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Boeing to Cut 300 Jobs in Australia as Manufacturing Weakens (1)

April 02, 2014

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Boeing Co.’s overall order backlog is at a record $374 billion after customers put in requests for 1,531 aircraft during 2013, chief executive officer W. James McNerney told a Jan. 30 investor call. Photographer: Dhiraj Singh/Bloomberg

Boeing Co. (BA:US), the world’s largest planemaker, will cut about 300 jobs at its Australian unit in the latest blow to the nation’s manufacturing industry.

The jobs will be eliminated by the end of the year, Boeing spokeswoman Caroline Bell said today in an e-mailed statement. The unit is Boeing’s largest manufacturing operation outside North America and employs about 1,300 people, according to the company’s website.

With the Australian dollar near a four-month high, the cutbacks add to the job creation challenge for Prime Minister Tony Abbott, who won an election last year pledging to restore confidence in the economy. Boeing was held up last month by the Reserve Bank of Australia as an example of manufacturing’s future in a nation where companies from BP Plc to Toyota Motor Corp. have announced more than 4,000 job cuts this year.

“Australia can’t compete,” Peter Gahan, director of the Centre for Workplace Leadership at the University of Melbourne, said by phone. “The high dollar is a real threat to the viability of manufacturing here.”

Boeing’s Melbourne plant, established as a unit of British planemaker de Havilland Aircraft Co. in 1927, makes wing components such as flaps and ailerons, or wing controllers, for aircraft including the 747 Jumbo Jet and 787 Dreamliner.

Full Rates

The job cuts were “in line with a long-established financial forecast,” Boeing said in the statement. “This was always our intention when the company’s aircraft programs stabilized at full production rates.”

The company’s overall order backlog is at a record $374 billion after customers put in requests for 1,531 aircraft during 2013, chief executive officer W. James McNerney told a Jan. 30 investor call.

Australia’s manufacturing sector has suffered in recent years as the market’s isolation combined with the strength of the dollar and high costs to make locally-made products uncompetitive internationally. The nation’s unemployment rate was at 6 percent in February, matching the highest since 2003.

A manufacturing index compiled by the Australian Industry Group has recorded just four months of expansion since July 2010. A comparable U.S. index by the Institute for Supply Management has contracted in just one month since July 2009.

RBA Governor Glenn Stevens, who’s cut Australia’s key interest rate to a record-low 2.5 percent as a mining investment boom wanes, cited Boeing’s Melbourne operation as an example of the nation’s continuing potential for manufacturing.

High-Value

“As a country we can find a future in parts of very high-value manufacturing and services,” he told a parliamentary hearing March 7. “We can do more of, say, making ailerons for Boeing 787s in Melbourne, even as we do less of car assembly.”

BP yesterday said it would close its Bulwer Island refinery in Queensland by 2015, with the loss of about 355 jobs. Philip Morris International Inc. said it would shutter a 60-year-old cigarette plant in southeast Melbourne, cutting 180 jobs.

Toyota Feb. 10 became the last of Australia’s car manufacturers, after Ford Motor Co. and General Motors Co., to announce a pullout from a country where Ford started assembling Model Ts in 1925. Toyota has 2,500 plant workers, the company said at the time, and the announcement put in jeopardy about 50,000 jobs in the broader auto and parts industry.

Later that month, Alcoa Inc. said it would close its 50-year-old Point Henry aluminum smelter in the city of Geelong west of Melbourne, with the loss of 580 jobs.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net Keith Gosman, Malcolm Scott


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