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Originally published Saturday, January 10, 2009 at 12:00 AM

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4,500 at Boeing to lose their jobs

The region's biggest private employer is starting to shrink again, slamming into reverse the jobs engine that has propelled the Seattle area up and down through so many economic cycles over the decades.

Seattle Times aerospace reporter

The region's biggest private employer is starting to shrink again, slamming into reverse the jobs engine that has propelled the Seattle area up and down through so many economic cycles over the decades.

Boeing executives said repeatedly in recent years that they intend to avoid the giant busts of earlier eras, and as this downturn begins, management insists that the airplane business remains solid despite the imminent cuts.

Boeing said Friday it is cutting more than 5 percent of its 76,400-person Washington work force, and just shy of 7 percent of the total Commercial Airplanes roster. The cuts -- about 4,500 people, mostly in Washington state -- will be made largely through layoffs, though the figure also includes attrition.

Support positions

"Initial 60-day layoff notices will be issued Feb. 20, and most layoffs will occur in the second quarter of the year," said Scott Carson, chief executive of Commercial Airplanes in a message to employees Friday morning.

He emphasized that Boeing intends to keep building jets at current rates. That means those laid off will be people not directly involved in production -- administrative and clerical workers and other support positions such as facilities maintenance.

Many of those losing their jobs could be long-term contractors rather than permanent employees, according to a Boeing news release.

Carson called the cuts a "difficult and painful decision" made necessary by a dramatic slowdown in airline business and the broader impact of the global recession.

Both passenger and freight air traffic have sharply decreased worldwide since September, Carson said. Airlines are cutting capacity, parking older planes, and reducing orders for spare parts. And new jet orders tapered off in 2008.

"Industries and individuals must prepare for a year of tough challenges," Carson told employees. "We believe that acting now will allow us to keep employment reductions to a minimum while we adapt to the uncertainties of this economic cycle."

Industry analysts will watch keenly to see if order cancellations later in the year force Boeing to reassess its production rate. If that happens, it would inevitably mean further layoffs.

Unions weigh in

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Gov. Chris Gregoire said the announcement is "sad and disappointing, and yet more evidence of the deepening national recession."

Union officials said the company should lay off contractors, not union members. That sets the stage for a fight with Boeing if union members are hit while contractors remain.

Bill Dugovich, a spokesman for Boeing's white-collar union, the Society of Professional Engineering Employees in Aerospace, said he doubted that SPEEA members would be cut significantly. More than 23 percent of union engineers are working 12 or more hours of overtime each week, trying to get the 787 and 747-8 programs back on schedule.

Dugovich said labor contracts require that nonpermanent, nonunion contractors be laid off before any SPEEA-represented employees. More than 2,500 such contractors are working on jobs that could be performed by SPEEA members, he said.

Senior Boeing officials assured top International Association of Machinists union leaders that the layoffs will have "minimal impact" on their members, said IAM spokeswoman Connie Kelliher.

Still hiring on one front

Reflecting its continuing need for production help, Boeing has continued to hire IAM mechanics for assembly work. The union said Boeing added 13 new IAM jobs last week and 19 more Friday.

Tom Wroblewski, the IAM district president, echoed SPEEA's line by calling on the company to cut contractors first and protect the jobs of permanent employees.

For the IAM, one area potentially affected could be facilities maintenance. Last fall, the union negotiated a contract clause that it maintains should give IAM facilities workers priority over contract workers in the event of layoffs in this area.

"Our expectation is that Boeing will do the right thing and release the many on-site contractors performing our facilities and maintenance work," Wroblewski said in a statement. "We will push them to retain their valued employees."

However, some facilities-maintenance workers worry that the contract language won't protect them because Boeing will argue that any layoffs are due to economic weakness and not to subcontracting.

Everett maintenance electrician Scott Blymyer said a senior manager warned his crew at an early morning meeting Friday to expect layoffs.

The contract clause "doesn't protect me," Blymyer said. "The only thing that is going to protect me is my seniority and my work ethic."

Kelliher said that when the union gets more details from Boeing, it will present the company with alternatives to preserve jobs. And if IAM members lose out, "that's when we'll fight."

Production could slow

Some Wall Street observers, such as UBS analyst David Strauss, think Boeing may still be forced to slow production later, which would force further layoffs.

"We think Boeing will inevitably lower production in the face of declining air traffic and limited aircraft financing and we believe the sooner that it can put the delivery peak behind it the better," Strauss wrote to clients Friday. "We believe the eventual recovery in the aerospace stocks won't happen prior to production rates getting more realistic."

Strauss said the number of relatively young aircraft -- including 737s and other models Boeing is currently producing -- parked idle in the desert has more than doubled over the past year and reflects a clear oversupply of jets.

But for now, Carson made clear, Boeing plans to maintain current levels of production and won't put off any of its new airplane programs.

"Many of the job reductions will be in overhead functions and other areas not directly associated with airplane production," Carson's message said. "This will enable us to continue our high production rates and successfully execute our key development programs."

Carson said the company has already taken other steps to prune spending, including cutting back on corporate travel, managing inventory costs and leaving some open positions unfilled in the final months of 2008.

Earlier cycles

In earlier times, a Boeing downturn signaled a giant economic bust for the whole region.

In 1971, a collapse in Boeing employment -- from a peak of more than 100,000 to under 40,000 -- prompted a famously satirical billboard: "Will the last person leaving Seattle -- turn out the lights."

And starting in the late 1990s, after a production debacle closed assembly lines, Boeing began a six-year slide that shed more than 51,000 jobs in the state.

In last fall's labor negotiations, Boeing executives defended their increased use of outsourcing and of outside contractors by arguing that the strategy would dampen such wild swings in employment.

The region is about to put that theory to the test.

Dominic Gates: 206-464-2963 or dgates@seattletimes.com

Copyright © 2009 The Seattle Times Company

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