Boeing to cut military aircraft workers in restrucutirng; 10 percent of execs are first to go

Tuesday, September 7, 2010

Boeing slims down military aircraft business

ST. LOUIS — Boeing Co. is slimming down its military aircraft business and cutting workers as the U.S. tightens defense spending and profit margins shrink.

Boeing’s military division makes the well-known Chinook transport helicopters, as well as the C-17 transport and the F/A-18 fighter-bomber.

The job cuts will start with 10 percent of the group’s executives. Boeing didn’t say how many more workers will lose jobs. It will consolidate six divisions of the business into four.

Boeing said in July that layoffs were likely because of expected government spending cuts. The Pentagon has been looking for savings in weapons spending, including pressing for better prices on the C-17 and the F-15E fighter.

The military aircraft unit provided about 20 percent of companywide revenue in the first half of this year, and its profit margins fell. Defense is about half of Boeing’s business, with commercial aircraft making up the other half.

The military aircraft unit earned $320 million during the first half of this year, up from $310 million during the first half of 2009.

Boeing is bidding on what would be a major contract to make a new tanker for the Air Force. It’s competing with European defense contractor EADS, the parent of Airbus, to build 179 planes for the $35 billion program. Boeing has said it expects the Pentagon to pick a winner in November. The Boeing plan is based on its civilian 767 airliner.

Starting Oct. 1, the four new divisions will be St. Louis-based global strike; Ridley Park, Pa.-based mobility; Seattle-based surveillance and engagement; and St. Charles, Mo.-based missiles and unmanned airborne systems.

The company said the new structure is aimed at making the military aircraft business focus on capabilities instead of products.

“This reorganization, coupled with our productivity goals, will reduce organizational complexity and allow us to be more efficient,” Boeing Military Aircraft President Chris Chadwick said.

Shares of Chicago-based Boeing fell $1.22 to close at $63.42 on Tuesday. The defense division is based in St. Louis.

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