Boeing’s decision to shut down C-17 production is, in part, a tangible example of the effect that pressures from sequestration and an uncertain budget future are having on the U.S. aerospace industry.
Boeing decided in September to close the Long Beach, Calif., final assembly line in 2015 following delivery of the last 22 strategic airlifters on order. The U.S. Air Force received the last of 223 C-17s last year. Boeing had kept the production line open with company funding, while cutting back the production rate from as many as 16 airlifters per year to 10 and pursuing additional international orders.
The company might have kept the line open longer, but uncertainty about the U.S. market contributed to the decision in September to close it.
“Our desire would be to extend beyond that,” Dennis Muilenburg, president of Boeing Defense, Space and Security, told Aviation Week. “But, when you look at the uncertainty in the market and the timing of the additional international sales and then combine that with the budget situation in the U.S. and [ask] how do we invest our limited R&D dollars . . . you quickly come to the conclusion that we cannot continue to spend money to keep that line open, given all of the other budget constraints. So, the fact that we are facing sequestration and uncertainty in the budget drove the timing of our decision. So that is why we are making that decision now to preserve our options to invest elsewhere.”
International interest has still been robust. The remaining orders are for foreign allies and international customers, including the United Kingdom, Australia, India, Canada and the and United Arab Emirates.
The final assembly line closure will result in the loss of about 3,000 jobs; the reductions will primarily start next year. Company officials suggest that the facility is unlikely to host a new production program.
Muilenburg says Boeing is committed to a continued research and development (R&D) investment, despite the funding situation. “The lack of clarity over how it will flow down to individual program is what makes the capital outlays, the R&D planning and the talent planning so difficult,” Muilenburg says. “And, to me that is the devastating impact here.”
Five years ago, 7% of the company’s defense work was for international customers; that level is nearly 29% now. The goal is to increase it to fully 1/3 of sales in the next five years, Muilenburg says.