Tough decision

In my last blog entry I talked about the challenges that we all face in 2009. Now comes word that the U.S. is in the middle of the worst loss of jobs in more than 60 years - and as companies large and small are having to adjust to our worsening economy, Boeing is not immune.

As I’m sure you’ve heard, we’re taking the tough step of reducing Boeing Commercial Airplanes employment by about 4,500 positions in 2009. This will bring BCA employment to around 63,500 jobs – which is about where we were at the beginning of last year. Most of the job reductions will be right here in the Seattle area and in Washington state, and will take place during the second quarter.

You don’t need any more proof than this that we’re challenged right now with a very difficult business climate. As our Commercial Airplanes CEO Scott Carson put it, we’re doing this in order to make sure we remain well positioned and are able to control costs under the current economic conditions.

photo

777 final assembly under way in Everett last month.

I started at Boeing in 1981 – just before what turned out to be one of the biggest downturns we’ve seen in this industry. I’ll never forget going through the process of watching many friends and colleagues - some who’d just started working at Boeing, and many with whom I’d developed strong relationships in the work environment – having to change jobs or go on to other things outside the company. It makes a strong impression on you.

The job reductions will mainly be in areas not associated with airplane production. But that doesn’t make it any less painful. I’ve gone through a number of these cycles in our business, and it’s difficult for everyone associated with Boeing.

We’ve tried as best we can to maintain as stable an employment environment as possible. Ultimately, our success as a business is the best recipe for continued and stable employment. But there are things that we just can’t control, and one of those is the difficult time we find ourselves in during the global economic slowdown.

As we continue, the same fundamentals remain. We need to deliver on our airplanes backlog. We have to continue to be more productive. And we need to continue to make progress on our development programs.

The job reduction is a step we have to make in order to meet those goals, remain competitive, and adapt to the uncertainties in the marketplace. We’re facing fierce competition. As Scott Carson pointed out to employees, we’re not in this industry alone. Our competition is not standing still, and neither can we.

Comments (16)

Kevin L Kennedy (Everett, Wa):

As we are all aware, this is and will be one of the toughest times in our history, however, I find it difficult to justify laying off 4,500 hard working employees in anticipation of canceled orders. We have been lead to believe that so far there have been no major cancellations or deferrals of aircraft. When in fact as of today FedEx is preparing to order 15 additional 777 freighters. The only purpose this will serve is to damage an already weak local and state economy.

Kinbin (Taipei, Taiwan):

Hmmmm.... non-voluntary, forced attrition is a somber thing. It was wise, though, that any 'guillotine' exercises minimize production instabilities.

Non-union, collective (departmental) wage reductions to meet cost cutting measures do have its benefits, but there is little room for the above pseudo-socialistic job environments.

Sadly, some people will simply lose it all in the current roundup, while the remainder are wondering if they are in the next roundup exercise.

Chris C (South Africa):

It is certainly sad to read about the planned layoffs of around 4,500 Boeing employees. It must be a very sad, disappointing and sickening feeling to be issued with a layoff notice, but I’m impressed that Boeing does offer assistance for those people.

As said many times before, these are very tough times in the aviation industry right now, and whilst it is terrible to downscale the Boeing team by 4,500 people, in the long run the remaining 63,500 people will benefit from it, as Boeing will remain the world’s leading aerospace company, period. As hard a decision as it maybe, this is the right decision as attested by Scott Carson and yourself, Randy. Boeing faces a fierce competition, just the same way as the competition faces a fierce Boeing, and Boeing needs to remain innovative and designing the world’s finest airplanes.

..........

On a side, positive note, congratulations on securing an additional 15 orders for the formidable Boeing 777F from FedEx! That’s an excellent order achievement, and an upbeat way to start the order tally for 2009. It’s great to see some positive news like this in this current global financial crisis.

