Published August 2003

Boeing’s commercial group to lay off 5,000 more

By Bryan Corliss
Herald Business Writer

The huge layoffs announced recently by the Boeing Co. ensure that Snohomish County won’t recover from its economic slump before the end of this year, an economist said.

“We’re not going to see a turnaround until we get to the end of this stuff,” said state regional economist Donna Thompson.

Boeing announced July 17 that it will lay off up to 5,000 more commercial airplane workers this year, on top of the 5,000 it already had planned to cut.

That will mean, by year’s end, the elimination of almost 40,000 workers since the layoffs started in December 2001, most from the Puget Sound area.

Boeing Commercial Airplanes chief Alan Mulally described the cuts as “extremely painful for all of us at Boeing.”

“This is an unprecedented and very difficult time for all of us in the commercial aviation business,” Mulally said in the statement announcing the layoffs. “Many of our airline customers continue to face significant challenges.”

Critics said the layoffs indicate that Boeing is focused only on short-term profitability.

Preserving a skilled work force is “essential to the long term,” said Richard Aboulafia, an analyst with the Teal Group in Virginia. “The bad news is no one thinks about the long term anymore.”

Unlike previous layoffs, assembly-line workers will largely be spared this time, said Machinists union District President Mark Blondin. Only about 10 percent of the new cuts will involve Machinists, he said.

“That’s still 500 families that are going to be affected,” Blondin said.

Boeing spokesman Bill Cogswell said a combination of factors, including the outbreak of SARS, or severe acute respiratory syndrome, led to the decision.

“It’s not just one thing,” he said. “It’s just the state of our industry right now.”

As recently as May, Boeing Chairman Phil Condit said Boeing was nearing the end of layoffs in the Commercial Airplanes division.

Boeing won some significant new orders in July, including the 45-jet All Nippon Airways deal and the 34-jet AirTran deal. The company also is poised to close the long-debated, 100-jet 767 tanker deal.

But most of those planes won’t be built for a couple of years, Cogswell said. “It’s not really an impact to our immediate situation here.”

Analyst Bob Toomey said the Boeing cuts were inevitable given “the global competitive pressures — primarily Airbus — combined with the obvious serious depression we’ve had in the airline industry.”

“It’s an unpleasant but brutal reality,” added Toomey, with RBC Dain Rauscher in Seattle. “Obviously, you hate to see anybody lose their job, but that’s the bottom line.”

However, union leaders said Boeing’s bottom-line focus is shortsighted.

The layoffs have “torn a significant amount of capacity from the company,” said Bill Dugovich, spokesman for the Society of Professional Engineering Employees in Aerospace. “This has hit and will continue to hit at the Boeing Co.’s capability to do the work it has to do.”

Aboulafia said Boeing is trying to convince shareholders that the key to future success is higher profits now.

“Money rules. Long-term considerations are in the back seat,” he said.

But Blondin said the problem lies less with Boeing leaders in Chicago than with the Bush administration in Washington, D.C., which has done little to stimulate the economy.

“It ain’t Chicago that’s not buying the airplanes,” he said. “The fact is, they don’t have the orders. The economy is in the toilet.”

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