Evaluation on the Downsizing of Boeing Company(Assignment No. 3)

Boeing Company

“Boeing” is said to be the world's largest aerospace and defense company which operates in over 90 countries and claims the title of America's largest exporter. It has three divisions: commercial airplanes (50.3% of revenue), integrated defense systems (48.3%), and a small aircraft leasing subsidiary (1.2%). The most prominent is the commercial airplane section which faces intense competition from its Airbus line of planes.

Since Boeing is known to be the only remaining U.S manufacturer of large commercial aircraft, they will be making military and special aircraft ten years from now. But according to Alan MacPherson, professor and chair of the Department of Geography in the College of Arts and Science its days of manufacturing large passengers jets will probably have to come to an end.

After the incident of The World Trade Center and Pentagon on September 11. The senior Boeing officials sensed that airplane manufacturer would suffer drastically on this happening. Because of this event, the Boeing Commercial President and CEO Alan Mulally consulted Chairman Philip M. Condit and made the decision on September 18 to cut 20%( 20,000) to 30%( 30,000) of 96,000 people in Seattle area employed by Boeing’s commercial airplane unit. This decision was hard to make by the Boeing’s Company because such dealings and actions will affect the lives of the people who work in their company.

The following are the evidence noted by Pritchard and MacPherson:

1. Boeing's sale or closure of approximately 10 million square feet of space devoted to commercial and military aircraft production in the past decade

2. a 60 percent decline in Boeing's commercial aircraft production, with less than 50 aircraft in backlogs of four of its six commercial aircraft models, when most viable, mature aircraft programs have backlogs in excess of 100

3. the lack of new aircraft programs—Boeing's most recent aircraft is the 777, designed in the early 1990s

4. Boeing's announcement on Dec. 20 that it would shelve its futuristic, high-speed, sonic-cruiser design in favor of a cheaper alternative, its second cancellation of a proposed commercial jetliner program

This strategy will probably be positive because aviation services and high-tech military aircraft manufacturing have had higher profit margins than the commercial side.

The effect of this strategy is lossing the members or the employees of this company who mainly do reviting and aircraft assembly. And now, they will be needing people who have new sets of skills that will fit on a specific position.

I conclude that downsizing could be a hard decision for the company to be made because the lives of the employees will be affected. On the other hand, it will be helpful for the company to maintain their standing in the industry to be able to compete to other companies.

Reference:

http://www.businessweek.com/bwdaily/dnflash/sep2001/nf20010919_2675.htm

http://www.buffalo.edu/reporter/vol34/vol34n21/articles/Boeing.html