According to people with knowledge of the situation, Boeing Co. has started making more drastic cuts to its strategy ranks than anticipated, reducing the number of strategists employed by important divisions and refocusing efforts on addressing industrial pressures.
The move is the most recent illustration of the company's renewed focus on its industrial sector after Boeing's announcement on Monday that Stephanie Pope, a 51-year-old leader of global services, will take over Dave Calhoun as CEO.
Amid a travel slump caused by COVID-19 and a former 737 MAX security issue, Boeing has been facing supply disruptions. The company currently owes approximately $40 billion in debt.
However, some critics fear that at a pivotal moment for the industry, Boeing's increased operational emphasis is taking attention away from its long-term prospects, with layoff notices set to be sent out to impacted strategists this week, according to the sources.
Boeing announced in November that Marc Allen, who was previously viewed as a potential CEO, would resign as chief strategy officer and that a portion of his planning staff would be transferred to other divisions.
Calhoun stated in a memo dated Nov. 16 that strategists would be directly joining the business divisions they support and that this would include enabling and empowering the company's units.
But according to sources, those units were facing a minimum of 50% reduction in the number of strategists working day to day in Stan Deal's Boeing Commercial Airplanes and Boeing Global Services. How many workers were impacted overall was unknown.
Some planners are being advised not to return to work when their 60-day notices land, indicating the rapidity of the shake-up, according to the sources, although they will still receive job search assistance.
Plans at Defense, which initially integrate the unit's strategy and business development, are changing more slowly, but the sources said that reductions of at least 50% are also anticipated there.
When asked about the total number of job cuts made by the company, Boeing said that it had confirmed its internal Defense combination but did not give the number. There are, according to sources, about 200 strategists overall.
According to a spokesman, the company is integrating its strategy teams with the business units they support, and this is just one of several larger steps that have been taken over a number of years to streamline corporate structure and concentrate efforts on the business.
On Monday, Boeing's shares increased by 1.4%.
Future technologies
In aerospace, strategy is always a chess game because of the sizeable bets and the time needed to master new technologies.
Former Boeing skeptic and analyst Richard Aboulafia has already criticized the decision to eliminate key strategy teams. He stated on Monday that Pope's appointment and this favor harvesting past investments more than future technologies.
Not everyone had the same viewpoint. According to a person with knowledge of the company, its divisions had long considered the strategy department to be a high-cost rival and anticipated that it would eventually reshape itself.
Sheila Kahyaoglu, an analyst at Jefferies, praised Pope's appointment on Monday for having a stronger operational focus.
The reorganization occurs as the industry examines its crystal ball regarding the prospects of single-aisle jets, the aerospace industry's cash cow, which represents one of the most significant strategic decisions in a generation.
A major element of Airbus's possible strategy has already been revealed, despite the fact that successor models are more than ten years away. Airbus of Europe suggested it might ask for public support, which was one of the mechanisms that helped start a 17-year trade battle with Boeing.
Calhoun has lowered expectations for a new Boeing aircraft until the mid–2030s, saying that it must be 20%–30% higher in efficiency. As Boeing is saving money to pay off $39 billion in debt, its shares have increased by 30% this year.
Sources claim that the development of a 737 replacement was never completely halted. Yet Boeing confirmed that its legendary Product Strategy division will now report to Product Development, which manages ongoing projects.
Analyst Nick Cunningham of Agency Partners expressed that one hopes the strategy adjustments are not a means of giving up on the company's future given the necessity to create new initiatives and adapt to the changing climate, especially with regard to decarbonization. Or, as some might say, it's just realistic.