Boeing to fly from Seattle
About half of 1,000-person headquarters staff to be left behind
NEW YORK (CNNfn) - Boeing Co. is moving its main offices out of Seattle and leaving about half its 1,000-employee headquarters staff behind in the move.|
The company said Wednesday it is looking at three possible metropolitan areas to relocate to: Chicago, Dallas and Denver. It expects to pick a location this summer and to have an operational center at the new headquarters as soon as this fall.
"As we've grown, we have determined that our headquarters needs to be in a location central to all our operating units, customers and the financial community -- but separate from our existing operations," said a statement from Phil Condit, the company's CEO, who made the announcement at a Washington, D.C., press conference.
"The role of the new, leaner corporate center will be to seek new growth opportunities around the globe."
Condit said that as the company has diversified beyond its core commercial aircraft business that will continue to be based in Seattle, it was important that it give each segment of the company a sense of both freedom from the corporate office as well as equal footing in the allocation of the company's resources.
"It really separates the business -- commercial airplanes -- that is headquartered in Seattle from the strategic, corporate-center role," he told CNNfn's The Money Gang. "It's that separation we were after." (371KB WAV) (371KB AIFF)
Over the last five to six years the company has used acquisitions to broaden its reach in military aircraft as well as space and communications businesses, and that growth, more than a need to cut costs or respond to a weakening economy, is what drove the timing of the move, he told CNNfn.
Condit said it is also possible that some of the 500 employees who will not be working at the new headquarters may stay with the company working for the different segments, but he would not estimate the overall reduction in jobs that would occur.
The company also gave the heads of its three largest divisions the CEO title. Alan Mulally will be president and CEO of commercial airplanes, and remain based in Seattle. Jerry Daniels, president and CEO of military aircraft and missile systems, will operate out of St. Louis, while Jim Albaugh, president and CEO of space and communications, will be based in Seal Beach, Calif.
The company's statement gave no estimate of the cost of the move or the job cuts, or when any charges would be recorded against earnings.
Concerns for Seattle economy, image
The move was applauded by a Boeing analyst, but brought concern from Seattle leaders.
Ted Cho, analyst with Bank of America Securities, said the short-term costs and disruptions of the move were worth it to achieve both the cost savings and the greater freedom for each segment.
"I think the idea is more of a psychological move than practical -- to make the other two segments feel they are on an even par with commercial aircraft," Cho said. "It should theoretically allow the segments to respond more nimbly to changes in respective markets. There is going to be a one-time cost associated with the move -- my guess is about $100 million. But it's nothing that Boeing isn't able to absorb."
Seattle Mayor Paul Schell, who was informed of the planned move in a phone call shortly before Wednesday's announcement, told a press conference he would try to get Boeing officials to change their mind about the move. And he said it was important to realize that many top executive jobs as well as tens of thousands of high-paying manufacturing and engineering jobs would stay in the area.
Schell acknowledged the decision is a blow of sorts to Seattle. But he said he had also received assurances from a Boeing official that the company's support for community and cultural programs would not be lessened.
The direct impact of the move will be fairly limited on the overall Seattle economy, said Paul Sommers, a senior research fellow at the Evans School of Public Affairs at the University of Washington. Sommers points out the economy of the region is still strong even after Boeing cut about 30,000 production jobs in the region over the last few years.
"But that was a normal thing. We've been through cycles like that ever since World War II," he said. "We've also been sustained by a very strong tech economy up until this year."
Sommers said this move should raise broader concerns about the future of the region, which has already been rocked by the troubles of many Internet companies and uncertainty about the future of Microsoft Corp. (MSFT: Research, Estimates), the region's other leading corporate resident.
"Sure the company isn't leaving altogether, but you're never quite as comfortable when the corporate headquarters is somewhere else," said Sommers. "I imagine that Mr. Mulally will have to do more than he did in the past to justify still making wings in Seattle rather than some other location. And when you market your city as the best place to do business, it doesn't help when you have a big company decide to leave the area."
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None of the employees at the headquarters are represented by a union, although the International Association of Machinists and Aerospace Workers, which represents most of the Boeing production workers, has launched a campaign to organize an estimated 15,000 non-union Boeing employees in the Seattle area, including some of the clerical, computer and technical employees who work at headquarters. The union could not give an estimate of how many, other than to say it's less than a majority.
Mark Blondin, the president of Machinist Union District 751 in Seattle told a news conference he was set to talk to Boeing Thursday about how the move would affect asset allocation for the commercial aircraft segment.
"We're going to take them on anytime they impact the interest of our members," he said. "Right now, they're moving 500 non-represented jobs that work in corporate headquarters out of this state. How that affects asset utilization, we'll find out."
Dennis London, the union's lead organizer for the current organizing campaign, said he thought that Boeing might be trying to send a message to non-union employees in Seattle with this move, but that he thought it could also help the union's efforts.
"This should tell people that without a union, they don't have a voice in the process," he said.
Shares of Boeing (BA: Research, Estimates), a component of the Dow Jones industrial average, lost $1.15 cents to close Wednesday at $53.85.