Also, be sure to check out the fantastic website over at Atlas Air on the phenomenal, highly-efficient Boeing 747-8Freighter!! This website is stellar, with a look at the latest rendering of the -8’s flight-deck. Atlas sure seems proud of the new 747! http://www.atlasair.com/holdings/boeing.html

Tom (Bothell, WA):

I can understand a hiring freeze and a reduction in contract labor, but I don't understand how Boeing could Lay-off full time workers just 1 month after increasing the Dividend payout... Yes, economic times are tough right now and Boeing needs to reduce spending and cut costs, but getting rid of rid of Boeing employees while padding the pocket-book of investors is the same "Bad" management that leads to low morale and lack of confidence in leadership.

Jim Hasstedt (Everett, WA, USA):

In my humble opinion we ought to just suck up those jobs and not contribute further to our country's escalating unemployment rate.

Based on the size of our existing workforce, 4500 jobs is not a huge amount, especially considering Scott Carson's statement that some of those lost positions can be attained through natural attrition and reduction of non-Boeing labor.

We all know that eventually we'll need to hire those people back (although specific individuals and the expense we've already put forth to bring them up to their current level of expertise will be lost), and in the mean time it only puts an additional burden on the rest of us to pick up their workload. The recurring theme at Boeing seems to be "do more with less", and frankly many of us are at the peak of our productivity already, and are not able to take on any more responsibilities.

My biggest concern is the realization that there are so many of us with decades of experience here at Boeing that are keeping things purring along based on our accumulated knowledge and experience. Once we retire (which won't be much longer), there appears to be a large vacuum of qualified younger employees to fill our shoes. We need to keep the people we've already hired in order to ensure a thorough transfer of knowledge, and in certain organizations we will eventually need to hire even more.

So the question in my mind is, are these job layoffs really in the best interest of our long term goals?

A. Martin SAVOL (Auburn):

The personnel reduction is contrary to all logic unless we have not been told the truth. We still have a backlog of 3700+ airplanes, customers are still complaining about the undelivered 787s.

From whence comes the need to have less workers??? To my increasingly negative eye, the big decision makers are also large stock holders for whom the price of Boeing stock is more important than the long term success of the company. As long as the customers are willing and able to accept the airplanes that they have ordered, don't cut the workforce, but get the planes delivered! This stated policy is contrary to all logic!!!

Paulo M (Johannesburg, RSA):

I was wondering about this today, as people who normally know very little industry news were the first to inform me about the job cuts at Boeing.

I think that if you work for Boeing you are the very best people the company has. Everyone brings value to this incredible company. I just wonder how much value the company loses in these kind of times. Are they losing much needed assembly line oversight that is so critically important for the Lean principles that Boeing has borrowed from the Detroit Car Manufacturers, from Toyota of Japan, that has been such an important integral part of Boeing's success from 2003 onwards?

But I can understand the company's position. It must be lean. It must survive this downturn so that it can hire again on the upswing.

Right now, the United States leads the world, as it has done so for so long. The US has lost many jobs to date; it has lead the world here. The loss of another 2 million high paying manufacturing jobs in the US will be felt globally.

In a week's time, the USA will have a new President. My wish is that he brings with him a team and principles that are more proactive and less reckless. Better market oversight. If laws are truly in American interests, then everyone else benefits.

R. Lytle:

In my mind, these layoffs simply demonstrate that Boeing mgt hasn't moved far enough forward in their thinking. They are still caught in the paradigm, influenced by union/worker mistrust and a complete disinterest in straight forward communication with the work force. There are companies out there, even in these tough economic times, finding ways to reduce numbers through voluntary reductions. Instead, Boeing resorts to the old slash and burn technique that destroys morale and trust. Where is the new era of mgt thinking now?

Norman (Long Beach, California, United States):

Very tough times ahead especially in manufacturing and Boeing is no exception as unemployment and related reduced orders is rising in all sectors of the economy.

The new orders from Fed Ex on 15 777-200LR cargo jets is very good news but certainly and understandably the layoff of 4,500 employees is the bigger news of the day. The further bad news in my area in already job beleaguered Southern California is that the last of the C-17's are already being made, following this, their will be further such unemployment and the plans to redevelop the old Boeing / McDonnell Douglas manufacturing buildings are pretty much stalling in mid construction, no help is coming for all those skilled workers now unemployed and those getting there. After the last C-17 leaves no more planes will be built in Long Beach, no AASI Jetcruiser, no 737, no MD-11, no MD-80/90, no 717, nothing.

