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Monday, January 26, 2004 - Page updated at 04:14 P.M.
Boeing considers sale of huge Wichita plant
By Dominic Gates
WICHITA, Kan. Boeing is exploring the sale of its 75-year-old manufacturing facility in Wichita, a complex nearly as big as its Everett plant.
The potential sale is outlined in an internal strategic-planning document provided to The Seattle Times by a company insider. The document key elements of which are supported by sources inside and close to the company presents a long-range vision that maintains Boeing's strong role in the Puget Sound area, while shrinking its presence throughout the rest of the country.
The timing of any sale was unclear in the document, and no potential buyers were named.
The Wichita plant, which employs about 12,400 people, houses the largest chunk left of aircraft-component manufacturing within Boeing. Its sale would be the most dramatic move yet in the company's stated mission to reduce its role in the business of making plane parts.
The top Boeing official in Wichita declined to comment on the prospect of selling the facility, which has been a Boeing plant since 1929, when Boeing bought Stearman Aircraft, a maker of biplanes.
Top Boeing executives have talked for some time about shifting the company's business model.
In this long-range vision, Boeing would continue to sell and market the planes that carry its name. But instead of building the bulk of an airplane from start to finish, Boeing engineers would create the initial overarching design of the jets and its mechanics would do only quick, final assembly. The bulk of what comes in between would be done by suppliers.
The internal document, which outlines the future shape of the company's global operations, makes clear that with Washington state having won final assembly of the 7E7, the Boeing pieces of the aircraft-manufacturing process the beginning and the end are envisioned as being centered in Everett. Machining capabilities will be retained in the Auburn fabrication unit, though that will shrink, as Boeing has announced.
The document also confirms the widely held view that the company foresees closing its Renton plant, though the timing is not stated. Boeing Commercial Airplanes Chief Executive Officer Alan Mulally has said that plant will continue producing airplanes until the 737 program ends, probably 15 to 20 more years.
Built in Wichita
The Wichita facility is central to Boeing's commercial-jet manufacturing.
There, the company makes fuselages for Boeing's 737 and 757 jets, engine casings for the 747, 757, 767 and 777, and the nose-and-cockpit section of every Boeing jet, except the declining 717 made in California.
Wichita workers build these massive structures piece by piece, many of the structural elements wrought from raw material on site. A great deal of the work is painstakingly done by hand.
Last year, Wichita won a huge piece of future work on Boeing's proposed 7E7 jet. Wichita is scheduled to supply an elongated nose-and-cockpit section for the 7E7, longer than the 36-foot section it makes for the 777.
That contract includes significant work installing avionics and hydraulics systems, work usually done elsewhere. In addition, Wichita may get the 7E7 struts and engine casings, another chunk of work as yet unallocated.
But that corporate vote of confidence in Wichita doesn't change that building parts is out of favor within Boeing, which wants to get away from such labor-intensive, high-overhead manufacturing because of the costs.
The plant closures and sales in the strategic plan would cut in half the footprint of Boeing Commercial Airplanes in the United States, from 52 million to 26 million square feet, and reduce the work force to about 45,000 from its current level of almost 55,000.
The document indicates Boeing also may sell its facility in Tulsa, Okla., which employs some 1,600 workers, and a small plant in Melbourne, Ark., with a work force of about 100. No timetable is stated for those potential divestments.
If all this comes to pass, the only major structural part of the 7E7 to be built in-house by Boeing would be the tail fin, set for production in Frederickson, near Tacoma.
If Wichita were sold, it would become an external supplier to Boeing. Just as the company's former Spokane plant, sold to Triumph Group in January 2003, continues to produce airplane ducting for Boeing, Wichita would have a major role in current and future programs, including the 7E7.
"Boeing Wichita clearly fits in the lean global enterprise for Boeing," Turner said.
Of course, the same could be said of Mitsubishi of Japan or Alenia of Italy, which fit into the enterprise as suppliers.
The impact of a sale
Within the past two months, Boeing management has directed an extensive environmental survey of the Wichita site and a detailed valuation of site assets, according to employees involved.
Turner insisted such surveys are common. However, an employee who asked for anonymity and who worked on the valuation analysis said his manager told him privately that the purpose of the work was to prepare the site for sale. Such management leaks have in the past week filtered down to the work force.
"It's the buzz throughout the factory," said Hoyt Hillman, a safety-and-environmental-health scientist who worked on the environmental survey.
An executive with a Boeing supplier who requested anonymity reported he had been informed by a peer at Boeing Wichita that a sale was being explored.
Union leaders have not been informed by Boeing of any pending sale. "We've heard it from our members. We haven't heard anything from the company," said Charles Bofferding, executive director of the engineering union, the Society of Professional Engineering Employees in Aerospace, or SPEEA.
But Bofferding said he wouldn't expect to hear officially until a deal was struck with a buyer. Boeing routinely cites legal reasons and Securities and Exchange Commission regulations for withholding information material to the stock price in advance of it becoming public, he said.
SPEEA has about 4,800 members in Boeing Wichita, and Bofferding is facing a move to oust his union from one of its two collective-bargaining units there. The members vote Feb. 12 on whether to decertify that is, get rid of the union.
Clearly, union leaders will be anxious about the impact a sale of Boeing Wichita might have.
"It comes as a shock," said Steve Rooney, president of District Lodge 70 of the International Association of Machinists in Wichita representing 5,800 members in the Boeing plant. "It would always be a concern that they would try to change labor agreements if a sale goes through."
After the sale of the Spokane plant a year ago, some workers were laid off and others had their wages cut by 15 percent.
Adam Pilarski, an analyst with aviation-consultant firm Avitas, said a sale would make sense only if the buyer could do the work more cheaply. "Clearly it would not be good news for the employees," Pilarski said.
Yet another observer, the Boeing supplier executive who declined to be named, also assumes a sale would reduce wages, but said a sale might ultimately benefit Wichita. "It's not necessarily bad news for this community," he said. "In the short run, yes, (the work force) will make less money; but in the long run, they'll have work. The jobs aren't going to be there 10 years from now if something doesn't change."
In justifying past divestitures, Boeing has argued as it did in June, when it sold a wiring plant in Corinth, Texas, to Labinal that the newly independent company will be positioned to get more work by becoming a supplier to other companies besides Boeing.
With three other aircraft manufacturers in Wichita Cessna, Bombardier and Raytheon build business jets and small private planes it's possible that fabrication work from any or all of those could be consolidated in what is now the Boeing plant.
Most likely any buyer would have to be a major aerospace supplier. If such a buyer were a supplier to Airbus and Boeing, it could further expand the work.
In 2002, Boeing's Wichita payroll was about $1 billion, and the company did $193 million in business with local suppliers, so the company generated, directly or indirectly, 17 percent of earnings in the city's economy.
Dominic Gates: 206-464-2963 or firstname.lastname@example.org
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