Boeing warns employees of job, cost cuts

Boeing Co. will cut jobs and reduce costs in 2009 to help offset expenses from aircraft program delays and to brace for possible order cancellations, Chief Executive Officer Jim McNerney told employees.

Employment may decline more than 5 percent in 2009 after several years of steady growth, McNerney and Rick Stephens, the head of human resources for Chicago-based Boeing, told workers in a memo today. The world's second-largest commercial-plane maker will make the cuts by leaving positions unfilled, firing contractors and layoffs, Stephens said.

Boeing has incurred higher development costs because of delays to three of its new models, the 787, 747-8 and 777, brought on by problems with suppliers, parts shortages, redesigns and an eight-week strike by machinists that ended Nov. 2. The strike cost the company more than $10 million a day in profit.

"We believe it's important to take these kinds of actions to protect our competitiveness" amid "significant challenges the company's facing in 2009," spokesman John Dern said. "This is not an across-the-board kind of mandate. Some parts of the company will still be hiring."

Boeing is also reducing discretionary spending, such as travel, and taking other measures to lower expenses and boost productivity.

The cuts are in addition to those announced yesterday in Wichita, Kansas, where Boeing's defense unit is laying off 800 workers, or about 27 percent of the workforce there. Details of the new measures will be released as plans are completed for each business unit, Stephens said in the memo.

Boeing Employment

"While no firm estimate has been made, the employment decline could exceed Boeing's average annual attrition rate of 4 to 5 percent and will be composed of a mix of normal attrition, hiring freezes and layoffs," today's memo said. Boeing employed 164,192 workers as of Oct. 31, a 5 percent gain over 5 years ago, according to its Web site.

Boeing, which is also the second-largest U.S. defense contractor, is also preparing for a possible moderating in military spending because of the government's focus on a financial bailout. The company said today that the 2009 "challenges" include the Pentagon's postponed decisions on programs such as the $35 billion aerial refueling tanker and a new military communications satellite.

Boeing has been hiring back workers it had laid off in the post-Sept. 11, 2001, air-travel slump, as airlines have placed record orders the past three years for newer, more fuel-efficient planes. The company's $276 billion order backlog for 3,734 aircraft would take machinists more than seven years to build. The planemaker has said some carriers may cancel orders as the impact of the global recession hurts traffic.

At the same time, competition is increasing from larger commercial rival Airbus SAS, which began implementing a cost- cutting program last year, as well as new competitors starting up in China, Russia, Japan, Canada and Brazil.

"To protect the competitiveness and innovation responsible for building our record backlog -- and to best serve our customers -- we must respond aggressively to these business realities," McNerney said.