Boeing Juggles Conflicting Tasks Company Scrambles To Boost Production, Hold Line On New Hiring
The Boeing Co. is used to stretching jetliners. Now it has to stretch itself.
Like a wrestler who has to bulk up to gain strength but shed pounds to make weight, Boeing is trying to balance its desire to get leaner and more efficient with its need to expand production, company executives say.
Boeing managers say it’s a full plate: soaring demand from plane-starved customers who have money for the first time in years; a union uncertain about most of the change and angry about some of it; rising expectations on Wall Street; and able competitors who will be happy to take the orders Boeing can’t fill.
As if that wasn’t enough, the company said on Aug. 1 that it is buying the defense and space businesses of Rockwell International, meaning Boeing now must integrate a new subsidiary with eight divisions and 21,000 employees.
By 1998, Boeing will be cranking out more than 400 jetliners a year, within range of its all-time record of 446. Output could go higher, company officials say. Employment will go up, too, though not to the record levels of the early 1990s, Boeing executives say.
The company is wrestling with more new products than it has ever built at one time, including a new long-range version of the 777, two new 747 derivatives, a stretch 757 and a possible 80- to 100-seat jetliner. Its new family of 737s is taking shape in Wichita, Kan., and Renton, while the three versions of the company’s big new jetliner, the 777, are barely out the door.
Boeing has a plan. Multiple computer systems will be replaced with one. Manufacturing will be improved or shipped out to people who can do it better. Processes will be streamlined so parts can be tracked and assigned with ease. And customized jetliners will roll out in nearby Everett and Renton in just eight months or less.
Workers, in turn, will be rewarded by not losing jobs to productivity improvements and by a bonus program that could earn them thousands of dollars in Boeing stock.
But the best-laid plans of managers and men often do go awry, even if they’re drawn on computer. The airlines’ financial recovery from the disastrous first half of the 1990s has come on in a rush. As a result, a strike in Winnipeg, Manitoba, has created a shortage of 747 wing panels, for instance, and production demands have outstripped capacity on the 777 wing line.
“The orders came back a little bit sooner than we expected,” said Bob Hammer, vice president in charge of the biggest of Boeing’s process-improvement programs. “We expected a little more breathing room.”
After landing only 120 orders in 1994, Boeing had 346 last year and 301 so far this year. After years of heavy losses, airline profits are up sharply. Analysts say more orders are coming, and they expect a robust jetliner market for the rest of the decade.
Boeing can’t afford to say no when airlines want jets. Nor can it respond in the way it has in the past, executives say.
Its usual answer when orders rise has been to hire more people and boost production. In 1990-92, for example, Boeing employment topped 100,000 in the Puget Sound region and the company delivered 1,266 aircraft, or more than 400 a year. Analysts say Boeing could push that to more than 500 if it wanted to.
But such a pace would cost money on the way up and more money on the way down, said Peter Jacobs, aerospace analyst at Ragen MacKenzie in Seattle and a former Boeing budget analyst. Airplane orders tend to follow broad swings in the world economy and peak about every 10 years. It would be cheaper to ratchet the yearly rate to a range between 400 and 450 aircraft and stay there for a while, Jacobs said.
Boeing’s announced plan is to nearly double production to 34 planes a month by 1998. But that isn’t “something that’s set in stone,” Boeing spokeswoman Barbara Murphy said. “Our goal is to remain nimble and respond to customer needs while at the same time lessening any employment disruptions. We want stable employment.”
Boeing employment has followed production cycles up and down since the company’s founding in 1916.
Boeing’s boom times in the late 1980s and early 1990s were especially chaotic and painful, Boeing executives say. Ramping up to produce the 747-400 required so much hiring that quality problems arose. When the cycle turned down and orders fell off, nearly 30,000 Seattle-area jobs were axed.
“I don’t think the company wants to relive that situation,” Jacobs said. “On the other hand, if you have the airlines breathing down your neck, saying, ‘If you can’t deliver these airplanes, Airbus can,’ you have to do something.”
Boeing’s Hammer agrees. “You never want to turn business away,” he said. “Our option here obviously is we’ve got to figure out how we’ve got to put these (new) processes in place.”
The simple answer is bringing in workers. Boeing is already at the employment level - about 78,000 locally - that it predicted for the end of this year.
That’s not without problems, too, said aerospace analyst Wolfgang Demisch of Banker’s Trust Securities in New York.
“When you add a lot of people, you also add a lot of mistakes,” he said. “The new guys just have to learn the ropes.”
The company’s answer is to hire more selectively and increase training before thrusting new talent into the fire, Boeing spokeswoman Donna Mikov said. “It’s far superior (to the old process), but it’s taking them a little longer to get on line,” she said.
The 777 wing line has been behind schedule since spring, but should be flying straight by mid- to late August, Mikov said. A planned two-week maintenance shutdown this month has been scrapped to help close the gap.
“Setting up new processes is always a difficult task,” Demisch said. “To do this while you’re simultaneously producing more is much more difficult. To do this while trying to be responsive to Wall Street ankle-biters who are saying, ‘Where’s my margin?’ is even more challenging.”
Instead of pushing employment to new highs, operations will be improved to the point where the company can build each jet with fewer people.
But Boeing’s No. 1 efficiency effort is already causing controversy among the employees who will be its foot soldiers in the coming months.
DCAC/MRM (Define and Control Airplane Configuration/Manufacturing Resource Management) is only one point of Boeing’s three-pronged assault on the future, but it’s a good example of what the company is up against.
In part, DCAC aims to ease the production process by slashing paperwork, modularizing parts and centralizing data on a single computer system. That will mean more work in some areas and less in others, Hammer said. Some new jobs won’t be part of the union, which has fired back by filing an unfair labor practices charge against the company.
That underscores the human challenge facing Boeing.
“The company has to focus on the people issues,” said Charles Bofferding, executive director of the Seattle Professional Engineering Employees Association, Boeing’s second-largest union. “The bottom line is it is the people who are going to get this done.”