News Column

'Sequestration' Threat Hits Boeing Defense

Nov. 7, 2012

Dominic Gates


Boeing said Wednesday it will continue to shrink its defense business by reducing the number of managers and facilities and consolidating business units to cut another $1.6 billion in costs in the next three years.

The shake-up in Boeing's defense division is an acceleration of a cost-cutting and restructuring process that has been going on for two years in response to reduced U.S. spending on new military and space programs.

Boeing's ongoing cost cuts must continue even if the threat of budget sequestration is averted by the new Congress, Boeing spokesman Todd Blecher said.

"No matter what happens to the defense budget, the trend line is flat to down," he said.

In a memo to defense-side employees Wednesday, Dennis Muilenburg, chief executive of the St. Louis-based Boeing Defense, Space & Security, or BDS, division, said the cost-cutting program has saved $2.2 billion over the past two years.

For the next $1.6 billion cost-reduction phase, the company is "putting everything in our business under a microscope," Muilenburg wrote.

He announced the amalgamation of various business units within BDS that will cut the number of executives by 10 percent - with a "sharp reduction in vice president and director-level positions."

The remaining executives will have expanded roles.

Overall, Muilenburg said in the memo, by the end of this year the number of executives will be 30 percent lower than it was in 2010.

He said BDS wants to reduce its management costs by a further 10 percent by the end of next year, reducing the ratio of managers to non-managers to 12.5 to 1, from 9.7 to 1 today.

Blecher said Boeing is "looking at management levels below the executive ranks" for the next round of reductions.

Rather than lose their jobs, some displaced BDS managers may transfer to the booming Commercial Airplanes side of the company, he said.

The company's defense operations in Washington state's Puget Sound region remain "very robust," particularly the P-8 anti-submarine plane and the Air Force KC-46 refueling tanker, Blecher said.

"Those two programs alone are huge growth drivers for the defense side of the business," he said.

Distributed by Mclatchy-Tribune News Service

Source: (c) 2012 The Seattle Times

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