McDonnell Douglas says it may temporarily halt production of its big MD-11 jet next year, in yet another setback to the stagnating commercial aircraft industry.
The company's 350-worker Salt Lake City plant makes components for the MD-11 and other aircraft.The news came four days after Boeing said it will cut an additional 7,000 jobs on top of the 9,305 it jettisoned in 1994.
The developments are telling signs that the long-anticipated upturn in commercial flying has yet to arrive. Although more people are buying tickets than in the early part of the decade, many airlines can't seem to get out of the red due to high costs.
McDonnell Douglas blamed a severe shortage of orders for the 300-seat MD-11 and said it may halt production for up to six months.
Spokesman Tom Williams said thousands of workers would face temporary layoffs.
"It's something that's very serious, that we don't want to do," Williams said Monday. "But it's something you have to honestly look at."
Without new orders for the MD-11, McDonnell Douglas may deliver as few as 10 next year, down from 36 in 1993.
Ironically, the situation comes just a few weeks after McDonnell Douglas reported a record year of profits, thanks to military jet production and declining costs in its commercial jet business.
The company earned $598 million in 1994 vs. $396 million a year earlier.
"This is going to be a slow recovery," said Howard Rubel, an analyst with the Goldman Sachs & Co. in New York. "My sense is that barring a major recession, we'll see gradually improving production rates from '95 or '96 on."
The MD-11, a three-engine jet, is built at the company's 10,000-worker factory in Long Beach, Calif. That facility also produces the smaller MD-80 and MD-90.
Williams said a decision on halting MD-11 production will be made within five months. He said company officials remain optimistic that new orders will come in.
Other options include slowing production again, a move that would force the company to further boost efficiency or absorb higher per-jet costs. Another option is to persuade some customers to take delivery sooner on MD-11s ordered for later years.
He noted that the Long Beach-based division, known as Douglas Aircraft, has been profitable for 16 straight quarters - at lower production rates than most in the industry believed possible.