Boeing, Citing Asia, to Cut 747 Production

Boeing Co. executives said Wednesday they expect to cut back production of the 747 jumbo jet next year because of weakening demand blamed on the Asian financial crisis.

The world’s biggest airplane manufacturer, which has been besieged by production problems that have cost it nearly $3 billion since the fall, is in the process of completing a long-scheduled increase in the rate of 747 output to five a month from four.

But Boeing commercial airplane group President Ron Woodard said the rate probably will be cut back again in about a year, although he did not specify a new rate.

“The rate will be down in mid-’99, we think,” he said in a conference call. “We have to figure out when and what we go to.”

Boeing executives said they continue to be hampered by production problems, especially on the next-generation 737 model, which could face delivery delays through the end of the year.

“It’s clear that we are still not out of the woods,” Fred Mitchell, executive vice president of the airplane group, said in a statement.

Boeing’s problems include more assembly line delays related to the dramatic increase in aircraft production and also problems in delivering finished aircraft, analysts said.

Behind-schedule jobs, which refer to each delayed step of aircraft assembly, have risen to just over 27,000 from about 23,000 a month ago, executives said, although they noted that the number of aircraft being produced has also risen.

Several planes are being flown to a former McDonnell Douglas plant in Long Beach for preparation before delivery. Woodard said a decision will be made this summer on whether to move some 737 assembly work there as well.

He said there would be only a “minimal” expense involved in such a move. A shift of work to California would ease the strain on the company’s suburban Seattle plant, which is at maximum capacity, he said.

Boeing said it has delivered 34 commercial jets so far this month and expects to deliver 10 more by month’s end. That means the manufacturer will have to deliver 61 jets next month to meet its target of 250 planes in the first half of the year.

Boeing stock fell 75 cents a share to close at $46.50 on the New York Stock Exchange.

Boeing has been struggling with production problems since it dramatically boosted aircraft production to meet rising demand. The Seattle-based company has gone from producing about 18 aircraft a month in April 1996 to 26 in early 1997 to 49 expected by the end of this year, including models formerly made by McDonnell Douglas, which Boeing acquired.

Boeing has raised production of the next-generation 737 to 14 a month from seven and is boosting 777 production to seven from five.

Boeing Chief Executive Phil Condit said 777 production is unlikely to be affected by the Asian crisis because U.S. airlines are making up for any drop-off in demand from the troubled region.