Clueless in Seattle

Boeing's layoffs announcement hints at management insanity.

IF, AS RUMORED, Boeing CEO Phil Condit is fired and replaced by president Harry Stonecipher, the company'll announce it on Christmas Eve, right? Or maybe his birthday.

"What were they thinking?" a Boeing mid-level manager asked, having a drink the other day and discussing the company's Merry Christmas announcement of more layoffs. "In effect they told employees to work hard so they can eliminate their own jobs. Good luck with that incentive plan!"

That's Boeing's style today—bad form in the midst of lousy earnings, a slump that could send us all spiraling back to the laid-off '70s. Before the last person leaves Seattle again, will someone please turn off Boeing's sputtering corporate PR machine?

A year and a half ago the Lazy B's pockets were stuffed with new jetliner orders while its stock made sky trails up the Dow at $61 a share. Slowly, Boeing found those positive orders had a negative affect—production had to be shut down and employees laid off because planes couldn't be stamped out fast enough. Company executives say they were too optimistic and underestimated the Asia Effect. But on the factory floor, workers complained all along that chronic assembly bottlenecks, inefficiencies, and mistakes remained as entrenched as the old-boy management network that perpetuates them.

With Asia and the airlines locked in economic stall, Boeing planes were mothballed while a quickened assembly process produced profit-eating delays and mistakes. ("One little off-center hole," an engineer told us, "can cost the company $15,000." Factoring in other costly mistakes, "a customer could get hundreds of thousands of dollars knocked off the price.")

The company posted its first earnings loss in a half-century, and Boeing stock subsequently took a 50 percent drop from its record high last year. The company that expects $50 billion in annual sales had to admit it couldn't make even a dollar and could promise little more next year.

Investors were not happy. Could they be soothed? A master stroke was at hand.

With just 23 more shopping days until Christmas, Boeing announced a new round of layoffs, on top of earlier ones. "The situation in Asia" made them do it, Condit said. Stunningly, 20,000 more workers would be offed, raising the two-year total to 50,000.

It sent one big "Humbug!" echoing across Puget Sound. As a friend asked, "Who's advising Boeing these days? The Marquis de Sade?"

IT WAS INEPT—and unnecessary. The company didn't announce who might be pink-slipped or when released employees would hit the bricks, thus leaving everyone worried about their futures. Yet with 1999 production expected to increase 12 percent (to 550 jets), it's likely going to be next Christmas before many of those workers are gone.

Bunching its bad news into one big spitwad, Boeing gambled that the backlash will blow over soon and the tired march toward double-digit profit can resume again. They may have rolled craps instead: Wall Streeters have bailed, stockholders are demanding Condit's scalp, workers say they've been betrayed, and the general public wonders just what kind of unfeeling creatures lurk in those eerily austere East Marginal headquarters.

Like its ultrarosy projections and confused employment strategy—hiring, training, and firing the same workers in a matter of months—the company winged it again, making its upstart rival, the run-by-committee Airbus Industrie, look brilliant. How well considered was this latest cutback move? Condit was out of town—in Australia—when he was abruptly called in. They couldn't wait at least until New Year's, when medications are at hand?

"There's one positive sign, though," says the Boeing manager. "Morale. It can't get any lower."

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