Boeing Co. said on Wednesday it will cut jobs at its commercial airplane unit, addressing intense pressure to lower costs to compete with rival Airbus even as the aviation industry booms.
Boeing Commercial Airplanes Chief Executive Ray Conner announced the move in an employee webcast after the world's biggest aircraft maker saw sales fall and profit margins narrow last year.
Once based in Seattle, Boeing has already cut about 4,000 jobs in Washington state and has come under fire there after receiving a major package of tax incentives in 2013.
Boeing and Airbus are producing planes at record rates, and are due to boost output sharply in the next few years. Both have enough backlogged orders to keep factories humming for seven or eight years.
But last year Airbus won 57 percent of new aircraft orders booked by the two airplane makers. Boeing's operating profit margin narrowed to 3.5 percent in the fourth quarter, from 9.3 percent a year earlier. Factors included the high cost of producing its state-of-the-art 787 Dreamliner and a charge it took to account for slowing sales of its 747 jumbo.
"To win in the market, fund our growth and operate as a healthy business, we are taking thoughtful steps to reduce the cost of designing and building our airplanes, part of which involves evaluating our employment levels across all of commercial airplanes," Boeing said.
"We will start reducing employment levels beginning with executives and managers first."
The company did not provide a time frame for the job reductions or an overall target for cuts. It said the number of cuts "will depend on how effectively we bring down costs as a whole."
Washington state granted Boeing tax breaks in exchange for the company's decision to put a new aircraft program, the 777X, in the Seattle area to "maintain and grow" aerospace employment.
Washington state remains the center of Boeing's commercial airplane operations, and employment has tended to rise when production booms.
But this time, Boeing is producing record numbers of planes with fewer workers than in the past. Employment is falling as the company outsources work to other states and countries, reorganizes its engineering talent around the world and steps up automation and lean manufacturing efforts.
Boeing stock fell 1.2 percent to $116.36 on the New York Stock Exchange on Wednesday.
(Reporting by Alwyn Scott; Editing by Steve Orlofsky, Cynthia Osterman and David Gregorio)