Boeing says it plans to lay off hundreds of engineers

EVERETT — The Boeing Co. continues slashing its workforce as it seeks to hold off market pressure and make good on promises to shareholders.

The company told workers Monday that it plans to lay off hundreds of engineers by week’s end. The announcement came in an internal memo from John Hamilton, head of engineering for Boeing Commercial Airplanes.

The cuts are needed to stay competitive, Hamilton said in the memo. A copy was obtained by The Daily Herald. “Along with reducing non-labor and supply chain costs, we are also continuing efforts to match employment levels with business and market requirements.”

More cuts could come later this year, he said in the memo.

Monday’s news may have buoyed Boeing’s stock price, which rose by $3.41 to $179.02 by the time trading closed on the New York Stock Exchange.

Boeing has been slashing its workforce for several years. Company executives in December said they plan to cut jobs this year at about the same pace as in 2016, when Boeing’s total workforce dropped by nearly 11,000, including about 7,000 jobs cuts in the commercial airplane division.

The cuts have continued this year. Boeing started 2017 with a new round of buyouts and limited layoffs. So far, the company has trimmed more than 2,000 jobs this year, including about 1,800 buyouts and more than 200 layoffs.

At the end of March, the aerospace giant employed 146,962 people around the world. Nearly half — 70,640 — work in Washington, including more than 35,000 in Everett. The number of Boeing workers in the state has dropped by nearly 9,000 since the end of 2015.

Boeing Commercial Airplanes is the company’s largest division. It employed 74,196 as of March 30. That is down from 83,508 at the end of 2015, an 11 percent reduction.

Friday’s layoffs are expected to affect chiefly engineers around Puget Sound. Workers will receive 60-day notices, making their last day of work June 23. Managers will be included in the cuts, according to a company spokesman.

The union representing the engineers, the Society of Professional Engineering Employees in Aerospace (SPEEA), pressed the company for further information about which employees are likely to be affected, said Bill Dugovich, the union’s spokesman.

“We’ve known that additional layoffs were coming,” he said. However, the lack of details and “abruptness of this announcement was surprising.”

Boeing told SPEEA it is working on providing more information, Dugovich said.

As far as the union is concerned, the cuts “absolutely” are driven by the bottom line, he said.

Boeing executives have promised to keep sending more cash to shareholders and to boost profits to about 15 percent of revenue, more than 50 percent above the company’s performance last year. They also pledged to continue spending billions of dollars to buy back issued shares, driving up the value of outstanding shares.

At the same time, one of Boeing’s biggest profit generators — its twin-aisle 777 jet — is bringing in less and less cash. The company is making fewer of the long-haul airplanes as it develops a successor, the 777X. Both aircraft are assembled in Everett. The 777X is still in development. Boeing and its suppliers have started producing parts for the program’s test aircraft and early production airplanes. It is expected to start flying passengers for airlines in 2020.

To ensure the 777X is assembled in Washington, state lawmakers in 2013 passed a tax break package worth an estimated $8.7 billion over 16 years. The tax breaks go into effect in 2024, after tax benefits granted in 2003 to land the 787 program expire.

Boeing’s job cuts “are causing a significant reduction in overall aerospace workforce,” said Tara Lee, a spokeswoman for Gov. Jay Inslee, who championed the tax package in 2013.

A Boeing lobbyist notified Inslee’s office Monday morning about the layoffs announcement, Lee said. “The governor, the state Department of Commerce, and our staff will continue to monitor the situation.”

With most of the 777X design work finished, Boeing started cutting the number of contract engineers working on the program in the fall.

Boeing is past the busiest periods for several major development programs: the 737 MAX, 777X and 787-10.

The company “probably has a lot of engineers without a whole lot to do,” said Scott Hamilton, an aerospace analyst based on Bainbridge Island.

Boeing Commercial Airplanes does not appear to be rushing to get started on what is expected to be its next major development program: an all-new design to fill a niche between the company’s biggest single-aisle 737 and its smallest twin-aisle, the 787-8, he said.

If the company’s board of directors had earlier greenlighted the middle-of-the-market plane, Boeing would not be cutting as many engineers, he said.

The number of engineers is related to, but does not simply mirror, development timelines, said Dugovich, SPEEA’s spokesman.

Boeing will be all right, so long as its current development programs stay on course, said Richard Aboulafia, an aerospace analyst and vice president at the Teal Group.

But the company could be courting risk if problems arise such as happened on the 787 program, he said.

