The Boeing Co. said Monday it will phase out the MD-80 and MD-90 twin-jet airliners, a decision that could mean big trouble for the Boeing plant in Salt Lake City that makes components for both aircraft.
Boeing said it would stop producing the MD-80 and MD-90 in mid-1999 when current orders have been filled.Seattle-based Boeing acquired St. Louis-based McDonnell Douglas in July for some $16 billion, saying it wanted the company for its defense and space business. McDonnell Douglas' commercial jet business has declined in recent years to where it represents only a fraction of the market.
That's because they have had to compete with Boeing's own aircraft, particularly the popular Boeing 737 short-haul airliners, which are direct competitors for the MD-80 and MD-90.
Despite the implications of the decision to kill the two programs, morale remains good at the Salt Lake plant, said Cheryl C. Smith, spokeswoman for the Utah operation.
"We are optimistic, because we have a good quality record here as well as a good production record," said Smith, who has been with the former McDonnell Douglas plant in Salt Lake City since it opened in 1987.
The Salt Lake plant currently employs 570 workers, down from a high of 631 in 1991. It was considered a major coup for the plant when work on the MD-80 and MD-90 was shifted from Long Beach, Calif., to Salt Lake City in November 1994, adding some 60 new jobs. The plant currently builds fuselage sections for the two aircraft.
Smith said that because of the local plant's record, Boeing could move other operations here that would keep the plant going. But that decision won't be made until January, when Boeing says it will make work-allocation decisions for all of its plants, including the former McDonnell Douglas facilities.
David Winder, executive director of the Utah Department of Community and Economic Development, agreed Monday that there was no immediate cause for alarm.
"Boeing probably didn't pay big money to shut down plants. What usually happens is that the people in Salt Lake City will have to convince Boeing that some operation should be located in Salt Lake City by proving it's a good operation.
"We must have a good business climate in Utah so we can keep attracting employers all the time. Hopefully, Boeing will be more a part of Utah's economic climate that McDonnell Douglas is. It presents a challenge to the workers at the (Salt Lake) plant and to state officials to show Boeing officials this is a great place to be."
The Salt Lake plant also does work for the MD-11 trijet aircraft, "but not much," said Smith. Boeing says that airplane, along with the MD-95 twinjet program, will continue but added that the long-term future of the MD-95 is uncertain. Currently, Boeing is only committed to build 50 MD-95s ordered by AirTran for first delivery in mid-1999.
But whatever the eventual fate of the Salt Lake plant, employees likely won't be hit with layoffs anytime soon. The mid-1999 cutoff date for the two programs gives them 20 months even in the worst-case scenario.
But the long-term fate of all McDonnell Douglas employees involved in commercial aircraft production, including the Salt Lake workers, remains undetermined for now, said Ron Woodward, president of Boeing Commercial Airplane Group, in a release.
"We realize everyone will want to know how these decisions will affect them personally," said Woodward. "We want to provide them with clear answers about the future just as soon as possible."
Boeing also has former McDonnell Douglas operations in Toronto, where 2,000 employees make aircraft wings, and a 170-employee parts plant in Melbourne, Ark.
Woodward said the decision to stop producing the two aircraft came after careful analysis of the commercial aircraft market.
"Our market assessment, including recent order history, indicates that there does not appear to be sufficient market demand to warrant extending production of those models beyond that point," he said.
"Our product decisions are driven by the marketplace, and our commitment to increasing shareholder value over the long term."
Boeing has said it will likely have to take a fourth-quarter write-off, of an as-yet unspecified amount, to account for the McDonnell Douglas cancellations, but some analysts have said it could be as much as $1 billion, according to the Associated Press.
Production problems have also plagued Boeing's profitability in the wake of booming demand for jetliners.
The company wrote off some $1.6 billion in October because of late deliveries to plants, slowdowns on assembly lines and shortages of parts and labor. It expects to write off another $1 billion next year due to lagging production rates.