it helps stabilize our employment and that’s good news,” she said.

Merely protecting the status quo is crucial these days at Douglas, where employment has plunged nearly 75% from four years ago, when it peaked at about 42,000 people.

The Saudi order could be the bridge Douglas needs to survive until the entire aircraft business recovers, which is expected in the late-1990s. It could also encourage other airlines to reconsider buying Douglas planes in the interim, now that they know Douglas will remain in business for some time.

The order “will allow us to weather the storm as we await the end of the current commercial airline recession,” Douglas President Robert H. Hood Jr. said in a statement.

After hearing President Clinton’s announcement of the deal, more than two dozen laid-off Douglas workers telephoned their union, UAW Local 148 in Lakewood, about the prospects for being rehired.

Douglas Griffith, the local’s president, was in Washington for the announcement and unavailable for comment.

The Saudi order drew cheers from Wall Street. McDonnell’s stock climbed $1.875 a share, to $118.875, and Boeing gained $2.125, to $46.50, in New York Stock Exchange composite trading. But some analysts said Douglas still faces a troubled future.

“They’re not out of the woods yet,” said John Simon, aerospace analyst at Seidler Amdec Securities in Los Angeles. “This is a very specific event. The only thing that will change the outlook for Douglas or Boeing is an uptick in the (business) cycle.”

Among the local suppliers that could be affected is Northrop, whose Hawthorne plant provides the fuselages for Boeing 747 jumbo jets, which are expected to be among the planes added to the Saudi fleet.

“We’re hopeful the 747s will be included, and that it can help preserve the jobs we have,” said Northrop spokesman Tony Cantafio, noting that Northrop’s 747 work force has dropped from 3,000 a year ago to 1,900 today.

Boeing spokesman T. Craig Martin agreed, saying that “in the current environment, something that just helps keep jobs is very important. That is probably going to be the major impact” of the Saudi order.

Officials of some aerospace suppliers said they do not expect to be hiring many workers because of the Saudi order, although they cautioned that the exact impact would not be known until Saudia Airlines, Douglas and Boeing work out the order’s details next month.

“It’s simply too early to tell,” said Valerie McClelland, a spokeswoman at Chula Vista-based Rohr, which supplies engine components to Douglas and Boeing.

Whenever there’s a major boost in aircraft orders, the first to feel it are the parts suppliers, which might have to ship components a year or two before the airplane reaches final assembly.

But just as Douglas and Boeing have slashed costs to counter the industry’s slump, so too have they put pressure on suppliers to cut prices and operate more efficiently. Thus, some suppliers are likely to fill new orders from the Saudi purchase with workers they have.