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Better times, fewer jobs ahead, Boeing's Mulally tells Wall Street

By David Bowermaster
Seattle Times aerospace reporter

Alan Mulally

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But the chief of Boeing Commercial Airplanes also believes employment will fall further even as production rebounds.

"Clearly we're on this (path) to improve our productivity every year, forever," Mulally said yesterday, "so (employment's) going to be less going forward."

Mulally's remarks may not sit well with the tens of thousands of local Boeing workers laid off since the Sept. 11 attacks. But the comments were well received by investment analysts on hand for Boeing's annual investor conference yesterday in New York.

The Renton-based commercial-airplanes division has been lauded for remaining profitable even as deliveries dropped by half, to 281 planes in 2003 from 563 planes in 1998.

Mulally receives much of the credit for the group's financial success. He attributes the rosy financial figures to an enterprise-wide commitment to do more with less.

Yesterday he vowed to stay the course while demand for airplanes revives.

During Boeing's last production boom in the late 1990s, "we really blew it," Mulally said. The commercial-airplanes group ballooned to 127,000 workers, 3,750 suppliers and 70.5 million square feet of facilities.

The girth was counterproductive. Boeing lost money on every plane it produced as it fell behind schedule and costs spiraled out of control.

Mulally and his team moved aggressively to cut costs after Sept. 11. Commercial-airplanes employment stands at 53,600, down 58 percent from a peak of 127,000 1998.

And as Mulally has been saying for the past two years, those jobs aren't coming back.
 
"We are not going to have the dramatic increase in employment as we have before, because it's not what we do now," he told the analysts yesterday.

Indeed, a chart accompanying Mulally's presentation displayed the progress of Boeing's "lean global enterprise" from 1998 to 2003, and projected forward to an indeterminate "future state."

The "future state" employment was summed up in a single word: "Less."

A similar chart that appeared in an internal strategic-planning document obtained by The Seattle Times in December was more precise, pegging "future state" employment at 45,000.

That figure included the loss of 8,000 jobs as a result of anticipated sales of Boeing Commercial Airplanes facilities in Wichita, Kan., as well as Tulsa and McAlaster, Okla.

Boeing has confirmed it is shopping those three facilities to potential buyers, under the condition that the plants would continue to build parts for Boeing planes.

The internal document also indicated Boeing facilities would slide to a "future state" of 26 million square feet, down 50 percent from 52.7 million sq. ft. in 2003 and 70.5 million sq. ft. in 1998.

The "future state" of facilities in Mulally's chart yesterday said simply, "continued consolidation."

Mulally also tackled the hot-button topic of outsourcing.

Rather than make excuses for moving work overseas, Mulally said building a network of global suppliers has enhanced Boeing's ability to weather the cycles of the airplane business.

"The real overarching vision is, you want to use the minimum amount of resources and the minimum amount of time to produce our products," Mulally said, "and you want to use a global network, not do it all yourselves.

"We loved doing everything," he added.

Going forward, however, Boeing will further narrow its focus on design and final assembly, leaving suppliers to engineer and manufacture thousands of detailed parts.

David Bowermaster: 206-464-2724 or dbowermaster@seattletimes.com