Boeing to discontinue 2 McDonnell jetliner models
Nov. 04, 1997
SEATTLE (AP) _ Boeing Co. plans to stop making two McDonnell Douglas airplane models, which have been losing out to competition from Boeing's 737 line. But Boeing will keep alive the MD-11 jumbo jet and the 100-seat MD-95.
Boeing, which acquired McDonnell Douglas this past summer, said the decisions announced Monday followed months of market analysis.
The Seattle-based company said it would stop producing the MD-80 and MD-90 aircraft in mid-1999 when current orders are filled.
``Our market assessment, including recent order history, indicates that there does not appear to be sufficient market demand to warrant extending production of those models beyond that point,'' said Ron Woodard, president of Boeing Commercial Airplane Group.
MD-80s and MD-90s are single-aisle twinjets whose sales have languished in recent years due to competition from Boeing's family of 737 jets.
Boeing will keep alive the MD-11 and the MD-95, but said the longterm future of the MD-95 is uncertain.
The MD-11 is a three-engine jumbo jet that often is sold as a freighter. The MD-95 is a new variation of the MD-90.
Boeing said it is committed to build the 50 MD-95s ordered by AirTran, with first delivery scheduled for mid-1999.
In a teleconference, Woodard said that Boeing estimates a market for 300 or more MD-11s over the next 20 years, with 80 percent of those being freighters. He said Boeing will focus marketing the plane as a freighter, but will still build passenger versions.
The MD-95 is less certain, he said, since it has to compete in a tougher market for commuter jets. He said other airlines have expressed interest in the plane, but Boeing has not made a decision about the aircraft's long-term production.
``Production beyond the launch order of 50 airplanes _ as well as any development of MD-95 derivatives _ will depend on reducing the cost of producing the airplane,'' he said. ``Over the next several weeks, we'll be discussing this issue with our partners and suppliers on the MD-95 program. We'll make a final decision on the program's future once we conclude those discussions.''
Woodard said Boeing hopes to decide that issue early next year, along with getting a clearer picture of how McDonnell Douglas' commercial jet programs will blend with its own.
As of Sept. 30, there were 19 unfilled announced orders for the MD-11, which is being produced at the rate of one per month.
Boeing stock fell 31 1/4 cents a share to close at $47.68 3/4 on the New York Stock Exchange.
Boeing acquired St. Louis-based McDonnell Douglas, its longtime rival, this summer for about $16 billion. Boeing wanted the company primarily for its defense and space business. In recent years, McDonnell Douglas' commercial jet business has dwindled to a trickle.
McDonnell Douglas employs about 10,500 workers at its Douglas Products Division facility in Long Beach, Calif., where its commercial jetliners are made. Boeing said the long-term future of the Long Beach workforce remains undetermined.
``We realize that everyone will want to know how these decisions will affect them personally,'' said Woodard. ``We want to provide them with clear answers about the future just as soon as possible.''
To account for the Douglas cancellations, Boeing last month warned of a possible fourth-quarter write-off. Boeing hasn't secified how much that would be, but some analysts said it could approach $1 billion.
Mounting production problems have also been hurting Boeing's bottom line. The company last month wrote off $1.6 billion because of late aircraft deliveries, snarled assembly lines and shortages of parts and skilled labor as it struggles to keep up with booming demand for jetliners.
Boeing also expects to write off an additional $1 billion in the coming year because of problems increasing commercial jet production rates.