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Boeing May Cut Another 1,500 Jobs

The layoffs at the satellite unit in El Segundo come on top of the cutbacks already made there this year.

November 22, 2002|Peter Pae | Times Staff Writer

In another sign that the slump in the telecommunications industry has been far more severe than anticipated, Boeing Co. said Thursday that it may slash as many as 1,500 jobs at its satellite manufacturing operation in El Segundo.

Boeing also said it plans to vacate buildings and consolidate workers into under-utilized facilities, further jarring El Segundo's teetering commercial real-estate market. El Segundo is still trying to recover from the aerospace downturn of the 1990s and has one of the highest office vacancy rates in the region.

The additional Boeing job cuts are on top of the nearly 1,500 jobs that the satellite unit has already slashed from its payroll this year. By June, Boeing Satellite Systems' total work force could shrink by more than a third to 5,800, from 8,800 that occupied the sprawling complex before Boeing began the major cutbacks earlier this year.

The announcement came a day after Boeing said it was laying off 5,000 commercial aircraft workers in Washington and Oregon.

Those cuts were on top of 30,000 jobs Boeing slashed this year because of a downturn in the commercial aircraft market after last year's terrorist attacks.

The latest move at Boeing's satellite unit completely reverses an aggressive expansion plan that Boeing undertook shortly after acquiring the business from Hughes Electronics Corp. two years ago amid what was expected to be a boom in global wireless communications and Internet broadband systems.

"It is with great reluctance that we are taking these steps, but the magnitude of the decline in the commercial satellite market provides us with little flexibility," said James Albaugh, president of Boeing Integrated Defense Systems, which oversees the satellite business.

In a letter to Rep. Jane Harman (D-Venice), Boeing said it was suffering from a significant drop in orders and the company did not see any "near-term recovery in the commercial satellite market." The company said there were only seven commercial satellites sold this year worldwide, compared with 27 in 2001. Only one of the seven was sold by Boeing. The satellites, some of which can take 18 months to build, sell for $100 million to $250 million each.

Harman sharply criticized the cost-cutting measures as shortsighted and said they could hurt the business in the long run if too many core engineers are let go and satellite-making expertise is permanently lost. "You can't just bring these people back or hire new people to build these enormously complex systems," Harman said.

Boeing officials told its El Segundo employees about the layoffs Thursday morning. The job cuts didn't surprise analysts, who said that in addition to the dramatic market downturn, Boeing has been hit hard by quality problems with its satellites.

Last summer, Boeing officials had to turn over technical documents about one of its satellite designs to insurance underwriters, hoping to head off a possible lawsuit by insurers who are facing $1.5 billion in claims because of defects in one of its satellite designs.

Boeing's stock closed Thursday at $32.44, up 71 cents a share, on the New York Stock Exchange.

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