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WASHINGTON: Boeing Co. took the first step on Friday to end production of its C-17 military cargo plane in 2009 due to flagging interest from the U.S. government and overseas customers, the company said.
Boeing notified 700 suppliers it will no longer buy parts for the four-engine jet not under contract or firmly committed, and will begin significant work force reductions in early 2008 if there is no new business.
“Without (Defense Department) or international customer commitments, we're compelled to take this regrettable but necessary action,” Dave Bowman, Boeing's C-17 program manager, said.
Boeing has been lobbying Congress to save the program.
The Defense Department did not request new funding for the plane in its budget for the fiscal year that begins Oct. 1 and Boeing said interest from potential international customers is “significantly less than it was a year ago.”
Boeing made a similar announcement last year before receiving a U.S. military commitment for 10 new planes in the current Pentagon budget.
But the company said it is carrying more financial risk this year and would require funding for up to 16 planes in the next federal budget to keep the C-17 production line running through mid-2010 at its current rate of 15 planes per year, the most cost-efficient schedule.
More than 7,000 jobs are at stake in California, Missouri, Georgia and Arizona, the company said.
Boeing said again it was assessing the potential financial impact of ending C-17 production and may incur costs beyond those that would be recoverable from the U.S. government. Officials said they could not provide specific figures.
The aircraft costs about $200 million and is designed to carry large equipment and troops to hard-to-reach airfields. It has been in service since the 1990s.
It is one of Boeing's most significant projects, bringing in about $3 billion in annual revenue. The company has delivered 167 C-17s out of 209 orders, including those from Britain and Australia.
Boeing shares fell 82 cents to close at $87.03 on the New York Stock Exchange.
