Boeing will cut as many as 4,000 jobs by June, according to a report by The Seattle Times. Sources cited a need to reduce costs in order to stay competitive with Airbus, whose single-aisle A320 jets are quickly gaining market share and are less costly than Boeing’s 737 jets.
Richard Aboulafia, vice president of analysis at Teal Group, said pressure from Airbus isn’t the sole instigator of the cuts. Boeing has approximately $29 billion in deferred production costs for the 787, which will dilute profits for years to come.
“It’s a whole host of stuff that shouldn’t really be happening,” Aboulafia said.”Continuing to grow production rate while chasing marginal demand is probably not a great way to make money. It’ll just eat into your profits.”
According to reports, reductions in staff will occur through attrition and voluntary buyouts, and cuts will include executives and managers. Approximately 1,600 employees would need to take the buyouts, which target workers at or nearing retirement eligibility. Boeing said in a statement that it would proceed with layoffs as a last resort.
The buyouts are expected to have a greater impact in Everett, where 747 and 777 production cuts were announced last month. Renton may feel some shock, however, even though production of the 737 still is ramping up.
Jon Holden, president of the local International Association of Machinists and Aerospace Workers district, released a statement via the union’s website stating, “We have not been notified of these types of reduction numbers. We continue to have concerns about work that has been moved outside of Washington State, which is why we focused so much energy on trying to get job number guarantees for the $8.7 billion in aerospace tax incentives that our citizens are paying. This should make it clear to the legislature why it is important to tie guaranteed job numbers to tax incentives like the other states have done.”
Boeing recently said it was faced with a decision to make a larger 737 MAX or develop a new mid-size plane, the 797, in order to keep up with Airbus. Aboulafia said that, as with any company, product development coexists with current demand and backlog, and Boeing’s exploration of a new product appears to be a fair move.
“In terms of what they’re doing, it’s the right path. Before pursuing that middle-market plane, they have to look at all their options,” he said. “I think the strategy is right.”