Boeing's defense losses could hurt jobs in St. Louis

The company announced Friday that it will dramatically reduce its total workforce by about 10%, or about 17,000 jobs worldwide. The company lost $5 billion in the third quarter and is reeling from a month-long strike at its Seattle-area operations.

“Boeing's finances continue to deteriorate and current trends cannot continue,” said Loren Thompson, a longtime aerospace analyst and a close observer of Boeing for decades. “In both the commercial and defense sectors, every program is subject to scrutiny and cleanup. … You have to assume that St. Louis will be targeted.”

In filings with the Federal Securities and Exchange Commission, Boeing CEO and President Kelly Ortberg said its fixed-price defense, space and security development business – often under government contracts – “simply isn't where it needs to be.” . “We expect significant new losses at BDS this quarter…” He referred to the strike and the decision to halt production of the 767 freighter.

According to the information, Boeing lost $2 billion on the T-7A, KC-46A, Commercial Crew and MQ-25 programs. The T-7A Red Hawk flight training system and the MQ-25 Stingray aerial refueling drone are manufactured in the St. Louis area.

Boeing declined a request for an interview and said Monday that there was no news beyond Friday's announcement that it planned to cut jobs “in the coming months.” In the same letter, Ortberg said employees would receive “more tailored information about what this means for your organization” this week.

Experts and analysts who follow Boeing are also waiting for details to emerge, including the timing of the job cuts and any severance packages workers might receive.

Acting U.S. Labor Secretary Julie Su traveled to Seattle on Monday as the strike by about 33,000 members of the International Association of Machinists and Aerospace Workers entered its second month.

Boeing's announcement of job cuts caused confusion among some industry observers.

“It kind of defies logic, that’s the problem,” said Richard Aboulafia, managing director of AeroDynamic Advisory, an industry consulting firm. “You need more talent, not less.”

But others said Boeing's financial health had become unsustainable.

There was a time when it was believed that the defense side of the company could offset the difficulties in its commercial arm, said Thompson, the analyst. But the company's defense business has seen increasing problems and missteps, he said, as Boeing has lost money on certain contracts and on secured contracts – presenting potential targets for cuts.

“There are a number of Boeing defense programs that are underperforming,” Thompson said — which he said led to the firing of Ted Colbert, the company’s defense chief, last month. “The defense side has been losing money for years. The new CEO (Ortberg) must take measures to curb the losses.”

One area of ​​defense work around St. Louis that Thompson predicts will “definitely suffer a setback” is the development of a next-generation fighter jet, which the Air Force has recently signaled lack of clarity on – unless the cost will ultimately amount to a fraction of what is currently expected.

Just in June, Boeing officials announced that the company would build an “advanced fighter aircraft” manufacturing facility at its complex in northern St. Louis County as part of a $1.8 billion expansion project.

Thompson said it was “a sad spectacle” to see Boeing's current difficulties, especially given its status as the “largest aerospace company in the world” just a decade ago.

“Now his survival is a question mark,” he said.

But Boeing has been in tough spots before and has found ways to get back on its feet. For example, the company furloughed three-quarters of its commercial workforce at its Seattle hub in the early 1970s, Thompson said – a period referred to as the “Boeing bust.”

This time, however, Thompson believes a Boeing recovery will require the kind of government support that other industrial giants like General Motors have received in the past.

And the threatened exodus of employees from the company will make a turnaround difficult. Beyond the loss of workers whose jobs will be eliminated outright, the company's plan will likely lead to broader instability and morale problems that will lead to even more departures, experts said.

“Cuts always hurt the workforce more than just the numbers they’re talking about,” said analyst Aboulafia.

There are now a variety of competitors in the aerospace industry that could absorb the workers laid off by Boeing – companies that he said won't suffer the same kind of self-inflicted damage that comes with massive job cuts.

“Only one of them wants to undergo a lobotomy, and that is Boeing,” Aboulafia said.