Boeing said Wednesday it will continue to shrink its defense business by reducing the number of managers and facilities and consolidating business units to cut $1.6 billion more in costs over the next three years.
However, its defense operations in the Puget Sound region remain “very robust,” particularly the P-8 anti-submarine plane and the Air Force KC-46 refueling tanker, said Boeing spokesman Todd Blecher.
“Those two programs alone are huge growth drivers for the defense side of the business,” he said.
The role of one local defense-side executive, Tim Peters, is expanded in the consolidation.
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The shake-up in the division is an acceleration of cost-cutting and restructuring that have been going on for two years in response to reduced U.S. spending on new military and space programs.
Boeing’s ongoing cost cuts must continue even if the threat of across-the-board budget cuts is averted by Congress, thus avoiding the need for a more dramatic defense contraction, Blecher said.
“No matter what happens to the defense budget, the trend line is flat to down,” he said.
In a memo to defense-side employees Wednesday, Dennis Muilenburg, chief executive of the St. Louis-based Boeing Defense, Space & Security (BDS) division, said the cost-cutting program has saved $2.2 billion over the past two years.
For the next phase, the company is “putting everything in our business under a microscope,” Muilenburg wrote.
He announced the amalgamation of various business units within BDS that will cut the number of executives by 10 percent, with a “sharp reduction in vice president and director-level positions.”
The remaining executives will have expanded roles.
In this region, Peters, who has headed the Airborne Early Warning and Control aircraft and the P-8 programs, will now be in charge of an enlarged division that includes the Air Force KC-46 tanker program and the C-17 transport aircraft programs.
Overall, Muilenburg said in the memo, by the end of this year the number of executives will be 30 percent lower than in 2010.
He said the defense division wants to reduce its management costs by a further 10 percent by the end of next year, reducing the ratio of managers to non-managers to 12.5 to 1, from 9.7 to 1 today.
Blecher said Boeing is “looking at management levels below the executive ranks” for the next round of reductions.
Rather than lose their jobs, some displaced division managers may transfer to the booming commercial-airplanes side of the company, he said.
Dominic Gates: (206) 464-2963 or firstname.lastname@example.org