Boeing faces risk by jettisoning workers in tight labour market
If Boeing cuts too deep or in the wrong places, it risks undermining its eventual recovery from years of turmoil
BOEING will start sending out pink slips on Wednesday (Nov 13) to employees affected by a planned round of job cuts, a delicate balancing act between improving efficiency and keeping together a skilled workforce to help lift output again.
The company announced a 10 per cent reduction in positions last month, equivalent to about 17,000 employees. The move is aimed at restoring Boeing’s competitive edge as it reels from multiple crises, including reduced output in the wake of a near-catastrophic accident in January and a strike that shut down most of its production for seven weeks.
But if Boeing cuts too deep or in the wrong places, it risks undermining its eventual recovery from years of turmoil. Manufacturers like Boeing used to count on a large portion of furloughed workers to eventually return to work. That pattern was broken when its Covid-era layoffs spurred a permanent exodus, including top-flight engineers and mechanics.
And these days, workers have more options. Unemployment in Seattle is hovering at 4 per cent and aerospace workers are in high demand, particularly with the region’s booming space economy.
Rivals like SpaceX, Blue Origin and Amazon.com’s Project Kuiper are all searching for new hires to support rapidly growing operations around Seattle, where Boeing manufactures most of its commercial airplanes, said Stan Shull, a space industry analyst and consultant at Alliance Velocity. The opportunities range from working on Starlink satellites for Elon Musk’s space venture to helping with rockets, space stations, lunar landers and the like for Jeff Bezos’s rival company.
There are about 1,350 job openings at more than 50 space companies in the Puget Sound region, by Shull’s count. While engineers of all stripes are in demand, the companies are also searching for machinists, administrative help, sales and marketing staff and other positions, said Shull.
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Shifting demographics within the US workforce and continued low unemployment mean Boeing will face more competition when it needs to resume hiring to support its growth, said Richard Aboulafia, a managing director with AeroDynamic Advisory.
“It works fine as long as labour markets aren’t tight,” Aboulafia said in an interview. “But aerospace and defence labour markets are really tight.”
Besides, rolling out blanket workforce cuts are “the surest formula for losing 10 per cent of your best people” who will gravitate to potentially more stable employers, Aboulafia said.
The lost institutional knowledge was apparent as the company made only halting progress ramping up manufacturing of its 737 Max jetliner this decade. Executives later acknowledged they’d underestimated the training required to bring the large influx of new hires up to speed in their factories.
Even so, the company is staffed for peak production levels it likely won’t see for years, especially after a 53-day strike largely halted work in its plants across the west coast. Boeing had 171,000 employees at the start of this year, 12 per cent more than the 153,000 it employed five years earlier, when its factories were at their pre-crisis peak.
Relations between workers and Boeing hit a low during the strike that just ended. Boeing was finally able to settle the dispute with concessions including a 38 per cent wage improvement, but many employees remain antagonised by a company they say has not paid them fairly for years.
Kelly Ortberg, who was hired in August as chief executive officer to turn around Boeing, has said the 10 per cent workforce reduction is part of a broader campaign to cut out bloat and inefficiency.
“We need to reset priorities and create a leaner, more focused organisation,” Ortberg said during an Oct 23 earnings call. The cuts are intended to “focus on consolidation of areas where we’re not efficient, and we need to continue to focus on reducing non-essential activity.” BLOOMBERG
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