Boeing Expects Layoffs in Defense Division

Boeing may further boost 737 production, but says it needs to reduce costs on the defense side.
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CEO Jim McNerney said the aircraft maker expects layoffs on the defense side.

Speaking on an earnings conference call, McNerney said the aircraft maker is "surprised" by the recent high level of demand for commercial aircraft. But on the defense side, he said cost cuts are needed as spending contracts.

B-1 Lancer bomber

McNerney said layoffs are likely at all levels, although some portion of the cost-cutting would be accomplished through attrition and churn. "We'll be looking to our entire cost structure including the top of the business on down to the bottom of the business," he said. "Layoffs would be proportional -- there would be no over concentration at the bottom of the organization."

>>Boeing May Build Even More 737s

Regarding the longer term future of the 737, McNerney said Boeing is deciding whether to create an entirely new aircraft or to re-engine the existing aircraft. "The decision framework for us

is when does a new airplane come together in terms of the technology readiness and the customer willingness to pay for one," he said. If the plane is a decade a way, new engines make sense, but "on balance, the customer feedback is sort of pushing us toward a newer airplane," he said. The company will take "the balance of the year" to reach a decision.

Earlier Wednesday, Boeing said earnings fell 21% on fewer aircraft deliveries, but the company beat estimates and reaffirmed its annual guidance. Net income totaled $787 million, or $1.06 a share. Analysts surveyed by Thomson Reuters had estimated $1.01. In the same period a year earlier, Boeing earned $998 million, or $1.41 a share.

In early afternoon trading, Boeing stock was down $1.06 at $67.56. Nevertheless, for the year, Boeing stock is up nearly 25% and remains the Dow leader. The index is up about 1% for the year.

-- Written by Ted Reed in Charlotte, N.C.