Boeing expects “substantial new losses” in the company’s defense business in the coming months as experts warn it should brace for cuts, including among its military aircraft production — and 16,700 jobs — in the St. Louis region.
The company announced Friday it will dramatically slash its total workforce by about 10%, or about 17,000 positions worldwide. It lost $5 billion in the third quarter and is reeling from the month-old strike at its Seattle-area operations.
“Boeing’s finances are steadily deteriorating, and the current trends can’t continue,” said Loren Thompson, a longtime aerospace analyst and a close observer of Boeing for decades. “Both commercial and defense, every program is going to be scrutinized and scrubbed. … You have to assume St. Louis will be targeted.”
In filings with the federal Securities and Exchange Commission, Boeing’s CEO and President Kelly Ortberg said the company’s defense, space and security fixed-price development business — often in government contracts — “is simply not where it needs to be. We expect substantial new losses in BDS this quarter …” He cited the strike and decision to end production on the 767 freighter aircraft.
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Boeing lost $2 billion on the T-7A, KC-46A, Commercial Crew and MQ-25 programs, according to the filing. The T-7A Red Hawk flight training system and MQ-25 Stingray aerial refueling drone are produced in the St. Louis area.
Boeing declined a request for an interview and said Monday that there were no updates beyond Friday’s announcement that it planned to cut jobs “over the coming months.” In the same letter, Ortberg said that this week, employees would receive “more tailored information about what this means for your organization.”
Experts and analysts following Boeing are also waiting for specifics to emerge — including about the timing of when the jobs will be cut and any severance that workers could receive.
U.S. Acting Labor Secretary Julie Su went to Seattle Monday as the strike by some 33,000 members of the International Association of Machinists and Aerospace Workers entered its second month.
Boeing’s job cutting announcement left some industry watchers scratching their heads.
“It kind of defies logic, is the problem,” said Richard Aboulafia, the managing director of AeroDynamic Advisory, an industry consulting firm. “They need more talent, not less.”
Others, though, said Boeing’s financial health has become untenable.
There was a time when it was thought that the company’s defense side could compensate for struggles in its commercial line of business, said Thompson, the analyst. But woes and missteps have mounted within the company’s defense operations, he said, as Boeing has lost out on certain contracts and lost money on ones it secured — creating potential targets for cutbacks.
“There are a number of Boeing defense programs that are underperforming,” said Thompson — something he said led to the removal of Ted Colbert, the head of the company’s defense unit, last month. “The defense side has been hemorrhaging cash for years. The new CEO (Ortberg) will need to take steps to stem the losses.”
One area of defense work around St. Louis that Thompson predicts is “definitely going to take a hit” is the development of a next-generation fighter aircraft that the Air Force recently signaled ambivalence about — unless the cost ends up at a fraction of what is currently expected.
As recently as June, Boeing officials announced that the company would build a manufacturing site for “advanced combat aircraft” site at its north St. Louis County complex, as part of a $1.8 billion expansion project.
Thompson said it was “a sad spectacle” to see Boeing’s current struggles, particularly given its stature as the world’s “greatest aerospace company,” just a decade ago.
“Now its survival is a question mark,” he said.
But Boeing has been in dire straits before and found ways to bounce back. For example, the company furloughed three-quarters of its commercial workforce at its Seattle hub around the early 1970s, Thompson said — a time referred to as the “Boeing Bust.”
This time, however, Thompson thinks a Boeing recovery will require some kind of federal support, like other industrial giants, such as General Motors, have received in the past.
And the looming exodus of workers from the company stands to make any turnaround harder. Beyond the loss of workers whose positions are directly eliminated, the company’s plan is likely to spark broader instability and morale problems that will lead to even more departures, experts said.
“Cuts always result in more damage to the workforce than just the numbers they’re talking about,” said Aboulafia, the analyst.
Meanwhile, there are a variety of aerospace competitors that could absorb workers displaced from Boeing — companies that he said aren’t engaging in the same type of self-inflicted harm that comes with massive job cuts.
“Only one of them wants to give themselves a lobotomy, and that’s Boeing,” said Aboulafia.
View life in St. Louis through the Post-Dispatch photographers’ lenses. Edited by Jenna Jones.
