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Boeing gains $8.9B contract
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June 15, 2000: 8:59 p.m. ET
Aerospace company also announces plans to sell parts business
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NEW YORK (CNNfn) - Hours after putting its parts fabrication business up for sale, Boeing Co. won an $8.96 billion U.S. defense contract to build 222 new F/A-18E/F jet fighters for the Navy over the next five years.
The versatile, carrier-based "Super Hornet" attack jets are the biggest military aviation program for the Navy and Boeing. The planes to be built under the initial full-scale production deal are the first of up to 548 that the Navy hopes to buy in years to come.
Work on the planes will be done at Boeing plants in St. Louis and Los Angeles and all 222 are to be delivered by September of 2006.
Boeing also announced plans Thursday to seek a buyer for its parts fabrication business in St. Louis, a move aimed at accelerating its ongoing push to focus on design, manufacturing and systems integration.
Boeing spokeswoman Jo Anne Davis said the company had expected Thursday's Navy order, which would not boost expected output at the parts unit.
Davis said Boeing is currently in "serious" discussions with a small number of potential buyers for the business, one of the world's leading metal-structures and composites-manufacturing business, which currently operates at only 40 percent of its capacity.
The company did not divulge the names of possible buyers, the price it was seeking, nor did it specify if there would be potential layoffs at the unit, but did say there would be no job cuts at Boeing as a result of the sale. The parts fabrication operation posted annual revenue of about $300 million last year.
 The parts business was stung by a decision by Greece early last year not to purchase up to 60 of Boeing's F-15 fighter jets, opting instead to purchase Lockheed Martin aircraft. As a result of that decision, Boeing decided to shed more than one-third of its 20,000-member work force in St. Louis, where the jets are manufactured.
Boeing (BA: Research, Estimates) hopes to reach a final sale agreement within the next several months. To encourage the buyer to keep the parts fabrication business based in St. Louis, Boeing is offering to enter a long-term supplier relationship with the company.
The nearly 1,700 employees who work at the business primarily provide high-speed machining, composites manufacturing and sheet metal parts fabrication for several military jets, including the F/A-18 Super Hornet specified in Thursday's Navy contract and the F-15.
Roughly 70 percent of the employees are represented by a union, primarily the International Association of Machinists and Aerospace Workers.
In a statement to employees at the plant, Jerry Daniels, president of Boeing's Military Aircraft and Missile Systems unit, called the F-15's future "uncertain right now." However, he noted that if the company succeeded in landing future contracts, including the $300 billion Joint Strike Fighter program scheduled to be awarded by U.S. officials next year, the parts fabrication operation could see a significant upturn in business.
"There's a lot at stake," Daniels said. "If we focus our business and reduce the cost of our products, we will increase our chances of winning more domestic and international jobs."
The F/A-18E/F Boeing will build for the Navy is designed to replace the Navy's current F-18C and aging F-14 attack jets and will include longer range, more advanced weaponry and better defense against enemy ground fire and air threats.
"The Super Hornet is the cornerstone of future naval aviation," Navy Chief of Operations Adm. Jay Johnson said earlier in the year.
Boeing shares closed up 1-5/16 to 40-1/8 in trading Thursday. 
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The Boeing Company
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