December 29, 1998
ROD MINOTT: In early December, Boeing made the stunning announcement that it would eliminate 48,000 jobs over the next two years. That's 20,000 more than what the company had said it would cut last summer. The loss of jobs will reduce Boeing's work force by 20 percent. Workers coming off the day shift at the 737 plant near Seattle blamed senior management for causing the layoffs.
GRAY RUSSROCK, Boeing Machinist: They're supposed to be getting six figures a year. They're supposed to be planning ahead 15 years. What the hell did they do? So who gets to keep their job? The guys at the top get to keep their jobs, the guys at the bottom, we go out.
ROD MINOTT: Machinist Anthony Carson said the news hit workers hard.
ANTHONY CARSON, Boeing Machinist: Morale is like - it's kind of - it's very low at this point - it's very low, because you don't know if you're going to have your job the next day so your clarity is gone, so it's kind of tricky at this point because people are trying to base things off a day-to-day life and it's kind of hard to do when you have a house payment and have a car payment.
ROD MINOTT: Boeing management blames the layoffs on the economic crisis in Asia. Alan Mulally heads the commercial airplane division.
ALAN MULALLY, President, Boeing Commercial Airplane Division: Approximately 25, 28 percent of our total airplane production output goes to Asia, and so the concern that we have, of course, is that our production looks very solid for 1999, but this worsening situation of the economies in Asia will decrease the need for new airplanes, especially in the year 2000 and 2001.
ROD MINOTT: The economic turmoil has caused many Asian airlines to cancel or delay plane orders from Boeing. Jin Cho is with Asiana, a South Korean airline that recently cut back its Boeing 747 flights from Seattle to Seoul.
JIN CHO, Asiana Airlines: Yes, we have been cutting back on flight schedules because we sawed off a couple of planes to reduce the - I think - short-term debt to make our accounting book a little better.
ROD MINOTT: Most of the production cuts will hit the 747 jumbo jet, Boeing's most profitable plane. The company plans to reduce production from about three 747 planes a month to two at the end of next year. Manufacturing could drop as low as one 747 every month in the year 2000 if market conditions worsen. Airline industry analysts say both Boeing managers and the Asian crisis are to blame for the company's woes. Some also cite fierce competition with AirBus, the European consortium that also manufacturers commercial jets. According to University of Washington economist Charles Hill, aggressive rivalry with AirBus led Boeing to seek record sales at unprofitable prices.
CHARLES HILL: They have this notion that they have a God-given 60 percent of the market and they were going to get that 60 percent of the market, whatever it took, and if that took deep discounts on the prices of planes, they were going to do it, if that took accelerated deliveries, they were going to do it.
ROD MINOTT: The aggressive marketing paid off. Boeing doubled its production within the last two years. But Hill says the company wasn't equipped to handle it all. Some customers complained of delayed deliveries and even poor workmanship on jets.
CHARLES HILL: So they basically met their delivery schedule by hiring far more people than they historically would have done, but as a result of aggressively going after market share, they suddenly found they had to produce far more planes than they thought they would have to do in a very short space of time, before they'd fully implemented their manufacturing process improvements.
ROD MINOTT: Tim Goree was one of those workers brought on to help Boeing get through its production crunch. Last September, he'd been hired to help assemble wings on the new 777 wide-body jet. With no seniority, he was laid off after working at Boeing for only three months.
TIM GOREE: I was shocked. The main thing going through my mind was what am I going to do for the bills. Well, I heard rumors before we actually got our warn notices, but I really didn't think that I was going to be affected in the first round.
ROD MINOTT: Goree claims Boeing told him that he would have a job for at least two years. Now he worries how $360 in weekly jobless pay will cover his family's expenses.
TIM GOREE: We're not financially set. You know, we don't have a savings account. We've been living week to week, you know, paycheck to paycheck, and four kids and a house payment, and everything, it's pretty tough, you know, especially now that I don't know where the money's going to be coming from.
ROD MINOTT: Boeing says it's facing tough economic times too. Its share of new orders for commercial aircraft has shrunk to 50 percent in the face of competition with AirBus. In addition, the aerospace giant had to deal with the economics of a huge merger with McDonnell-Douglas last year. The company also posted its first annual loss in 50 years in 1997. Economist Hill says Boeing has to become more efficient in order to become more profitable.
CHARLES HILL: If you look at productivity at AirBus, it takes 143 employees to build an aircraft at AirBus; it takes 216 employees to build an aircraft at Boeing. That's a very compelling statistic. That tells you something about the belt of efficiency of these two operations at this point in time.
ROD MINOTT: Boeing's Alan Mulally, who heads the commercial plane division, points out that the company has, in fact, started implementing changes to beat the profit problem. He says Boeing is becoming more efficient in its manufacturing and remains on schedule to deliver a record number of jets next year.
ALAN MULALLY: We have a commitment to deliver the 620 airplanes next year. That looks really good. The airlines want them. We're getting the airplane's production system back in sequence where it's getting healthy again. We're delivering airplanes, we're producing the airplanes. When we said we were going to make them, the quality of the airplanes gets better every day with every airplane, so the whole team has rallied around getting our production health back from this tough situation we've been. I think that through '99 and going forward, I think it'll give us a good base to get back to a - you know - a profitable and a healthy Boeing.
ROD MINOTT: Meantime, economist Dick Conway thinks the Seattle area will weather the blow of the Boeing layoffs because its economy is more diversified than in the past.
DICK CONWAY: Back in 1970, when Boeing also had about 100,000 workers in the area, the company accounted for about one in three jobs in the entire economy here. Today, it's closer to one in six jobs. That's why we figure that we're better able to withstand a Boeing downturn - quite apart from the fact that the anticipated cutbacks at Boeing are quite a bit less than they were back in 1970.
ROD MINOTT: But airline analysts say it could take up to five years for Boeing to rebound. They say for Boeing to survive, it must become more efficient and in the future, that will mean building jets with far fewer workers.