Boeing introduced major technological innovations and fundamental changes to its supply chain on its 787 Dreamliner. However, problems during design and with the supply chain put the program years behind schedule. On a smaller scale, the company’s new military tanker, the KC-46 also has been dogged by design and supplier issues. In both cases, Boeing powered through the problems, in part, by assigning legions of engineers to the programs.

Competition with rival Airbus Group is fierce, and airlines do not pay more than they have to for airplanes.

However, while market pressures are real, Boeing’s need to slash costs is “mostly self-inflicted” — a consequence of its executives’ focus on rewarding shareholders, Aboulafia said. “They don’t seem to want to break their addiction to giving cash to shareholders.”

Jerry Cornfield contributed to this story.

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.

Talk to us

More in Herald Business Journal

The 214-foot tall cranes work to unload their first cargo shipments at South Terminal at the Port of Everett on Thursday, April 8, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
Renovated Port of Everett terminal gets first cargo customer

The 655-foot Westwood Columbia is the first ship to call at the newly upgraded South Terminal dock.

Project Roxy is a proposed 2.8 million square foot distribution center that would be built on a 75-acre parcel at the Cascade Industrial Center. The rendering depicts the proposed project at 4620 172nd Street in Arlington from a northwest perspective.
1,000 jobs: Amazon to open distribution center in Arlington

The company is the tenant behind Project Roxy, a $355 million building at the Cascade Industrial Center.

Garry Clark, the new CEO of Economic Alliance Snohomish County (Kevin Clark / The Herald)
At a tough time, a new CEO leads local economic development

Garry Clark has taken the helm at Economic Alliance Snohomish County, where job one is pandemic recovery.

Kathy Coffey (left) and Courtney Wooten
Leadership Snohomish County offers racial equity conference

The fifth annual day-long Step Up: Moving Racial Equity Forward will be held online on April 30.

Signs from the Department of Ecology warning about contamination in the creek that runs through Powder Mill Gulch on Wednesday, March 31, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
State order targets Boeing Everett plant’s polluted history

Records show a dispute over cleanup requirements for chemically tainted water. The company denies there’s a disagreement.

FILE- In this Sept. 30, 2020, file photo, a Boeing 737 Max jet, piloted by Federal Aviation Administration (FAA) chief Steve Dickson, prepares to land at Boeing Field following a test flight in Seattle. Boeing says it has informed 16 of its customers that they should address a possible electrical issue in certain 737 Max aircraft before using them further. Boeing said Friday, April 9, 2021, that the recommendation was made “to allow for verification that a sufficient ground path exists for a component of the electrical power system.” (AP Photo/Elaine Thompson, File)
Boeing: possible electrical issue in some 737 Max aircraft

The company said that the new problem was unrelated to the flight-control system.

Edmonds grocery store workers may soon earn hazard pay

Some employers are required to increase wages by $4 an hour, the city council voted Tuesday.

Aerospace supplier with Everett site files for bankruptcy

Wichita-based TECT Aerospace filed for Chapter 11 and plans to sell an Everett manufacturing facility.

Washington's Lottery ticket display. (Andrea Brown / The Herald)
Want to get lucky? Washington’s Lottery lists Top 10 stores

One of the luckiest retailers in the state was a Safeway in Everett, as measured by $1,000-plus winners.

What local firms are doing to promote diversity and equity

Here’s how some of Snohomish County’s biggest companies and organizations say they are making a difference.

Boeing President Ron Woodard, fifth from left, breaks ground with Boeing officials to make way for the Boeing Commercial Airplane Group Headquarters Office Building at the Longacres Park site in Renton Wash. Wednesday, May 14, 1997. (AP Photo/Loren Callahan)
For sale: Boeing’s Commercial Airplanes headquarters in Renton

A large warehouse on the Bomarc property in Everett also is for sale.

Snehal Patel, Global Head of Cell Therapy Manufacturing at Bristol Myers Squibb, stand outside the facility on Monday, March 29, 2021 in Bothell, Washington. A Bristol Myers Squibb facility in Bothell is one of four facilities in the United States where the company supercharges a person's T-cells to better fight blood cancers. The facility uses a virus  -- a viral delivery system -- to add punch to an individual's T-cells. The T-cells are then returned to the person better-equipped to destroy cancer cells.  (Andy Bronson / The Herald)
Cancer patients nationwide send their blood cells to Bothell

At a Bristol Myers Squibb lab, the cells are altered and returned to patients fighting non-Hodgkin’s lymphoma.