By Andrew Tangel
Boeing Co. is offering buyout packages to its workforce, the
plane maker's first major step to reduce labor costs as it grapples
with the coronavirus pandemic's deepening toll on global
A Boeing spokesman said the company expected several thousand
employees to accept voluntary layoffs or retire. However, Boeing
executives increasingly believe potential involuntary layoffs and
production cuts may be unavoidable, depending on how the crisis
unfolds, people familiar with the matter said.
"It's important we start adjusting to our new reality now,"
Chief Executive David Calhoun said in an internal email outlining
the plan to Boeing employees early Thursday.
Later in the day Boeing Co. said it would temporarily suspend
production at its military-aircraft facilities near Philadelphia to
curb the virus's spread.
The Chicago-based aerospace giant is the largest U.S. exporter
and, with its workforce of about 160,000, one of the nation's
largest manufacturing employers. It has previously announced steps
including a freeze on most hiring and overtime as it seeks to
preserve cash amid turmoil in the credit markets and a broader
While airlines around the globe have parked much of their fleets
as governments close borders and order would-be passengers to stay
home, the plane maker hasn't detailed how it plans to adjust its
production of passenger jets -- or the size of its workforce -- to
meet an increasingly bleak outlook for aviation.
Mr. Calhoun, in his letter Thursday, said the voluntary layoff
offer "aims to reduce the need for other workforce actions."
Boeing's commercial unit chief Stan Deal, in his own note to
Boeing employees, described the state of the industry in stark
terms, noting multiple airlines have suspended operations amid a
collapse in passenger demand.
Buyouts, he said, will help Boeing prepare for a
"different-sized commercial market once the recovery starts." Some
analysts forecast Boeing will cut production of wide-body aircraft,
typically used in international travel, by half or more.
The plane maker employs almost 65,000 people who build
commercial aircraft, with an additional 25,000 working in the unit
that provides services to airlines. Boeing didn't pursue layoffs
earlier this year after suspending production of its 737 MAX jet in
Aviation industry officials say the new coronavirus pandemic is
shaping up to be a bigger threat to aviation than the Sept. 11,
2001 terrorist attacks. "This is more horrific because it's
global," one former Boeing executive said.
After the attacks two decades ago, Americans grew skittish about
flying and demand for air travel in the U.S. dropped sharply. Soon
after the attacks, Boeing moved to lay off as many as 30,000
workers and made deep cuts in production. It delivered nearly 30%
fewer passenger jets the following year. General Electric Co.'s
jet-engine unit, which Mr. Calhoun led at the time, cut 4,000 jobs,
or 13% of its workforce.
Now, airlines are considering whether to defer deliveries of new
jets, industry officials said, potentially choking off a source of
cash as Boeing scrambles to raise liquidity from financial markets
or U.S. government stimulus.
Airlines generally don't want new jets anytime soon, the
industry officials said. While some carriers may seek to replace
older planes, low oil prices could make newer, more fuel-efficient
models less attractive, they said. "The last thing they need is a
new aircraft to just park," said Rob Morris, head of consultancy at
Ascend by Cirium, an aviation consulting firm.
Mr. Deal, in his message to Boeing employees, said the plane
maker may wind up deferring airplane deliveries or offering other
forms of assistance to help airlines navigate the crisis.
Boeing's airline customers and some of its suppliers have
already moved to reduce their labor costs, announcing everything
from layoffs to voluntary leave without pay.
The plane maker earlier sought at least $60 billion in
government aid for itself, its suppliers and the broader aerospace
The company hasn't said whether it will seek loans under a $2
trillion stimulus package approved in Washington, D.C., last week.
Some of the aid would come with restrictions on layoffs.
Mr. Calhoun reiterated he wanted to maintain an employee base
for when the crisis abates. "We can't get back to regular
operations again after the crisis if we don't have the people and
skills to make that happen," he wrote.
Write to Andrew Tangel at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
April 02, 2020 22:19 ET (02:19 GMT)
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