Boeing Co. has implemented bigger cuts than expected in its strategy ranks. It has reduced the number of planners working in key divisions by half, in order to focus on dealing with industrial pressures. This move reflects a renewed focus on industrial priorities, following the appointment of Stephanie Pope to the new role of chief operating officer on Monday. She is now in line to succeed Dave Calhoun as CEO.
.gif)
UThe company has been facing supply disruptions and has almost $40 billion of debt due to the COVID-19 travel slump and an earlier safety crisis. Critics are concerned that the increased operational focus is diverting attention from Boeing's long-term future at a crucial stage for the industry. This week, redundancy notices are due to go out to affected strategists, according to sources. In November, Boeing announced that Marc Allen, who was once seen as a future CEO, would step down as chief strategy officer, with part of his planning team redeployed to divisions. In a memo, Calhoun had said that this would "enable and empower our business units," with strategists "directly joining the business units they support.
"However, sources say that those units are facing cuts of at least 50% in the number of strategists who work day-to-day inside Boeing Global Services and Stan Deal's Boeing Commercial Airplanes. The total number of employees affected is unknown. Some strategists are being told not to go back to work when the 60-day notices land, though they will receive job search advice, according to sources. At Defense, plans are evolving more slowly as it first combines the division's strategy and business development, but cuts of 50% or more are expected there too. Boeing confirmed the internal Defense combination but declined to comment on the number of job cuts across the company. Sources say it has around 200 strategists in total.
"We are directly aligning our strategy teams to the business units they support," a spokesperson said. This is part of broader steps taken over several years to simplify corporate structure and focus resources on the business. On Monday, Boeing shares rose 1.4%. Strategy is a perennial chess game in aerospace due to the company-sized bets and time needed to master new technology. The decision to cut core strategy teams has already drawn criticism from analyst and long-time Boeing skeptic Richard Aboulafia. He said that this and Pope's appointment favor the harvesting of past investments over future technologies. "If it doesn't have these things, how does it know where it wants to be in five or 10 years?" he said. However, not everyone is as pessimistic. One source familiar with the company said that its divisions had long seen the strategy department as a costly rival and predicted that it would gradually reshape itself. Jefferies analyst Sheila Kahyaoglu on Monday welcomed the greater operational focus visible in Pope's appointment. The shake-up comes as the industry studies its crystal ball on the future of single-aisle jets, the aerospace cash cow, marking one of the biggest strategic choices for a generation. Although successor models are over a decade away, Europe's Airbus has already aired a key component of its potential strategy by suggesting it may request public support: a mechanism that helped trigger a 17-year trade war with Boeing. Calhoun has tempered expectations of a new Boeing airplane until the mid-2030s, saying it must be 20%-30% more efficient. Shares are up 30% this year as Boeing conserves resources in favor of paying off $39 billion in debt. However, sources say that it never fully halted work on a 737 replacement. But, Boeing's storied Product Strategy team will now sit under Product Development, which runs existing projects, Boeing confirmed in response to a Reuters query. "One hopes the strategy changes are not about abandoning the future of the company in terms of the need to develop new programs (and) respond to the changing environment, particularly decarbonization," said Agency Partners analyst Nick Cunningham. "On the other hand, you could argue that it's just realistic."
