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By Catholic Online (NEWS CONSORTIUM)

11/8/2012 (1 year ago)

Catholic Online (www.catholic.org)

Pentagon's second-largest supplier takes steps to save billions

Boeing has announced a major restructuring of its defense division. Along with the announcement came news that the firm will cut 30 percent of management jobs from 2010 levels. The company will also close facilities in California and consolidate several business units to cut costs.

U.S. arms suppliers are currently under pressure to cut costs and preserve profit margins amid dwindling defense spending in the U.S.

U.S. arms suppliers are currently under pressure to cut costs and preserve profit margins amid dwindling defense spending in the U.S.

Article Highlights

By Catholic Online (NEWS CONSORTIUM)

Catholic Online (www.catholic.org)

11/8/2012 (1 year ago)

Published in Business & Economics

Keywords: Boeing, airline, Pentagon, budget, management


LOS ANGELES, CA (Catholic Online) - Boeing employees were made aware about the changes this week in a memo obtained by Reuters, and since confirmed by Boeing.

The Pentagon's second-largest supplier, Boeing said the changes were the latest step in an affordability drive. The action has slashed costs by $2.2 billion since 2010, according to the memo.

U.S. arms suppliers are currently under pressure to cut costs and preserve profit margins amid dwindling defense spending in the U.S.

Chief Executive of Boeing Defense Dennis Muilenburg said in a message that the company aimed to cut costs by an additional $1.6 billion from 2013 through 2015.

"We are raising the bar higher because our market challenges and opportunities require it, and our customers' needs demand it," Muilenburg said.

Savings would reach $4 billion, Muilenburg said making the company more viable and better able to deal with a tougher marketplace.

Boeing will also cut the number of executive jobs an additional 10 percent by the end of 2012, bringing overall cuts in its executive team to 30 percent for the past two years. The move could result in a 10 percent cut in management costs.

Boeing said the changes were not a response to the threat of additional, across-the-board U.S. budget cuts due to take effect on January 2, or the outcome of U.S. elections, but represented another step in its continuing drive to "be more competitive while investing in technologies and people."

The company did not give details on how its employees would be phased out, saying many employees will be repurposed into Boeing's growing commercial business.

A company spokesman declined to say how many jobs had already been cut from the 2010 level.

Rival Lockheed Martin has reduced its management ranks by about 25 percent in recent years after announcing a voluntary buyout.

"Many investors focus on Boeing's commercial operations," Defense consultant Loren Thompson said, referring to the jet-making business.

"But defense provides 40 percent of the company's revenues and returns, so controlling costs there is crucial to maintaining the company's overall profitability."

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