Boeing on Wednesday said it would close a Wichita, Kansas plant that employs 2,160 people, risking political ire as it prepares to shift production of a major tanker project elsewhere.
The plant in the central US state is the hub of operations for the B-52 and 767 Tanker programs and will be shuttered by the end of 2013, the firm said.
"The decision to close our Wichita facility was difficult," said Boeing's Mark Bass, adding that the decision was based on the firm's assessment of "the current and future market environment" and remaining competitive.
The announcement came less than a year after Boeing beat out Europe's EADS-Airbus group for a hotly contested $30-plus billion contract to supply up to 179 refueling tankers to the Air Force.
Boeing had claimed that contract would create around 7,500 jobs in Kansas -- a state which had strongly backed its highly politicized tanker bid.
Boeing said it was "too early to tell" what proportion of the jobs would be lost. Some staff would be likely be transferred and some suppliers would be kept.
"Although work on the KC-46 tanker will now be performed in Puget Sound (in Washington state), the 24 Kansas suppliers on the program will be providing vital elements of the aircraft as originally planned," the firm said in a statement.
Elected representatives from Kansas, after having lobbied intensively for Boeing to win the Air Force contract, voiced thinly veiled anger at the decision Wednesday.
"Today's statement from Boeing is terrible news. It is a confession that it will not honor its commitment to Kansas," said Wichita area Congressman Mike Pompeo.
He vowed to "hold the company accountable for its promises and commitments."
There was a similarly terse reaction from Kansas governor and long-time Boeing supporter Sam Brownback.
"No one worked harder for the success of the Boeing Company than Team Kansas," he said, describing the decision as "very disappointing."
Jeremy Hill, the director of Wichita State University's Center for Economic Development and Business Research, said Boeing's decision would cost Wichita's economy $1.5 billion in lost wages over the next decade.
But he said Boeing's decision to keep using most of its Kansas suppliers was a silver lining to otherwise bad news.
"Instead of having a total impact of the loss of 8,000-some jobs, it is going to be a lot less. Obviously the direct jobs are going to disappear."
Unemployment in the Wichita area is 7.2 percent, below in national average of 8.6 percent.
The jobs lost could increase the local jobless rate by around 0.7 percentage point.
According to industry analyst Richard Aboulafia, of the Teal Group, the decision could also spell future political trouble for Boeing.
"It's a difficult calculation to make. Shutting facilities and concentrating work elsewhere saves overhead costs, which is important in a time of shrinking defense revenue," he told AFP.
"Losing political leverage is difficult for a defense contractor. You never know when another highly politicized contract like KC-X (tanker) will appear, and Kansas political delegations have been quite active on Boeing's behalf."
by Andrew Beatty © 2012 AFP
Date: Jan 4, 2012