Boeing Co said it would close its Defence, Space & Security facility that employs more than 2,160 workers in Wichita by the end of 2013 as part of a move to cut costs amid a tightening U.S. defence budget.
The plant is the base for the company’s Global Transport & Executive Systems business, which supports the U.S. Air Force’s executive fleet, and its B-52 and 767 aerial tanker programmes.
“This is the kind of closure you expect to see in a declining defence market,” said Richard Aboulafia, aerospace analyst with the Teal Group, Reuters reports.
The closure of Boeing’s operations in Wichita essentially marks the company’s exit from the city, Aboulafia said. Boeing formerly owned Spirit Aerosystems, which is based in Wichita and still makes Boeing wings and fuselages.
Boeing said on Wednesday it would move the operations to facilities in other states, but still expects to place purchases worth billions of dollars with Kansas-based suppliers. The company did not give an estimate for cost savings or expenses associated with the move.
Boeing’s lobbying clout with lawmakers, who control the defence pursestrings, has been buttressed by distribution of its manufacturing across the United States.
“It’s a difficult calculation, you lose political leverage but you also get rid of overhead,” Aboulafia said of the Wichita decision.
President Barack Obama and Congress, in an effort to get control of the government’s huge deficits, agreed last year on a budget deal that could cut projected defence spending by more than $1 trillion over the next decade.
U.S. weapons makers are preparing for leaner and more uncertain defence budgets by redoubling their efforts to cut costs, drum up export sales and sell more goods to commercial clients.
Boeing said in a statement that the site does not have enough sustainable business on the horizon to create an affordable cost structure to maintain and generate new business.
“In this time of defence budget reductions, as well as shifting customer priorities, Boeing has decided to close its operations in Wichita to reduce costs, increase efficiencies, and drive competitiveness,” said Mark Bass, vice president and general manager for the Maintenance, Modifications & Upgrades division of Boeing’s defence, space and security segment.
Bass said Boeing does not anticipate job reductions as a result of this decision until early in the third quarter of 2012.
Boeing announced the decision after completing a study of the plant. The plane maker’s overall defence business has about 64,000 workers.
Boeing said it has spent more than $3.2 billion with about 475 Kansas suppliers in 2011, spanning its commercial and defence businesses. The company said that based on Boeing Commercial Airplanes growth projections for the next few years, Boeing anticipates even more growth for suppliers in Kansas.
Boeing said it will place its future aircraft maintenance, modification and support work at the Boeing facility in San Antonio. Engineering work will be placed at the Boeing facility in Oklahoma City.
Work on the 767-based KC-46 tanker, picked last year as the new refuelling aircraft for the U.S. Air Force, will now be located in Puget Sound, Washington. The company said the 24 Kansas suppliers on the program will still provide “vital elements” of the aircraft.
The closure comes at a tough time for the U.S. economy, which shed 7.5 million jobs during the 2007-2009 recession and has regained only 1.2 million of them through November despite growth in the country’s population.
Manufacturing has been a pillar of the economic recovery so far, but factory jobs have come back even less strongly than in the wider economy. The number of U.S. manufacturing jobs has slipped by about a third since 1999.
Boeing shares were down 42 cents, or 0.6 percent, to $73.80 on the New York Stock Exchange in afternoon trading.