SEATTLE (Reuters) – Boeing Co <BA.N> is overhauling its newly formed “Enterprise Operations” organization after just six months as it looks to cut costs and repair a crisis-weakened supply chain, according to internal memos and a person familiar with the strategy.
The restructuring, which took effect on Friday, and other linked efforts like moving 787 assembly outside Washington state, are key pieces of Boeing’s broader strategy for surviving an industry-wide crisis fueled by the coronavirus downturn.
Taken overall, Boeing’s steps to cut costs, while making factories more efficient in preparation for a rebound in the global jet market, are among the largest changes to operations at the U.S. planemaker since the Sept. 11, 2001 attacks.
Boeing is slicing Enterprise Operations – an overarching quality-control watchdog formed in April to shepherd the company through its worst-ever crisis – into four new “councils”, according to a memo seen by Reuters.
The councils will oversee Supply Chain, Quality, Program Management and Manufacturing – all key areas where Boeing is facing daunting challenges exacerbated by the COVID-19 pandemic.
“These moves will help to make us leaner, sharper and more resilient for the long term so we can emerge a stronger company,” Chief Financial Officer Greg Smith said in a September memo seen by Reuters.
Smith will continue to oversee the councils’ work.
A Boeing spokesman confirmed the memos and pointed to past statements on challenges Boeing faces.
Boeing faces a depressed market for twin-aisle jets like its brand-new 777X, and sees its Commercial Airplanes and Defense divisions as too siloed, one senior Boeing executive said.
For example, on manufacturing and quality, Boeing is working through three separate 787 Dreamliner production flaws, just as it looks to shift production exclusively to South Carolina from 2021.
Boeing is also worried any production recovery after the crisis may be threatened by parts shortages and bottlenecks. The shake-up aims to avoid separate aircraft programs buying parts without talking to each other.
Boeing also needs to rein in a previously announced job-shedding program that has gone too far in some cases, including a wave of commercial executives. Part of the councils’ function is managing Boeing’s operations workforce.
“You can’t have a brain drain in one area just in the spirit of meeting reduction targets,” the executive said.
Boeing is also using the crisis to inject new blood into its defense and space unit. It is moving veteran Commercial Airplanes executive Bill Osborne, who was also the top executive in Enterprise Operations, into a newly created Total Quality and Operations role at the Defense division, Smith’s memo said.
Osborne is seen by insiders as a turnaround expert after leading manufacturing quality at truck maker Navistar International <NAV.N>.
The move comes as Boeing gears up for a test mission with its Starliner astronaut capsule after setbacks this year. It is also grappling with cost overruns, quality issues like “foreign-object debris” and fresh delays on its KC-46 tanker for the U.S. Air Force.
“Now, more than ever, we need to double-down on our core operations,” Boeing Defense Chief Executive Leanne Caret said in another September memo seen by Reuters, with a special focus on “first-time quality and operational excellence.”
(Reporting by Eric M. Johnson in Seattle; Editing by Tim Hepher and Mark Potter)