Dissecting Boeing cost-cutting

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Introduction

Feb. 11, 2016, © Leeham Co. The news yesterday that Boeing is undertaking a new roundBoeing Logo of cost-cutting has been buzzing around management and labor circles for months.

LNC last year began hearing management at Boeing Commercial Airplanes would likely face personnel cuts of 10% to 15%. Cuts were expected within the marketing/sales departments, in part due to struggling sales of the 7-Series airplanes, sources told LNC.

The leading labor unions, SPEEA (engineers) and IAM 751 (touch labor), each told LNC last year they expected workforce layoffs were in the future.

More ominously, a consultant who occasionally worked with Boeing, told LNC that the elevation of Dennis Muilenburg from president and chief operating office to president and CEO (and, eventually, chairman) would make former CEO Jim McNerney’s cost- cutting efforts pale by comparison.

Summary

  • Major layoffs predicted at Boeing’s Share Services Group.
  • Work continues to be shifted out of Washington State.
  • Large number of retirements at IAM and SPEEA expected by year end.
  • Airbus pricing pressure, 787 deferred production costs, commitments to shareholders and 777X squeeze cash flow.
  • “Mac the knife.”

 

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Muilenburg’s blessing on process cleared way for SPEEA contract

Dennis Muilenburg

Dennis Muilenburg, CEO, The Boeing Co.

Jan. 14, 2016: (c) Leeham Co. Blessing a new process in contract negotiations made an agreement possible between Boeing and its engineers’ union, SPEEA, its executive director told LNC in an interview after the surprise deal was announced yesterday.

“This process would not have happened if Muilenburg hadn’t blessed it,” said  Ray Goforth, executive director of SPEEA. “This process would not have happened without Muilenburg.”

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Boeing, SPEEA reached contract accord months ahead of schedule

Boeing LogoJan. 13, 2016: Boeing and its engineers union, SPEEA, reached a contract accord months ahead of the September amendment date, SPEEA announced today.

The full press release is below.

We’ll update as we get more information.

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Pontifications: Boeing to focus on “long-term liabilities” in 2016’s SPEEA contract negotiations

Hamilton KING5_2

By Scott Hamilton

Nov. 16, 2015, © Leeham Co. Boeing will target “long term liabilities” in its contract negotiations with SPEEA, the engineers union, its president quoted CEO Dennis Muilenburg as telling him in September.

Ryan Rule, president of the local SPEEA union, met for an hour with Muilenburg when he was here for a visit by China’s president Xi Jinping. Rule termed the meeting cordial. He told Leeham News last week that Muilenburg wasn’t specific about the “asks” Boeing will seek in contract negotiations next year, citing only “long term liabilities,” which Rule took to mean health care and pension benefits.

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Boeing unions gird for new jobs-for-tax breaks push

Nov. 11, 2015, © Leeham Co. Boeing’s two leading unions, the IAM District 751 and SPEEA, are girding for a second try in the Washington State Legislature to retroactivity tie job retention to $8.7bn in tax breaks given by the state in 2013 in exchange for the 777X final assembly line and the airplane’s wing production factory being located in Everett (WA).

IAM 751 is Boeing’s “touch labor” union that assembles all the 7 Series airplanes in Washington State. The District also represents some Boeing employees outside Washington. SPEEA is the engineers union that represents all in-state engineers and technicians under contract to Boeing.

The 787 assembly site in Charleston (SC) is not represented at this time by any union.

Leaders of 751 and SPEEA Monday said they will renew their efforts to tie jobs-for-tax breaks when the next session of the state Legislature convenes in January. Efforts in last January’s session came up short, largely overshadowed by the bi-annual budget session that required special sessions extending into the summer recess because no agreements could be reached.

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Pontifications: Steady as she goes at Boeing–for now

By Scott Hamiltn

By Scott Hamilton

July 27, 2015, © Leeham Co. Dennis Muilenburg, who became the chief executive officer at The Boeing Co. the Tuesday after the Paris Air Show ended (and at which Jim McNerney was front-and-center in his role as CEO), was on the company earnings call for the first time in this role last Wednesday.

If anyone was expecting, or hoping for, dramatic announcements or policy changes, they were disappointed.

