Boeing Chief Says Overseas Plants Won't Hit U.S. Jobs

By Doug Cameron Features Dow Jones Newswires

Boeing Co. is moving some work completing aircraft to China and other overseas markets but doesn't expect this to affect its U.S. manufacturing workforce, said the chief executive of the world's largest aerospace company.

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Dennis Muilenburg is trying to reshape the company by boosting the profitability of its core commercial jetliner business and increasing defense exports while trimming costs with job cuts and more automation.

"My goal over time is to add manufacturing jobs, but these will be different kinds of jobs," Mr. Muilenburg said in a recent interview.

Mr. Muilenburg and other manufacturing CEOs are under pressure to help deliver on President Donald Trump's pledge to boost employment in the sector in return for tax and regulatory changes. However, potential changes to trade policies sit uneasily with some big exporters such as Boeing.

Boeing has been cutting its U.S. workforce through a mix of buyouts and involuntary layoffs, with the aim of revamping its factories through increased automation and use of new technologies it says can lower the cost of jet and defense systems' production. Boeing's employee roll fell to around 145,000 at the end of May, down 30,000 from 2012, though it hired 11,000 new workers last year.

But Mr. Muilenburg said that overseas facilities such as the new plant it is building with a Chinese partner near Shanghai aren't directly harming U.S. jobs. He said the effort is an essential part of doing business in a China market that is expected to generate sales of 6,800 jets over the next 20 years.

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Employees at the Chinese plant will paint jetliners destined for the Chinese market and equip them with seats and other interior fittings. Boeing is building the plant in partnership with state-owned Comac, which is spearheading China's own efforts to develop a more advanced aerospace sector, recently flying for the first time its C919 jetliner, a competitor to the Chicago-based company's own best-selling 737.

Comac also supplies Boeing with parts for its jets but has ambitions to produce a range of its own, recently inking a deal with a Russian aerospace company to develop a new widebody plane, the most profitable part of the industry.

Mr. Muilenburg said: "We know as we're investing there we're also creating a competitor."

Other aerospace executives such as United Technologies Corp. CEO Greg Hayes have flagged the potential impact of China's aerospace ambitions. "The Chinese will build aircraft someday, they will build engines someday, they will build aircraft systems someday and our goal is to continue to innovate to stay ahead of the curve such that we can capture those markets, and not them," Mr. Hayes said at a recent investor conference.

Boeing is the largest U.S. exporter by dollar value, and while fast-growing customers such as China increasingly want to trade orders for more work in their own countries, Mr. Muilenburg said barters to secure cheaper labor costs wasn't part of Boeing's strategy.

"We're not in the business of taking large operations in the U.S. and moving them overseas," he said. Mr. Muilenburg credited the new administration with revising its own thinking on how global industry supply chains interact, recognizing how domestic jobs are tied to work carried out overseas.

Boeing recently secured a potential $50 billion in defense and commercial sales from Saudi Arabia. The Saudi sales include a pact to complete some Boeing Apache attack helicopters in the kingdom, and the company is also interested in assembling fighter jets in India to secure a deal that could involve more than 100 planes.

The Saudi agreements were sealed during the recent state visit by the president that included delegations led by Mr. Muilenburg and the CEOs of Lockheed Martin Corp. and Raytheon Co.

Boeing and Lockheed both supported the Trans-Pacific Partnership trade deal dumped by the Trump administration, but have retained close ties with the White House.

Mr. Muilenburg said the company has a "seat at the table" when it comes to trade policy, tax and regulatory reforms and the defense budget.

The executive, who enters his third year in charge as CEO in July, has been outspoken in calling the U.S. business climate uncompetitive, even after securing a record backlog of 5,700 jetliners and plans to boost monthly output of its workhorse 737 planes to 57 by the end of the decade from 42 at present. That would boost Boeing's annual deliveries to more than 900 by the end of the decade from an estimated 750 this year.

New orders for Boeing and rival Airbus SE have been scarce this year, but while the U.S. company is considering an all-new plane that would sit between the 737 and the 787 Dreamliner that was plagued by delays, Mr. Muilenburg said the biggest benefits may come from changing the way it makes planes, rather than designing them.

"The opportunity ahead of us in terms of transforming how we design and build how we manufacture is even greater than some of the product innovation that we're going to bring to the table," he said.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

June 08, 2017 05:44 ET (09:44 GMT)