Published November 2002

Boeing reports decline
in earnings, layoffs to come

By Bryan Corliss
Herald Business Writer

The Boeing Co. will lay off at least 1,200 support staff workers over the next six months and will conduct new performance reviews of nonunion workers in the Commercial Airplanes Group in anticipation of further job cuts there, employees were told in October.

The news came after Boeing reported its third-quarter earnings had fallen 43 percent from last year’s level. The company also trimmed its revenue and profit forecast for 2003, and announced a slight cut in its projected production for the coming year.

The warnings are the first official acknowledgement that another round of layoffs is coming.

Boeing already has cut almost 30,000 workers — 20,000 of them in the Puget Sound region — in the past year.

“We are in a dramatically changed business environment,” Boeing Chairman Phil Condit told industry analysts and reporters. “Overall, the downturn is severe.”

But the announcements are not directly linked to the recent announcement that Boeing had lost a key sale — a deal for 120 single-aisle jets to British low-fare carrier easyJet.

“Our future employment levels will be determined based on our production rates going forward, which will be driven by total orders, not by individual competitions,” Commercial Airplanes Vice President Jerry Calhoun told employees in a memo.

The 16,700 employees in Boeing’s Shared Services Group were warned in October that between 1,200 and 1,500 of them will lose their jobs, on top of the 3,000 already laid off in the past year.

“We wanted to be forthcoming,” said Barbara Murphy, a spokeswoman for the business group. “We think it’s the respectful thing to do, to provide the information as soon as possible.”

The Shared Services Group provides a wide range of support functions to Boeing’s various production divisions, from computing resources to purchasing to fire protection. It also is the unit in charge of providing career transition services to laid-off employees.

The group is spread throughout Boeing, with the majority of the workers in Washington, Murphy said.

Boeing Commercial Airplanes Group also plans to shed workers, but it remains to be seen how many must go and whether the cuts will be achieved through layoffs, attrition or both, spokesman Peter Conte said.

On Wall Street, Boeing on Oct. 16 announced quarterly net earnings of $372 million on revenues of $12.7 billion. That’s down significantly from last year’s third quarter, when Boeing had net earnings of $650 million on revenues of $13.7 billion.

Boeing earned 46 cents a share for the quarter, which was in line with analysts’ estimates.

Condit said the company now expects to deliver between 275 and 285 commercial jets next year, down only slightly from previous estimates of 275 to 300.

He didn’t release an estimate for 2004 deliveries, but said the total would be close to next year’s level.

The projections already account for Delta Air Line’s move to delay delivery of 29 jets during the next two years, as well as similar moves other U.S. airlines are likely to make, Condit said.

Three-quarters of the planes Boeing delivers in 2003-2004 will go to overseas airlines, Condit said. Markets in Asia, and Europe to a lesser degree, are showing growth, but travel on North American routes remains down, as does airline traffic across the Atlantic and Pacific oceans.

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