SPEEA Questions Reasons For Boeing Layoffs
Jan 14, 2009
By Michael Mecham
Boeing’s drive to reduce costs with 4,500 layoffs this year in response to the worldwide recession doesn’t square with its record backlog and a recently announced 14% quarterly dividend, says the head of the airframer’s engineers’ union.
“These announced layoffs are puzzling,” says Executive Director Ray Goforth of the Society of Professional Engineering Employees in Aerospace (SPEEA). He noted that Boeing Chairman and CEO Jim McNerney said the dividend announced Dec. 10 was because of “our strong financial performance, record backlog and significant liquidity.”
“We wonder what has changed since Dec. 10,” Goforth asks.
Boeing said last week that the layoffs will be concentrated in contract employees, administrative and overhead positions before any production workers or engineers are cut. Some reduction will be accounted for by normal attrition, but those rates are likely to slow because of the national recession. Pink slips are expected to begin flowing immediatley.
SPEEA counts 2,560 contract workers doing jobs that it says should be performed by SPEEA members. It’s unclear how many of those jobs will be at risk, however, because they may be considered essential to getting the company’s production lines up to full speed after last year’s two-month machinist strike and production shortfalls from key suppliers.
Boeing says it hires contract workers to help it get through short-term bottlenecks or because it cannot find qualified personnel to hire full-time.
With delays in every one of its new airplane programs — 777 Freighter, 747-8 and 787 — plus a backlog of 3,700 unfilled airplane orders, the company faces a lot of production challenges in 2009.
The 787 is the biggest headache. One indication of how much it is struggling, says UBS Investment Research analyst David Strauss, is the arrival rate of major assemblies flown in from Boeing’s key foreign and domestic suppliers. December shipments to the 787 factory in Everett, Wash., were “well below pre-strike levels, reflective of the final assembly bottleneck at Boeing,” he says.
While Boeing suffered just seven canceled airplane orders last year, the company’s cash flow has been hit by the strike and production shortfalls. The company receives the bulk of its payments on delivery of each airplane. Anything that delays deliveries interrupts cash flow.
Requests by airlines and leasing companies to delay deliveries, seen as likely given the current international credit freeze, will exacerbate that cash flow problem.
McNerney and CFO Officer James Bell are expected to forecast a big drop in anticipated orders this year, following on the heels of a 50% drop in 2008 and a tightening in the airline business outlook when they report 2008 results on Jan. 28.
Photo: Michael Mecham for Aviation Week & Space Technology
