Plant's future uncertain amid speculation of Boeing Co. sale

Tuesday, January 27, 2004

WICHITA, Kan. -- Anxiety over the fate of The Boeing Co.'s Wichita plant intensified Monday, along with speculation about potential buyers for Kansas' biggest private employer.

One name has repeatedly topped industry analysts' lists: GKN Aerospace Services, the British company that purchased Boeing's Hazelwood, Mo., facility near St. Louis in 2001.

"There is good reason for that rumor," said Richard Aboulafia, vice president for analysis at the Teal Group, a Virginia firm that tracks the aerospace manufacturing industry.

One reason for GKN's interest is that the Wichita plant will get much of the composite materials work on Boeing's new 7E7 flagship plane, Aboulafia said.

GKN, with more than 5,800 employees in 11 manufacturing centers worldwide, is a world leader in the production of composite assemblies for airframes and engines.

The Wichita plant would also mesh well with GKN's St. Louis facility, Aboulafia said.

"As long as GKN can agree to Boeing's asking price, they will get to grow their composite business and get to expand to the important U.S. market the way forward for any British aerospace firm is the U.S," he said.

The Seattle Times, citing an internal Boeing planning document, reported Sunday the company is considering the sale of its 75-year-old manufacturing facility in Wichita.

The timing of any sale was unclear in the document, which a company insider gave to the newspaper. No prospective buyers were named.

Boeing's Wichita plant, which employs about 12,400 people, houses the company's largest remaining segment of aircraft-component manufacturing. Selling the facility would be the most dramatic move yet in the company's stated mission to reduce its role in the business of making plane parts.

Philip Finnegan, director of corporate analysis at Teal, also said GKN is a prime candidate because the company is interested in increasing its presence in the United States, something now made easier by the dollar's weakness against the pound.

Boeing has also declined to comment on the rumored sale and sent a memo to its Wichita employees, urging them to focus on their jobs.

"Remember, although we cannot predict the future, we can prepare for it by focusing on our core competencies and by working together," said the memo signed by Jeff Turner, general manager of Boeing-Wichita.

In past divestitures, Boeing has argued that the companies created by those moves would be positioned to get more work by becoming a supplier to companies besides Boeing.

Another possible buyer for the Wichita site is the Carlyle Group, a Washington, D.C.-based investment company with aerospace interests, Aboulafia said.

The Carlyle Group had no immediate comment.

A less likely candidate would be Smith Aerospace Industries, another British firm, Finnegan said.

But Smith Aerospace spokeswoman Jennifer Villarreal said the company was not actively looking to expand to Wichita.

Boeing's biggest competitor, Airbus Industrie, said Monday it has no plans to buy the Wichita plant.

Airbus has all of its manufacturing facilities in Europe. Its biggest U.S. presence is in Wichita, where it employs 155 people to do engineering on aircraft wings, said Airbus spokeswoman Mary Ann Gretchen.

"The only reason we opened in Wichita is because of the shortage of qualified engineers overseas," she said.

On Monday, Boeing lost its bid for a $24 billion military plane contract when the British government announced that it had selected the European consortium led by EADS, the parent company of Airbus.

It was unclear what impact that would have on Airbus' Wichita group.

"If they need more engineering work, it would fall into Wichita's hands," Gretchen said.

Just what the sale of the Boeing plant would mean to the Wichita community is unclear.

When the company sold its airplane parts plant in Spokane in January 2003 to Triumph Group of Wayne, Pa., production workers represented by the Machinists union took a 15 percent pay cut. Triumph laid off all of the plant's production workers and then rehired all but 36, leaving a production work force of 260.

In Corinth, Texas, where the French-owned Labinal Inc. bought a Boeing plant in April 2003, employment fell from 900 to 600 workers.

Neither Triumph nor Labinal returned calls for comment.

Workers fared somewhat better with the 2001 sale of Boeing's plant in Hazelwood to GKN Aerospace.

Of the 1,000 union-represented workers at the Boeing plant, GKN offered jobs to between 750 and 800 workers, said Rick Smith, president of the Machinists Union in St. Louis. Another 200 transferred over to Boeing's other buildings in Hazelwood, where Boeing later laid off 200 people based on seniority there.

Those workers kept their wages, seniority, vacation and sick days, Smith said.

Union leaders said nothing changed in Hazelwood other than the name on the door, and they credited the ease of the GKN purchase there in part to Boeing putting conditions on the sale that allowed people to retain seniority and benefits.

Smith said he would advise Wichita to get its government representatives, both state and federal, to pressure Boeing to put the same conditions on any buyer of the Wichita plant.

"Try to see if they can't get the same deal as we did in St. Louis," Smith said. "A change is tough."


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