Rosy Post-Merger Future Painted for Douglas Plant
As the good news that the European Union gave an 11th-hour approval to their $16-billion merger was sinking in Wednesday, the leaders of Boeing Co. and McDonnell Douglas Corp. offered a bullish assessment of McDonnell’s aircraft operations in Long Beach.
In an upbeat joint news conference, McDonnell Douglas Chairman Harry Stonecipher said the outlook for the 19,100 employees at its sprawling facility in Long Beach is “very positive.” The company’s success in turning around its once-troubled program to produce C-17 military cargo jets is a major factor, along with efforts to develop an MD-17 commercial version of the plane, he said.
Phil Condit, the Boeing chairman who will head the combined company when the merger closes Aug. 1, also praised McDonnell’s new 100-seater MD-95 passenger jet. The Douglas Aircraft division has taken orders for 50 planes from ValuJet Airlines Inc., with options for 50 more, and is scheduled to deliver the first of those planes in the summer of 1999.
“There are a number of things about the MD-95 that I find attractive,” especially the option of manufacturing versions with as few as 80 seats, Condit told reporters assembled at the Mayflower Hotel in Washington, D.C. Boeing does not sell a 70- to 100-passenger plane and has long been considering adding one to its lineup.
The MD-95 is McDonnell Douglas’ only new plane, and the very first of the jets is now in the middle of final assembly in Long Beach. Its initial test flights are scheduled for June 1998. A final decision on the program will depend on a detailed financial analysis, which federal laws prohibit Boeing from doing until after the merger is officially consummated.
The MD-95 may play a critical role in determining whether Douglas Aircraft products will continue to be produced after the two companies combine their operations on Aug. 4. Boeing executives have repeatedly stressed that the marketplace will determine which planes will continue to be produced.
But on Wednesday, Stonecipher said he anticipated the Douglas Aircraft product line would have life over the foreseeable future. Boeing, which has a large backlog of orders for its jets, is also expected to shift some of its production to Long Beach.
“We don’t have to talk about people losing their jobs,” he said.
Lehman Bros. analyst Joe Campbell said he expects Boeing to offload some of its extra manufacturing work to Long Beach very quickly to relieve the burden on its plants in the Seattle suburbs of Everett and Renton.
“There is no question in my mind,” he said. “They are going to fill up Long Beach right away.”
Still an open question is how much Boeing will invest in the Douglas Aircraft and Military Transport Aircraft facilities and whether Long Beach will become the firm’s first major assembly site outside the Puget Sound area.
Campbell said Southern California is a logical place for Boeing to go for a new production site, but that Long Beach might not be the best choice in the region. The firm also acquired a big production complex in Palmdale after its acquisition of Rockwell International’s aerospace business.
Two integration teams have been working to determine how all of the former Rockwell and McDonnell Douglas plants will be folded into Boeing’s operations, Condit said. The production processes of various plants will be realigned to ensure each is handling the most efficient tasks, he said.
In one of several last-minute concessions to win the approval of European Union regulators, Boeing agreed to maintain McDonnell Douglas’ commercial aircraft business as a separate legal entity for 10 years so it can supply the Europeans with an annual report on its business activities. But Boeing spokeswoman Sherry Nebel said that was “a bookkeeping issue” and should not be taken as a sign that the Long Beach facility will necessarily remain open for the next decade.
Vartabedian reported from Washington and Kaplan from Los Angeles.
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