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Boeing to shift some defense work out of Washington state: sources

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young

By Andrea Shalal and Alwyn Scott

WASHINGTON (Reuters) - Boeing Co (BA.N) on Monday said it would move the majority of its defense services and support work out of Washington state to other U.S. cities, affecting the jobs of about 2,000 of its 5,200 defense employees in the Puget Sound region.

The changes, first reported by Reuters earlier Monday, are part of ongoing efforts by Boeing to streamline its defense business, and will not affect its P-8A spy plane or KC-46 aerial refueling tanker programs. Both of those programs are based on commercial jetliners made in the area.

Boeing said the transition could take three years to complete and that it would shift as many affected workers as possible to the company's growing commercial jetliner operations.

Chris Chadwick, chief executive of Boeing Defense, Space and Security, said the decision was difficult but necessary to improve the company's competitiveness.

"This is necessary if we are going to differentiate ourselves from competitors and stay ahead of a rapidly changing global defense environment," Chadwick said.

Union officials said the company has scheduled meetings with defense workers at key sites in the Puget Sound region on Tuesday and that managers and workers expect the company to announce work will be transferred to other parts of the country.

Boeing said most of the work would be relocated to Oklahoma City and St. Louis, where similar activities are done today, with a smaller share of the work to go to Jacksonville, Florida, and Patuxent River, Maryland.

In all, Oklahoma City could add about 900 jobs, while St. Louis could add 500 jobs, the company said.

Among the programs shifting to other cities are services and support work for the Airborne Warning and Control Systems (AWACS) program, as well as the F-22 fighter jet, which Boeing built together with Lockheed Martin Corp (LMT.N).

Jim O'Neill, who heads Boeing's global services business, said shifting the work would allow the company to use its resources more efficiently.

Boeing is moving to cut $2 billion in costs from its defense business, in addition to the $4 billion in reductions announced in recent years in response to dwindling U.S. defense spending and increasing competition.

Defense analyst Loren Thompson said Boeing’s plan to move as many of the defense jobs as possible to its booming commercial operations would reduce the overall impact to the Washington state workforce. “The net job loss will be less than 1 percent,” Thompson said.

“Boeing’s commercial business is growing while its defense business is shrinking, so it’s logical that you would make these sorts of shifts as a way of using the workforce as efficiently as possible,” said Thompson, chief operating officer of the Virginia-based Lexington Institute.

Boeing has sought to cut overhead costs in its defense business to help offset revenue dragged lower by declining military spending.

The company is also trying to pump up arms exports.

(Editing by Matthew Lewis and Steve Orlofsky)