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Saturday, October 20, 2001 - Page updated at 12:00 AM

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Boeing considers further consolidations in Everett, Renton production

Seattle Times aerospace reporters

The head of Boeing's commercial airplanes group said yesterday the company is thinking about combining its production facilities in Renton and Everett as it responds to one of the steepest business downturns in its history.

"Everything is being considered as we go down in production," said Alan Mulally, chief executive officer of the commercial-aircraft unit. "When you slow up on production, that's a perfect opportunity to consolidate."

Paired with Boeing's announcement Thursday that it may stop building the 106-seat 717 at its Long Beach, Calif., facility, Mulally's comments are the latest sign Boeing is conducting a comprehensive review of all its properties and production processes as it responds to a precipitous drop in demand for its airplanes after the Sept. 11 terrorist attacks.

Earlier this year, Mulally rejected the long-rumored possibility of moving production of the 737 and 757 single-aisle jets from Renton to Everett.

"Right now, it is not our intention to consolidate Renton with Everett," Mulally said at the Paris Air Show in June.

Mulally dismissed the speculation again last month, one day after Boeing announced it will cut up to 30,000 jobs in its commercial-airplanes group.

"An airplane has 4 million parts. You don't just pick it up and move very far," Mulally said Sept. 20. "That's why we've said in the near term we don't have any plans to consolidate. We still don't."

But the marketplace has changed and so, it seems, has Boeing's mindset.

Mulally confirmed yesterday that Boeing will cut production rates across all its product lines 50 percent by the middle of next year as deliveries drop from 522 this year to between 350 and 400 in 2002. That includes slashing production of the 737 from 28 planes per month to 14.

Do such radically lower production rates now make it possible to consider moving the 737 or 757? "Yes," Mulally said yesterday.

"There are times when it makes sense, there are times when it doesn't," he added. "Things have changed and you've got to move, you've got to adapt quickly."

Mulally made his comments to reporters after he addressed the Economic Development Council of Seattle, a local business group. He stressed that no decisions have been made, and he said any moves to downsize in the face of slumping demand must not undermine Boeing's ability to ramp up quickly when the economy rebounds.

Boeing officials have previously stated that even at current production rates there is sufficient room in the cavernous Everett plant for additional production lines. The twin-aisle 747s, 767s and 777s are now built in Everett.

Closing the 717 line in California — which may be decided by the year's end — would free up an efficient factory where Boeing installed its first-ever moving assembly line. Analysts said the space could be used to produce other aircraft or possibly even the Sonic Cruiser, which Boeing plans to begin building between 2006 and 2008. The 717 factory is adjacent to a vacant production plant in Long Beach that Boeing closed in 1997 when it ceased building the MD-11 jetliner it inherited from McDonnell Douglas. Combining the spaces could give Boeing the room necessary to assemble the Sonic Cruiser.

"It certainly would free up capacity for the Sonic Cruiser," said Scott Hamilton, former editor of Commercial Aviation Report and a longtime Boeing watcher.

Boeing was preparing to shift some 737 assembly work to Long Beach in 1998 because of production-line congestion in Puget Sound. Boeing canceled the move at the last minute after gaining control of the bottleneck.

Boeing executives have consistently said the Sonic Cruiser will be built at whichever site is most cost-effective. If the 717 line is shut down, what happens with the Long Beach facility is a "key question," Mulally said. He offered few clues as to the answer, however, other than to say that Boeing's Commercial Airplane Services group does a lot of work in Long Beach maintaining customers' aircraft and adding after-market equipment, such as in-flight entertainment systems.

Mulally's comments about consolidation came just one day after Boeing Chairman Phil Condit told Wall Street analysts "every cost is now variable" at Boeing. Workers, consultants and other items that can be quickly increased or decreased are usually the only costs considered variable. "Fixed costs" such as buildings, heavy equipment and real estate normally don't change much.

"The effort around lean and lean manufacturing means you can build more efficiently in the same space so you can in fact get facilities out (of the company)," Condit said, "and then with lean you can come back up in a smaller footprint."

David Bowermaster can be reached at (206) 464-2724 or dbowermaster@seattletimes.com. Kyung M. Song can be reached at (206) 464-2423 or ksong@seattletimes.com.

Information in this article, originally published October 20, was corrected October 24. Boeing is considering further consolidations at its Renton and Everett plants as a result of the downturn in the airline business, but no decisions have been made. A previous headline incorrectly indicated a decision to move jobs had already been made.

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