With Boeing Co. expected to announce plans for its Douglas Aircraft division in Long Beach this week, city officials are optimistic that the facility will play a key role in the aerospace giant’s overall strategy for the future.
“We understand that they are analyzing all of their options and we are optimistic that Douglas will be an important part of their operations,” said Long Beach City Manager James C. Hankla, who recently met with Boeing officials at the company’s headquarters in Seattle.
City officials said they were told by Boeing to expect an announcement on Monday, Nov. 3.
With some 10,000 workers employed at the Douglas facility, Boeing’s decision is a crucial one not only for Long Beach but for all of Southern California. As a result, speculation about Boeing’s plans has been rampant among local economic development officials and aerospace industry analysts.
Most industry sources seemed certain late last week that Boeing will cancel the MD-80 and MD-90 family of aircraft because they compete directly with the company’s 737 jetliner.
But Boeing is likely to continue making the MD-11 jumbo jet, which has a nearly two-year backlog of orders and is poised to play a large role in the cargo transport industry as a dedicated freighter. Boeing also is expected to support the MD-95 commuter jetliner currently under development in Long Beach.
Perhaps even more significantly, economic development sources said Boeing is considering a plan to overhaul a portion of the 450-acre Long Beach complex to produce parts and components for the company’s commercial jetliners. The overhaul, sources said, would require a substantial capital investment of as much as $1 billion.
Boeing officials declined to comment on the speculation.
“There is a product strategy re-evaluation going on and we are close to an announcement,” said Don Hansen, a spokesman at the Douglas facility.
Converting a portion of the Long Beach plant into a components facility makes sense for Boeing, which needs to reduce strains on its facilities in the Puget Sound area, said Jon Kutler, president of Quarterdeck Investment Partners, an investment banking firm that specializes in aerospace companies.
Earlier this month, Boeing reported a $696 million loss in the third quarter, resulting from a $1.6 billion charge taken by the company because of production problems at its Seattle factories.
Adding capacity in Long Beach “is not an immediate fix for Boeing, but it will help address their long-term concerns,” Kutler said.
In an effort to restore order to its assembly lines, Boeing, which has been stung by parts shortages, announced earlier this month that it was halting new production of 747 and 737 jetliners.
Those problems, however, appear not to have threatened the company’s competitive position in the world’s aircraft marketplace. Following his summit with Chinese President Jiang Zemin, President Clinton announced that China would purchase 50 new jet airplanes from Boeing, a deal worth $3 billion. Clinton characterized the deal as “the largest sale of airplanes to China in history.”
The company’s stock closed at $47.03 on the New York Stock Exchange on Oct. 30, down 39 cents from the previous day.
But in Long Beach, officials have their eyes less on Boeing’s bottom line than they do on the fate of the Douglas facility. And most city officials seemed secure in the belief that what is good for Boeing is also good for Long Beach.
“Boeing has given us every indication that they are going to have a presence here,” said city spokesman Gregory Davy. “I don’t think there’s any doubt that Boeing will be in Long Beach and become a long-time member of the community.”