Boeing’s Overhaul Plan May Include Job Cuts, Closures

Boeing Co. will announce as early as today a sweeping overhaul of its employment and facilities plans, and speculation is high that the company will add a new jet assembly line in Long Beach. But the aerospace company may spurn California efforts to host assembly of the potentially lucrative Joint Strike Fighter if it wins the project.

The Seattle company has for months been weighing those and other aspects of a far-reaching plan to reduce its payroll and consolidate its many plants and offices spread around the nation.

Many of those facilities are in Southern California, where Boeing inherited operations after it bought McDonnell Douglas Corp. and Rockwell International Corp’s aerospace and defense operations.

Boeing’s Space Transportation unit, which has more than 27,000 employees--16,000 in California--is headquartered in Seal Beach, at the former Rockwell headquarters site. The Space Transportation unit’s Expendable Launch Systems division, with about 6,000 employees, is based in Huntington Beach, at the former McDonnell Douglas Space Systems facility. Boeing also has a major defense electronics operation in Anaheim with about 4,000 employees.

Some major layoffs and consolidation moves were announced earlier this year, but it is unclear whether Boeing’s new plan will include further reductions in the region.

In March, the company announced plans to close its Monrovia plant and cut more than 6,000 jobs from various Southern California locations, including about a third of the work force in Long Beach. Boeing also shuffled work among Los Angeles-area plants.

But investors have been pressing hard for more cutbacks, as production line problems have cut into profits. Uncertainty over Asia’s economic woes has dampened revenue projections and further depressed the company’s stock price.

In recent announcements, Boeing has talked of cutting as many as 28,000 jobs in the next 18 months--but the company has not yet specified where the jobs would be eliminated.

“Boeing has to bring down costs in all its areas, but especially in space and defense,” said Jack Modzelewski, an aerospace analyst at PaineWebber Inc.

Speculation about the latest reorganization--which Boeing has said it would unveil by mid-August--has been rampant for months, especially in Long Beach, where employees have been hoping for more commercial plane work to help offset impending layoffs.

The source of their optimism is Boeing’s proposal to shift assembly work of some versions of its popular 737 jets to Long Beach to ease a production crunch on the 737 lines in Renton, Wash.

Though the plan has technically been a “study,” preparations for the possible line have been thorough, including sending shipments of mock 737 components to test the rail access to Long Beach and spending money to order a new crane and install new crane rails in the building targeted for the new line.

The proposal has infuriated workers in the Seattle area, who object to the Long Beach transfer and have been submitting counterproposals in an attempt to keep the work in Washington state. The result has been an awkward and divisive standoff between Boeing employees in Southern California and the Puget Sound area.

Government officials in both states have also been involved. In California, the Trade and Commerce Department and the city of Long Beach have been offering Boeing tax credits, employee training and other incentives to bring more work to Southern California.

“We’re going to do everything we can to help stabilize them in Long Beach,” said Randal Hernandez, chief of staff to Long Beach Mayor Beverly O’Neill.

If the plan is carried out as expected, the Long Beach work force would build versions of the new 737s that are not mass-produced, such as the Boeing Business Jet and a convertible freighter (both derivative of the 737-700). Boeing officials have previously said production could begin in Long Beach by the end of the year at a target rate of three to five planes per month.

Boeing is also said to be considering clustering some airlines’ 737 orders in Long Beach--possibly orders from Delta--as well as setting up a Long Beach assembly line for the 737-900, a larger jet that is not yet in production.

For now, though, Boeing is likely to commit to the low-rate 737 production. And although the new work would be widely celebrated at the former Douglas Aircraft facilities, it is likely to absorb only a few hundred of the thousands of jobs scheduled to be lost in coming years.

“Even with three to four 737s a month, and hopefully a reasonable number of 717s, that still is going to leave a lot of Long Beach a pretty empty facility,” said Howard Rubel, an aerospace analyst with Goldman, Sachs & Co.

Boeing will phase out production of the remaining McDonnell Douglas planes, including the MD-80, MD-90 and MD-11 by early 2000. Together the three projects employ about 6,500 workers in Long Beach.

The 717, a new 100-seat plane originally called the MD-95, will soon make its first flight and is the only commercial plane with a definite future in Long Beach.

But the former Douglas workers are optimistic, according to Kedrick Legg, president of United Aerospace Workers Local 148, which represents 7,500 Boeing employees in Long Beach.

“I don’t think Boeing will waste all those [skilled] people,” Legg said. “I just think a lot of good things are going to happen.”

California officials have also been eyeing another prize: the assembly work for the military’s Joint Strike Fighter, the subject of a competition between a Boeing-led team and one led by Lockheed Martin.

However, both companies have repeatedly hinted that they would build the plane outside California. Lockheed Martin is expected to choose Texas and Boeing is expected to pick St. Louis and might announce that choice today.

Nonetheless, the Legislature included in the budget an incentive package aimed at passing cost savings to the winning company through the use of California-based subcontractors.

“This has the potential to be very, very big,” said Will Smith, legislative director to Assemblyman George Runner Jr. (R-Lancaster), who pushed for the incentive plan. “We want final assembly, but if we can’t get final assembly, we want as much of the subcontractor work as possible.”