The Boeing Co. is cutting the number of workers who design and build commercial airplanes, starting with executives and managers.
The cuts are necessary to stay competitive, Boeing Commercial Airplanes CEO Ray Conner said Wednesday.
The Chicago-based company said in a statement that it is “taking thoughtful steps to reduce the cost of designing and building our airplanes.”
Reductions will start with execs and managers. “We will also use attrition and voluntary layoffs. As a last resort, involuntary layoffs may be necessary,” the statement said.
Boeing is looking at cutting costs where it can, including from travel expenses and its supply chain.
Despite booking record profits in recent years, Boeing faces internal and external challenges that could strain cash flow. The company has to either raise revenue or cut costs to successfully navigate the challenges.
Boeing faces a lot of pressure to keep down the price of airplanes, especially its biggest money-maker, the Everett-built 777.
The classic 777 is being replaced by the 777X, which is to start production in 2017, with first delivery in 2020. To keep the classic 777 assembly line in Everett busy until then, Boeing has to sell about 140 classic 777s. But to close sales, the company has had to offer deep discounts.
Boeing and rival Airbus have huge order backlogs, but global economic tremors have raised concerns in the industry that a recession could be coming. An economic downturn — or simply concerns of one — along with persistently low oil prices could prompt some airlines and airplane lessors to delay or cancel plane orders.
Nonetheless, Boeing and Airbus both say they are committed to making more commercial airplanes than ever. Boeing says it will increase 737 production in Renton from 42 a month now to 57 a month by 2019.
The company’s announcement last month that it expects to deliver fewer 737s this year has some industry watchers worried that introducing the new 737 MAX will be more difficult than previously expected.
Boeing also is increasing 767 and 787 production, and starting 777X production. The 787 increases are scheduled to come in North Charleston, South Carolina, not Everett.
At the same time, Boeing plans to make fewer 747s and classic 777s in the next few years.
Workforce cuts are more likely in programs with planned production decreases. The company does not have a target for how many jobs to cut.
China’s economy has dramatically slowed, raising concerns that Boeing and Airbus could lose orders in their backlogs today.
About half of Boeing’s commercial backlog is tied to “emerging markets, where there are real concerns over growth and foreign exchange pressures,” said Rob Stallard, an investment analyst with RBC Capital Markets, in a note to investors.
Boeing shares dipped slightly Wednesday, closing at $116.36, down from $118.88 on Tuesday.