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Company to end 717 production



Published: Sat, January 15, 2005 @ 12:00 a.m.



An executive said the overall market doesn't support continuation of the model.

CHICAGO (AP) -- Boeing Co. will end production of the 717 jet, its smallest passenger plane, next year, and plans to charge $615 million against earnings before taxes related to that and the loss of a $23 billion deal to supply refueling tankers to the U.S. Air Force.

The big Chicago-based airplane manufacturer said Friday the charge will work out to 48 cents a share for the fourth-quarter and full-year 2004 results, scheduled to be released on Feb. 2, 2005.

Boeing shares closed up 28 cents, at $50.91, on the New York Stock Exchange on Friday after being down earlier in the session.

The company will take a charge amounting to about $340 million, or 27 cents per share, before taxes due to the end of the production of the 717 sometime in 2006.

An additional $45 million of expenses associated with the shutdown are expected for 2005 through 2007, according to Boeing.

"Unfortunately, the overall market for the airplane does not support continuing 717 production beyond delivering on our current commitments," said Boeing Commercial Airplanes President and Chief Executive Officer Alan Mulally.

If no further planes are ordered, the last 717 will roll off the Long Beach, Calif. assembly line in May 2006, a Boeing executive said.

Executives would not say how many of the 2,500 employees would lose their jobs. Some union workers will be able to transfer to the C-17 cargo plane program, also built in Long Beach. Some salaried workers will be offered jobs at other Boeing plants, the company said.

Long Beach city officials estimate about 750 people could eventually be laid off. Ray Worden, the city's work force development manager, said the estimate is based on retirements and probable transfers.

Boeing confirmed that an additional 350 jobs will be cut with the closing of a Toronto facility that makes wings for the 717 and other Boeing planes.

Background

Boeing inherited the 100-seater airplane program when it acquired McDonnell Douglas in 1997. The Boeing 717 is the last passenger plane built in the state that produced one of the first airliners -- the historic DC-1 built by Douglas Aircraft in 1933 for TWA.

Boeing said the charge related to the initial production of aerial refueling tankers for the U.S. Air Force was approximately $275 million, or 21 cents per share, before taxes.

The Pentagon decided in November to reopen the Air Force's deal with Boeing to convert 767s into refueling tankers amid a corruption scandal involving former Air Force official Darleen Druyun.

That action was in response to a growing scandal centering on Druyun, who admitted giving special treatment to Boeing on the tanker deal and other contracts. Druyun later joined Boeing as a top executive. She has pleaded guilty on felony charges and was sentenced to nine months in prison. Boeing's former chief financial officer, Michael Sears, has also pleaded guilty for his role in hiring Druyun.

"Boeing remains firmly committed to the USAF 767 Tanker program and is ready to support its customer in whatever decision is made regarding the recapitalization of the nation's current aerial refueling fleet," Boeing said in a statement.




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