Boeing is reorganizing its defense unit away from platforms to a broader emphasis on capabilities as it continues to recast itself in response to the austerity culture that Defense Secretary Robert Gates is emphasizing. As with most reorganizations, the move includes a reduced headcount.
This is not Boeing’s first response to the call by Gates for reductions in the price of weapons systems and improved contractor performance.
They include January’s reorganization of the entire defense unit “for further growth in new and adjacent markets,” creating Boeing Defense Space and Security (BDSS). Others steps have been more incremental, such as last year’s cut of 1,000 jobs or last month’s lop off of another 550 in Southern California in favor of lower-cost Oklahoma to position the C-130 avionics modernization and B-1 bomber upgrade programs better for future Pentagon sales.
The incremental jobs cuts continue. In a sobering Labor Day message to employees, BDSS CEO Dennis Muilenburg referred to a new round of overhead cost cutting. Later, Boeing Military Aircraft President Chris Chadwick said that meant 400 jobs.
Spread across a $34 billion business unit with 68,000 employees, that is a combined 3% cut. No schedule has been set, but the final pink slips are likely by year’s end or early in 2011. Who gets cut is still being defined. Among other things, the reorganizational efficiencies mean 20 of his executive positions are redundant.
The cuts are not expected to touch Boeing Network and Space Systems, which is expanding its cyber security footprint into commercial applications. Indeed, Muilenburg has said that intelligence and surveillance, unmanned aerial systems and cyber security all rank high on Boeing’s acquisitions list.
It is the way the realignment unfolds that is of most interest. As of Oct. 1, Chadwick’s six operating divisions will shrink to four. (That is the start of the federal fiscal year, but a company official says the date is coincidental).
The effect is that traditional military platforms – F/A-18s, C-17s, P-8A (shown in flight test), cruise missiles – will no longer be emphasized as “programs.” Instead, Boeing will present them as tiers within its overall defense and security capabilities.
“Our focus is to move from a product-based culture to a capabilities-based culture,” says Chadwick. The time reference for a new strategic framework is 2020.
To begin with, the Rotorcraft Division disappears, its assets distributed among four remaining BDSS capability areas. Similarly, the weapons division is consolidated to include unmanned systems.
Boeing clearly is staying fluid as it reads the telltales of how defense and national security spending play out against record U.S. deficits. For instance, it was just last May that Chadwick asked Vice President Jean Chamberlin to head a new Airlift and Tankers Division for fixed-wing assets.
Now, as head of the even newer Mobility division, her reach includes rotary wing aircraft. The venerable CH-47 Chinook heavy lift helicopter and other low rate production programs are being mixed with some of Boeing’s highest profile efforts. The 767-based tanker, successfully campaigned to Italy and Japan, is prime on the list as the company awaits a decision in the U.S. Air Force’s $15 billion KC-X competition.
Led by Vice President Bob Feldman, Airborne Battle Management has been broadened into Surveillance and Engagement to include not only the 737-derivative P-8 Airborne Warning and Control System aircraft but also Boeing’s future efforts in ground surveillance.
Global Strike under Vice President Shelley Lavender goes beyond F-15, F/A-18 and F-22 manned fighters to include developmental programs such as the Phantom Ray unmanned aerial system test bed. Combining mobility, survivability and engagement “captures the essence of what we do,” says Chadwick.
Meanwhile, deployable unmanned systems, such as the Boeing/Insitu Scan Eagle will be included in the Missiles and Unmanned Airborne Systems unit, overseen by Vice President Debbie Rub.
Mixing them with conventional guided munitions – Harpoon, Joint Direct-Attack Munition – may seem a stretch, but the common denominator is they all rely on guidance and flight control systems. “They are potential hyper-growth areas that we really need to spend a lot of leadership focus on,” he says.
More realignment is possible. “We’re looking at the market through the eyes of our customer,” says Chadwick. So if Boeing sees an angle for convincing its government customers that it is driving more efficiency and cost management to suit their needs, don’t be surprised if there are more workforce reductions, facility shifts and responsibility realignments.