With this Muilenburg’s first earning call, it was McNerney’s last. Predictably, it was a love fest between the out-going and the incoming. Muilenburg and McNerney swooned over how well they worked together and praised each other’s work, accomplishments and vision. The discussion wouldn’t be any other way, absent a scandal of some kind (remember Phil Condit resigning over the air force tanker lease deal, Harry Stonecipher over zippergate). Despite the buzz on Wall Street and elsewhere of the relationship strains between the two men, those days really don’t matter now. What does matter is what comes next under Muilenburg.

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Muilenburg’s challenges as Boeing CEO

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Introduction
Jan. 27, 2015: Dennis Muilenburg has been the No. 2 at The Boeing Co. for a little more than a year. He was named vice chairman, president and COO in December 2013.

Jim McNerney

His boss, Chairman and CEO Jim McNerney, turned 65 last August. Sixty-five is the mandatory retirement age, but this has been waived before and McNerney is widely understood to want to stick around through Boeing’s 100th Anniversary in 2016.

The industry is buzzing with reports that McNerney might move up soon to

Dennis Muilenburg

non-executive chairman, with Muilenburg assuming the CEO title.

If and when Muilenburg becomes CEO, he faces a laundry list of challenges.

Summary

  • Strong competition from Airbus that is getting stronger;
  • Continued cost cutting;
  • Learning the Commercial Airplanes business;
  • Declining defense business and revenues, putting pressure on profits and cash flow;
  • Flight testing and development of the KC-46A;
  • Development of the 737 MAX and 777X and proving that delivering new airplane programs on time and on budget can be achieved again;
  • Selling enough 777 Classics to maintain production rates to the 2020 EIS of the 777X;
  • Dealing with labor unrest with its Seattle area unions and a new attempt to organize the Charleston 787 plant; and
  • Deciding whether to take that “moonshot” and launch new airplanes earlier than the 2030 EIS McNerney set as policy.

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Oct. 28, 2009: five years ago today, Boeing announced 787 Line 2 goes to Charleston; then, now and the future

This is about eight pages when printed.

It was five years ago today that Boeing announced it would locate the second assembly line for the 787 in Charleston (SC).

The decision was expected and, some say, had actually been made months before–as early as the preceding February. We take a look back at the events leading up to Boeing’s decision to put the second line in Charleston, what’s happened since then and where Boeing will be in five more years.

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Odds and Ends: Coming soon–new Leeham News; Boeing v SPEEA; 86-seat Q400; Boeing 326; Budapest Air Show

Coming soon: We will be rolling out changes this month to Leeham News and Comment.  We will expand our News and Analysis, providing the most insightful commentary of aviation issues of any on-line publication. Most on-line news resources either collate into one portal news from around the world, or report news without analysis, or offer superficial analysis. We’re famous (or infamous, depending on your viewpoint) for providing insight in a no-BS manner.

We often report the news before anyone else, and we spot market trends long before others.

For example:

  • We concluded in December 2013 that Airbus had to launch the A330neo program, at a time when other on-line publications were still muddling along and even Airbus hadn’t reached its conclusion.
  • We were the first to report that Airbus revamped its A350-1000, ahead of the company’s own announcement and before any other media tumbled to the development.
  • We’ve been the leading publication to focus on LOPA (Layout Of Passenger Accommodations) and IAC (Integrated Airplane Configuration) when comparing Airbus and Boeing airplanes at a time when other publications didn’t even know the terms.
  • Our aircraft economic analysis has the advantage of aerospace engineering background to take into account detailed understanding of aerodynamic improvements, down to the last percentage point.

These changes include transformation into a combination paid and free content site. We’ll have paid content several times a week in addition to our free content.

Changes are coming to Leeham News and Comment this month. Watch this space for details.

Changes are coming to Leeham News and Comment this month. Watch this space for details.

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Boeing slammed for moving jobs to Southern California, WA state for naivete

Boeing took two hits over the weekend from Seattle Times columnists for the announcement that 1,000 engineering jobs will move from the Puget Sound area to Southern California.

Columnist Danny Westneat interviewed a “lonely, ignored voice” who predicted Boeing would go ahead and move jobs despite the $8.7bn tax breaks proposed by Gov. Jay Inslee that were then before the Legislature in hearings prior to approval. (SPEEA Executive Director Ray Goforth also warned of the loopholes in the proposed legislation, but he was ignored, too.) Washington State was criticized for being snookered on jobs once again.

Satirist Ron Judd also took Boeing to task in his Sunday column.

We got our knuckles rapped by a state official because we opined our coverage that the “state” tends to sit back and relax after wins.The state official wrote:

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