G (France):

There were obvious signs that a serious crisis was going to happen. The first sign of trouble was visible in 2007. On 27 April 2007 Randy Baseler posted a blog entry titled "Cycles" . The entry was about the latest aviation up-cycle. My comment to his optimistic view was, "The US property bubble popped about one year ago. A serious economic downturn is likely to follow in the coming months. I think the current airplane order frenzy will cease around mid 2009. The turbulence may start sooner if some major and unexpected events happen before 2009."

I believe Boeing's management also detected the signs of trouble quite early. This might be the reason why they were so "cool" about 787, 747-8 and 777F delays. It is not a very good thing to deliver much capacity into a depressed market.

Rick (Everett, WA):

I understand with times as they are that there needs to be a leaning out at Boeing. But, to open the gates and deposit 4500 more people into an economy already staggered by job loss doesn't seem like the responsible thing to do.

Part of being responsible is to find out where the money is being wasted and areas where the belt could be tightened. Ask the hard question of the people on the deck plates, accept the feedback and remedy the issues. Somewhere along the line with continued orders and backlog, losing employees and experience, the costs from a reduced workforce doesn't seem to merit a layoff plan.

To survive in today's economy the changes in the way we do business must be made from the Top down, not just directed from the Top. I read all comments on this article and see there is a pretty close view on this subject amongst the writers. I am also curious though, if any in the company look at the postings and is able to get an insight and a feel for the pulse of the company.

Rob (Renton):

Maybe those who lose their jobs will find work with Airbus. Here's a clip about Airbus from today's Wall Street Journal: "It landed new orders for 777 planes...".

paul wright (france):

You have a headline saying "who`s flying the 787?"

The answer is of course, " No-one!"

www.urtaggs.com (Fort Worth, TX):

sounds like a good deal for the 63,500. If the market stabalizes, those 4500 and more will find new employment

Dave:

As a long time employee and stock holder, I find some of the policies used in determining how to reduce the workforce are not always in the best interest of the company. From what I have been told and heard, it was decided to release all contract labor in many organizations no matter what the qualifications, abilities or the effectiveness of other people working in the same organization.

I am aware of one situation where an extremely effective contract employee will be released while retaining at least three Boeing employees that are less than effective in their jobs and it will probably take more than those three to absorb the work done by the one contract employee. At least two of these individuals have been layed off multiple times before and we still keep them around and even hire them back when the economy turns around. I know the immediate manager tried but were over ruled by their management.

Is that in the best interest of the company? I doubt the contractor cost the company anymore than any one of the other three individuals. To me, that is not being responsible managers. As a previous manager, I know it is possible to hire a contractor even in bad times and let less than effective employees go. That to me is the right thing to do for the company.

Rick (Everett, WA):

I was wondering where to write and then seen there was additional posts in the archived section. This will not be a topic that will be lost anytime soon. I talked with a gentleman from Facilities the other day and found out that layoffs went up really high in the seniority range. We talked about the JAL CEO who was focused on his company and took salary cuts along with his employees to be able to retain workers and not have to release them into an economy already in tough times. I believe they said his annual salary was roughly about $90K. Then we discussed the news report of the Teachers Union and School district in Maine that came to an agreement that they would all work five days a week and be paid for four, all to preserve jobs. The savings there was estimated at over $1.5 million a year, I believe that is what the report said. They were even brain storming how to save even more so there would be no problems in the coming years. I didn't vote for President Obama, but if you take stock in what he is saying, we need to pull together one and all to help each other, even if it means earning less to save your fellow person, the Mother, the Father, the Son, the Daughter, your neighbor, your community. How many would sacrifice to keep this company going strong? What drives it? Integrity and the creed to "do what's right?" Decisions can still be made that would alleviate anyone from being cut loose. May sound like a fairy tale, but there were the few that "had a dream."

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