Boeing Selling Out

Kevin Frayer/AP Photo
Related Quotes

BA 52.15 0.63
UTX 98.64 2.27



Boeing Selling Commercial Aircraft Plants
By ROXANA HEGEMAN
Associated Press Writer

WICHITA, Kan. - Boeing Co. is selling its commercial aircraft plants in Kansas
and Oklahoma to a Canadian-based investment group, part of the aerospace giant's
strategy to focus on design and final assembly.
Onex Corp. on Tuesday agreed to buy Boeing's commercial aircraft facility in
Wichita, along with plants in Tulsa and McAlester, Okla., for $900 million cash
and the assumption of $300 million in liabilities. Chicago-based Boeing has been
trying to sell the plants for more than a year.

"There have been terrible job losses at these plants over the last several
years. We confidently believe that can be reversed," Seth Mersky, a managing
director of Toronto-based Onex, said in a statement.

Separately, Boeing announced the sale of its Rocketdyne rocket engine subsidiary
to United Technologies Corp., parent of jet-engine maker Pratt & Whitney, for
about $700 million cash. Rocketdyne, based in Canoga Park, Calif., has sites and
assets in California, Alabama, Mississippi and Florida and 3,000 employees.

Onex's new aerospace company, which has yet to be named, would include members
of Boeing management. Also undecided is how many Boeing workers would be hired
at the new company - those decisions are still awaiting negotiations with union
officials.

Boeing is Kansas' largest private employer; about 7,200 people work at the
Wichita commercial plant, along with as many as 1,300 at the two smaller
facilities in Oklahoma. Boeing's defense operations in Wichita, which employ
approximately 5,000 workers, are not involved in the sale.

The Onex deal includes long-term agreements for the company to provide Boeing
with parts - including fuselage sections and wing elements - on four of Boeing's
existing planes and the new 787 Dreamliner, the company's next-generation jet.
Mersky said Onex plans to invest $1 billion in Kansas and Oklahoma in the next
five years and plans to seek business with other aircraft makers.

"If (Onex) can get additional business, which undoubtedly they should, they'll
be adding to employment," said Paul Nisbet, an analyst with JSA Research. He
expects the deal to lower Boeing's production costs. "I think everybody wins."

Boeing officials said the company had received bids from several interested
parties.

"We thought Onex was the right buyer, at the right time, because of their track
record working with employees, the unions, the community and their track record
growing companies," said Jim Morris, senior vice president of supplier
management for Boeing Commercial Airplanes.

Shares of Boeing closed down 63 cents to $52.15 in trading Tuesday on the New
York Stock Exchange. They are up about 1 percent this year after a 23 percent
rise in 2004. Both sales were announced after the markets closed.

Boeing expects to recognize a non-cash loss from the deal, which is subject to
close in the second half of 2005, pending regulatory approval. Onex plans to
form a new company to run the plants, to be led by Jeff Turner, who is currently
the vice president and general manager of Boeing's operations in Wichita and
Oklahoma.

The Wichita commercial plant houses Boeing's largest remaining segment of
aircraft-component manufacturing, producing parts for all of the company's
commercial jetliners except the 717, which is ending production next year.

"This agreement fully supports our strategy to focus Boeing on large-scale
systems integration, which is where we are most competitive and can add the most
value to our airplanes and services," said Boeing commercial airplanes chief
Alan Mulally.

Boeing is operating its commercial production facilities at 50 percent capacity,
by all accounts too low for optimal use, said Nigel Wright, Onex's managing
director. As an independent company, Onex hopes to attract business from Boeing
competitors such as Airbus and from smaller regional aircraft manufacturers.

More than 15,000 aviation workers in Wichita lost their jobs in an industry
downturn that accelerated after the 2001 terrorist attacks.

"In a time when so many jobs and industries are leaving our shores, we're
encouraged by Onex's willingness to invest in a showcase U.S. industry," said
Tom Buffenbarger, president of the International Association of Machinists and
Aerospace Workers, whose Wichita local represents nearly 6,000 Boeing employees.

Onex has global operations in service, manufacturing and technology industries.
The company - which boasts 140 acquisitions - does not operate the businesses it
acquires but works with local management teams.

Onex specializes in buying distressed companies it believes can be turned
around.

Last week, the conglomerate last week completed the purchases of two large U.S.
health care firms for about $1 billion: American Medical Response Inc. and
EmCare Holdings Inc., which between them have more than 22,000 employees.

Rocketdyne, which had nearly $700 million in sales last year, supplied the main
engines for the space shuttle in the 1980s and has continued to build booster
engines for Atlas and Delta rockets. It became part of Boeing in 1996 when the
company bought the aerospace divisions of Rockwell International.

Analysts had been anticipating the transaction as part of a consolidation of the
U.S. launch vehicle industry.

Jim Albaugh, president and chief executive of Boeing's St. Louis-based defense
unit, said the divestiture makes sense strategically even though the company
intends to keep building launch systems.

George Patterson
He who tries to carry a cat by the tail learns something he can learn in
no other way.