Boeing plans workforce reduction of 4,500, with layoffs in second quarter

Boeing said Friday it will cut its Commercial Airplane workforce in 2009 by about 4,500 people, mostly in Washington State.

The reduction will be made largely through layoffs, though the figure also includes attrition.

"Initial 60-day layoff notices will be issued on Feb. 20, and most layoffs will occur in the second quarter of the year," said Scott Carson, chief executive of Commercial Airplanes in an internal message to employees Friday morning.

Boeing intends to maintain jet production at current levels, so those laid off will be people not directly building airplanes. That could include administrative, clerical and other support positions such as facilities maintenance.

Many of those laid off could be long-term contractors rather than permanent employees, according to a Boeing press release.

Boeing employs just over 76,400 people in the state, the vast majority of those in the Commercial Airplanes unit, so the cut represents more than a 5 percent workforce cut.

In his message to employees, Carson called the move a "a difficult and painful decision" made necessary by a dramatic slowdown in airline business and the broader impact of the global recession.

Both passenger and freight air traffic have sharply decreased worldwide since September, Carson said. Airlines are cutting capacity, parking older planes, and reducing orders for spare parts. And new jet orders tapered off of in 2008.

"Industries and individuals must prepare for a year of tough challenges," Carson told employees. "We believe that acting now will allow us to keep employment reductions to a minimum while we adapt to the uncertainties of this economic cycle."

Tom Wroblewski, district president of the International Assocation of Machinists (IAM) union, which represents Boeing's blue-collar workforce, called on the company to protect the jobs of permanent employees by cutting contractors first.

For the IAM, the area most affected could be facilities maintenance, where Boeing does employ outside contractors. In the new contract negotiated last fall, the union updated a clause that it believes will give IAM facilities workers priority over contract workers in the event of layoffs in this area.

"Our expectation is that Boeing will do the right thing and release the many on-site contractors performing our facilities and maintenance work," Wrobelwski said in a statement. "We believe Boeing has many other options available, and we will push them to retain their valued employees."

The IAM said that when it gets more detail from Boeing it will present the company with alternatives to preserve these jobs.

Boeing has continued to hire IAM mechanics for assembly work. The union said Boeing added 13 new IAM jobs last week and 19 more today.

Some Wall Street observers, such as UBS analyst David Strauss, think Boeing may still be forced to slow production later, which would force further layoffs.

"We think Boeing will inevitably lower production in the face of declining air traffic and limited aircraft financing and we believe the sooner that it can put the delivery peak behind it the better," Strauss wrote in a note to clients Friday. "We believe the eventual recovery in the aerospace stocks won't happen prior to production rates getting more realistic."

Strauss said the number of relatively young aircraft — including 737s and other models Boeing is currently producing — that are parked idle in the desert has more than doubled over the past year and reflects a clear over-supply of jets.

But for now, Carson made clear, Boeing plans to maintain current levels of production and won't put off any of its new airplane programs.

"Many of the job reductions will be in overhead functions and other areas not directly associated with airplane production," Carson's message said. "This will enable us to continue our high production rates and successfully execute our key development programs."

Carson said the company has already taken other steps to prune spending, including cutting back on corporate travel, managing inventory costs, and leaving some open positions unfilled in the final months of 2008.

"We are taking prudent actions to make sure Commercial Airplanes remains well positioned in today's difficult economic environment," Carson said. "These steps will allow us to be in a financial position to adapt to uncertainties, meet our customer commitments and continue investing in our current and future product lines."

The reduction will cut total employment in the Commercial Airplane division to approximately the level as it was at the beginning of 2008.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com