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Boeing cuts final C-17 output by three jets, ends production early

A Boeing C-17 Globemaster III military transport aircraft of the United States Air Force (USAF) performs a fly-by during the Singapore Airsh
A Boeing C-17 Globemaster III military transport aircraft of the United States Air Force (USAF) performs a fly-by during the Singapore Airsh

By Alwyn Scott

NEW YORK (Reuters) - Boeing Co will produce three fewer of its famed C-17 cargo-carrying military transport planes than expected as it closes the production line, reflecting further decline in demand for the aircraft, the company said on Monday.

Boeing said that it would shut the production line in Southern California three months earlier than anticipated, in mid-2015 instead of late 2015, a decision that affects about 2,200 workers there. The closure also affects 300 workers in St. Louis, 300 in Macon, Georgia, and fewer than 200 in Mesa, Arizona, spokeswoman Cindy Anderson said.

Boeing first announced plans to close the line last September, and at the time said it would produce 22 more of the four-engine planes, which are capable of carrying heavy machinery, tanks and medical supplies around the globe. It has since delivered five of the planes. It now plans to build 10 in 2014 and seven in 2015.

"Based on current market trends and the timing of expected orders ... we have decided to build three fewer aircraft in 2015," Anderson said.

Boeing cited faltering sales when it announced plans to close the line last September. Of the 262 jets delivered so far, 223 went to the U.S. Air Force. The Air Force, which is under budget pressure, took delivery of its final new C-17 last year.

Foreign sales have not offset the loss of U.S. military orders. Boeing said it has logged 39 foreign sales to Australia, Canada, India, Kuwait, Qatar, the United Arab Emirates, Britain and a 12-nation group known as the Strategic Airlift Capability consortium.

A sale to Kuwait in February put the price for one plane and related equipment, training and support, at $371 million, according to the U.S. Defense Security Cooperation Agency.

By ending the C-17 program early, Boeing will take an inventory-related charge of $50 million in the first quarter. That charge is in addition to pension-related charges of less than $100 million that Boeing previously said it would take in closing the line.

Boeing is in the process of laying off up to 3,000 employees who worked on the program, and expects the job reductions to be completed by mid-2015, Anderson said.

She said workers are being offered jobs at other Boeing factories and that retirement and attrition also will reduce the number of layoffs required.

(Reporting by Alwyn Scott; Editing by Diane Craft, Grant McCool and Jonathan Oatis)

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