Boeing looks to save $100 million annually through job transfers

New work sites offer savings projection of $60,000 for each research engineering job moved out of Washington, California

The Seattle TimesMay 4, 2014 

A Boeing 777 jet stands in a production line at the company’s manufacturing plant in February in Everett. Boeing documents indicate a savings of $60,000 a year for every research engineering position moved from the Puget Sound region to areas with lower wages. The move of thousands of jobs to other parts of the country is affecting the morale of workers, according to sources.

ELAINE THOMPSON/THE ASSOCIATED PRESS

— The Boeing Co. expects to save more than $100 million a year by transferring 1,100 research engineering jobs out of Washington state’s Puget Sound region and an additional 200 from Southern California to lower-pay locations, according to internal Boeing documents reviewed by The Seattle Times.

The documents show the company is willing to spend more than $150 million to implement the plan, laying off people and closing research labs in Washington while moving the work to new engineering centers in Huntsville, Ala.; North Charleston, S.C.; and St. Louis.

For each engineering job moved away, management projects average annual savings of $60,000 in pay and benefits.

The restructuring of the Boeing Research & Technology (BR&T) unit is just one piece of Boeing’s broader push since the spring of 2013 to shift multiple engineering units away from the Puget Sound region. So far it has announced that some 4,300 engineering jobs are to be moved.

Boeing employees and some industry experts warn these plans have already undermined the morale of the entire engineering workforce here. But Boeing is moving ahead. The stark financial calculus outlined in the BR&T documents suggests cost-cutting is the prime driver.

Boeing vice president Jim Schlueter did not dispute the figures in the documents but insisted that “cost is just one element of the decision making.”

Among other goals in transferring the work, he said, the company aims to “gain access to new talent,” “reorganize how we operate,” and “reduce our footprint where we are not as productive as we should be.”

Echoing remarks last month by Boeing CEO Jim McNerney, Schlueter said the work transfer is about finding the best places to do research and the right skill mix for the future.

Ray Goforth, executive director of Boeing’s engineering union, had a different explanation when shown a summary of the documents: “So they really are just trying to drive out the older people to lower their labor costs. Wow.”

He said the BR&T engineers he’s heard from believe that the supposed savings are illusory.

“This utter dismantling of the research and technology capacity is going to really cripple the Boeing Company,” Goforth said.

BR&T is Boeing’s advanced central research and development unit.

The plan to move work from the Puget Sound to three new “centers of excellence” in Alabama, South Carolina and Missouri was announced in early December.

HOW IT WORKS

Of the 1,300 in Washington and California whose jobs will move, only about 110 tagged as having “critical” skills will be offered relocation expenses and incentives to move to one of the new engineering centers, the Boeing planning documents reveal.

Other employees who are laid off can apply for jobs, likely with lower wages, at the new locations. The documents show Boeing projects only about 280 will make such a transfer.

The company also plans to hire about 660 new people at the new centers, 40 percent of them entry-level engineers. To fill the remaining gap between jobs cut in Washington and jobs added elsewhere, management plans to use some 240 contractors in the U.S. and overseas.

The documents cite a 2014 average engineering wage in Puget Sound/Southern California of $125,000 compared with a projected average of $89,000 — 28 percent lower—at the new sites. With benefits in 2014 adding 70 percent of value to the wages, the full cost comparison is cited as $212,000 per head annually here versus $152,000 at the new engineering centers.

This will provide recurring labor-cost savings in excess of $100 million per year after 2016, once the work transfer is complete, the Boeing documents say.

The plan envisages lab reductions of 160,000 square feet in Puget Sound and Southern California.

The restructuring will reduce the Puget Sound area’s share of BR&T’s total workforce to 28 percent in 2016, from 54 percent at the beginning of this year.

‘NOBODY WANTS TO GO’

One engineer, who asked to be anonymous for fear of company retribution, said his group, which consists of 23 people, has been told only 10 jobs will remain here after the work transfer. No one yet knows who will be cut. In these circumstances, he said, for weeks everyone in his unit has been concentrating less on work and more on what steps they should take to protect their livelihood.

“This is the worst I’ve seen in 30 years,” he said. He’s already been told informally that he’s one of the “critical” individuals who will be offered relocation, but he said Thursday there’s no way he’s taking the offer. “I won’t go,” said the engineer. “Nobody wants to go. Nobody wants this to work.”

Boeing’s Schlueter said management is “aware of the risk of losing essential expertise and capacity, and we’re doing a number of things to address that.”

“But we’re also aware of the risk of not being competitive in the future,” he added.

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