Posted on Thu, Apr. 21, 2005
Boeing may cut back in Wichita
By MOLLY MCMILLIN, Wichita Eagle
If Boeing Co. doesn't sell its Wichita commercial operation to Onex Corp., the airplane maker will likely reduce its presence there, a Boeing official said this week.
Jim Morris, vice president for engineering and manufacturing at Boeing Commercial Airplanes in Seattle, said the company could consolidate facilities, outsource work and sell portions of the business to lower costs. Morris is overseeing the $1.2 billion deal with Onex.
Onex has several hurdles to clear. It must gain government clearance before it can buy Boeing's commercial business in Wichita and Oklahoma. It also must reach a deal with the company's unions.
It's not the first time Boeing has hinted at other options for the commercial business in Wichita, which employs more than 7,300.
When Boeing announced the deal in February, it said then that it would look to outsource work or sell parts of the business to cut costs if Onex didn't become the new owner.
More recently, Alan Mulally, head of Boeing's commercial airplane group, said if the sale to Onex - a Canadian investment firm - does not go through, Boeing still must improve productivity and "taking that (Wichita/Tulsa division) apart would be part of that answer," Mulally said.
Mulally was replying to an employee's question in a recent meeting in Everett, Wash. The Eagle obtained a transcript of his remarks.
One union official said Boeing officials are "trying to scare us into a deal."
"Let's all be mature about this, sit down and negotiate a contract and put things in place where they need to be," said Bob Brewer, Midwest director for the Society of Professional Engineering Employees in Aerospace. "The idle threats aren't working for anybody."
Onex is negotiating new contracts with the Wichita site's six unions. It has yet to make a final offer to Boeing's two largest unions: the Machinists and SPEEA.
Onex recently presented its final offer to the International Brotherhood of Electrical Workers. That offer includes a 10 percent pay cut, increases in medical insurance premiums and reductions in pension benefits, said Jim Davis, IBEW business manager for Local 271.
All union members in the commercial aircraft division will be eligible to vote on Onex's final offers to their respective unions. IBEW members vote on Onex's offer a week from today.
JSA Research aerospace analyst Paul Nisbet said he thinks Mulally's remarks were "obviously an attempt to coerce the union members into agreement."
Still, Nisbet said, "I think he's serious."
Company officials and some analysts agree that any outcome other than a sale to Onex would undoubtedly deter growth at the Wichita operation and lead to fewer jobs.
If the sale does not go through, the site will continue to be at a disadvantage with Boeing as its only customer, said Jeff Turner, Boeing Wichita's general manager.
"Easily within the next year probably, we'd begin to see the adverse effects," he said. The plant would "see a very strong push by Boeing to downsize us substantially."
As an independent supplier to Boeing, however, there are strong opportunities for growth, he said. Onex wants to bring in work from outside companies, including Boeing's rival, Airbus. Onex also said it intends to make large investments in the site, Turner said.
Without a sale, Boeing and its unions would still be under as much cost pressure as before, said Teal Group analyst Richard Aboulafia. And Boeing's business is changing, Aboulafia said.
"They really want to be a virtual manufacturer to the greatest extent possible," he said.
Since the sale was announced, several companies have expressed interest in buying parts of the business, said Morris, the Boeing official in Seattle. None are interested in the entire operation, he said.
The Wichita site could be divided into fuselage work, strut and nacelle work and support work. The company also could outsource production of smaller parts and explore a sale of its fabrication business.
In short, Boeing would continue its overall strategy of focusing on large-scale systems integration, Morris said.
"We wouldn't be able to continue to invest the money into Wichita to allow it to grow," he said.
And Wichita likely would not receive major portions of future new airplane programs, including any replacement for Boeing's popular 737 or any new plane after the planned 787, Morris said. Boeing Wichita builds the 737 fuselage.
Onex's contract with Boeing allows Onex to back out of the deal under certain conditions, including failing to reach a deal with the unions, Morris said. But he expects the deal with Onex to close by the end of June.
"We absolutely expect to get it done," he said.
© 2005 Wichita Eagle and wire service sources. All Rights Reserved.
http://www.kansascity.com
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment