Boeing Workforce Cuts Target Commercial Services Business
Boeing’s company-wide target of reducing its staff by 16,000 will hit its Global Services (BGS) even harder, with cuts in the company’s support business expected to approach 15%, the company says.
"We have begun taking action to lower our number of employees by roughly 10% through a combination of voluntary layoffs (VLO), natural turnover and involuntary layoffs as necessary,” CEO Dave Calhoun told employees in an April 29 message released alongside first-quarter (Q1) earnings.
"We’ll have to make even deeper reductions in areas that are most exposed to the condition of our commercial customers—more than 15% across our commercial airplanes and services businesses, as well as our corporate functions.”
BGS posted $4.6 billion in Q1 revenues, matching its 2019 performance. But the global coronavirus pandemic’s timing—starting in East Asia in January and not hitting Europe and North American for another two months—meant that the ramifications on Boeing’s airline support business is not reflected in the figures.
"We only saw the beginning of the impact of COVID-19 on our commercial services demand for the first quarter, and we expect COVID-19 to have significantly larger impact on the BGS business in future periods,” Calhoun said.
The cuts will affect BGS operations “throughout the country,” Calhoun told reporters on a media call following the earnings release. They also will go beyond reducing headcount and include "taking steps to rightsize our inventory and tailor our portfolio to ensure that we're positioned to serve our customers” Calhoun added.
Some of the BGS commercial decline will be offset by increased government spending, Boeing adds. Government work made up about half of BGS’s 2019 revenue and the market is seen as “stable,” the company adds.
Separately, Boeing’s Q1 earnings included a $336 million charge in its Commercial Airplanes business linked to Boeing 737 frame fitting, or pickle-fork, repair costs.