The Boeing Company (NYSE:BA) is reducing its workforce particularly from its commercial airplanes unit to cut costs as it faces strong sales competition from Airbus Group SE (EPA:AIR).
Last year, Airbus outperformed Boeing due to the strong demand for its A321 neo, narrow body and currency changes that lowered its manufacturing costs. Airbus recorded 1,036 net orders compared with Boeing 868 orders.
The American aerospace company’s commercial airplanes unit will eliminate 4,000 jobs in the middle of this year. The target job cuts represent around 4.8% of the unit’s workforce.
Seattle Times cited an internal memo showing Boeing’s Test and Evaluation division is targeting a 10% workforce reduction before the end of the year. People familiar with the plan suggested that Boeing’s total job cuts will likely increase to around 8,000 by year-end.
Sean McCormack, vice president of communications, Boeing Commercial Airplanes, said, “Our targets are –dollar-based. The more we reduce non-labor costs, the less impact there will be to jobs.”
1,600 workers volunteered to leave Boeing
Boeing’s spokesperson, Marc Birtel told Bloomberg that 1,600 workers decided to leave the company under a voluntary program announced last month, which provided savings for the company. He added that the company will not implement involuntary layoffs for now.
According to Birtel, the additional 2,400 positions are either vacant or will be removed through attrition. He added that Boeing’s commercial airplane unit is leveling its management structure to create a “more streamlined and nimble organization that can respond to marketplace demands.” Last year, the unit accounted for 61% of the aerospace company’s profit.
Other cost-saving initiatives
Dennis Muilenberg, the new CEO of Boeing started the efforts to overhaul its commercial jetliner manufacturing division to make his mark. He previously served as head of the company’s defense unit. Muilenberg is reducing the company’s costs to boost profits.
Aside from job cuts, Boeing is also renegotiating its agreements with suppliers, consolidating programs, trimming business travel, improving productivity and quality as well as reducing excess inventory.
According to Birtel, the success of Boeing’s cost-saving initiatives will ultimately affect the number of its planned job cuts.
The stock price of Boeing declined 1.76% to $128.57 per share today.