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Phaseout of MD-11 Jet Heightens Uncertainty

Aerospace: Boeing's decision to end production raises questions about future of Douglas plant in Long Beach.

June 04, 1998|KAREN KAPLAN | TIMES STAFF WRITER

Boeing Co.'s decision to phase out production of the MD-11 jetliner in early 2000 underscores the uncertainty facing the Douglas Products Division in Long Beach nearly a year after Boeing completed its acquisition of McDonnell Douglas.

In announcing Wednesday that it is canceling the program, Boeing placed the jobs of 3,000 Long Beach employees in jeopardy just three months after it said it would trim its 10,500-member work force there by about a third by the end of next year. The MD-80 and MD-90 production lines are already scheduled to be shut down in mid-1999.

But executives at Boeing headquarters in Seattle have consistently expressed optimism about the future of the Long Beach plant, which is competing for work against Boeing's airplane manufacturing facilities in the Seattle suburbs of Everett and Renton.

"This MD-11 announcement is not a signal that we are closing the Long Beach facility," Ron Woodard, president of Boeing's Commercial Airplane Group, reiterated Wednesday.

Indeed, Boeing's newest jet, the 100-seat 717, will roll out of a Long Beach factory next week--although only two airlines have placed orders so far. The company is also considering a plan to move some production of its popular 737 jetliner to Southern California, but a final decision is not expected until late summer.

"What we're seeing through a number of announcements in Seattle is that they're not sure what the end game is relative to the McDonnell Douglas deal," said Jon Kutler, president of Quarterdeck Investment Partners, a Los Angeles investment bank that focuses on the aerospace industry. "There's been a number of ups and downs."

In Long Beach, the MD-11 decision was met with disappointment but not surprise: It was well known that the program's fate rested on its ability to generate sales, and with Asian economies slumping, only three of the planes have been ordered this year. But workers there chose to focus on future opportunities rather than past failures.

"There'll be some layoffs, I'm sure, but we're optimistic about getting new work here," said Kedrick Legg, president of the United Aerospace Workers Local 148 in Lakewood, which represents about half of the 3,000 employees who work on the MD-11. "Our work force is very resilient. We're tough as rocks, and we'll keep on building airplanes."

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The decision will also affect legions of subcontractors who supply components for the MD-11. Los Angeles area subcontractors such as machine shops, heat treaters, platers and testing houses, played a large role in the program.

Boeing executives said it is too soon to predict how many Long Beach workers will be reassigned to other jobs and how many will have to be laid off once the last of the MD-11 nears completion in mid-1999. In large measure, it will depend on Boeing's ability to sell the 717--originally developed by McDonnell Douglas as the MD-95--to other customers besides AirTran Airlines, the discount carrier (formerly ValuJet) that ordered 50 of the planes when the model was launched in 1995. Last month a German leasing company ordered five of the planes.

The other major factor is whether Boeing decides to shift some 737 production work to Long Beach. The Douglas Products Division already does some finishing work on 737s, such as installing their interiors. But Long Beach could get significantly more work if Boeing establishes a production line to assemble 737-700Cs and Boeing Business Jets, a 737 derivative.

Boeing has disclosed plans to shift 737 work to Long Beach from its overburdened plant in the Seattle suburb of Renton. The local district lodge of the International Aerospace Machinists and Aerospace Workers in Seattle is fighting any transfer, but Long Beach employees and industry analysts are fairly confident they'll hear good news by August.

"The company is really leaning toward sending new work down here," Legg said.

The shuttering of the MD-11 program represents the loss of another Southern California aerospace legacy. Boeing's decision lays to rest the descendant of McDonnell Douglas' storied DC-10 trijet and erases the last of the "MD" planes from the landscape.

Douglas Aircraft Co. developed the wide-body DC-10 in the 1960s, in competition with Lockheed's L-1011 Tristar. The rivalry nearly bankrupted both firms, leading Douglas to merge with McDonnell in 1967 and forcing Lockheed to seek a government bailout in the early 1970s.

Early on, the DC-10 was involved in two major crashes that were blamed on design defects. In 1974, a Turkish Airlines plane crashed near Paris and killed 346 passengers when a rear cargo door blew out, decompressing the cabin so that the floor buckled and severed the plane's hydraulic lines. McDonnell Douglas later changed the cargo door design.

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Five years later, 273 people were killed when an American Airlines DC-10 crashed while taking off from Chicago after an engine tore off, damaging the left wing. Investigators blamed the crash on faulty maintenance and and design defects.

McDonnell Douglas improved the plane's safety record, and the company went on to sell a total of 446 DC-10s. McDonnell Douglas launched the MD-11 in 1986, but lower than expected sales forced the company to take a $1.8-billion charge in 1995. McDonnell Douglas and Boeing combined to sell 192 of the planes.

Ironically, the MD-11 may be a victim of its own success. Paul Nisbet, president of JSA Research, an aerospace research firm in Newport, R.I., said it was hard for Boeing to sell the the plane as a freighter, a key goal, in part because so many older MD-11s in very good condition are on the market. They can be bought and converted into freighters.

Boeing shares closed unchanged at $45.88 on the New York Stock Exchange on Wednesday.

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Times staff writer Ralph Vartabedian in Washington contributed to this report.

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