Boeing Bets on Backlog to Weather Storm

By J. LYNN LUNSFORD

Boeing Co. will lay off some workers and reduce costs next year to remain competitive amid an expected decrease in Pentagon spending, the delay in some contract awards and the potential effect of a global recession in the airline industry, company officials said Thursday.

In a memo to employees, Boeing Chairman and Chief Executive Jim McNerney said he believes a record backlog of orders in both the commercial and military sides of business will help the aerospace company weather "what clearly has become a more challenging business environment."

Rick Stephens, the company's senior vice president for human resources and administration, said in the same memo that the company is already taking steps to cut costs, including an announcement on Wednesday that it was laying off roughly 800 people from a Boeing military plant in Wichita, Kan.

"While no firm estimate has been made, the employment decline could exceed Boeing's average annual attrition rate of 4-to-5% and will be composed of a mix of normal attrition, hiring freezes and layoffs," Mr. Stephens said. Mr. Stephens said that the company would try to minimize the number of layoffs "through natural attrition, release of outside contract hires and job transfers within Boeing."

Boeing employed 164,192 people as of Oct. 31.

On Wednesday, Boeing Commercial Airplanes President Scott Carson said during an analysts conference that despite continuing turmoil in the credit market, the company hasn't seen an appreciable number of cancellations or deferrals. Unlike previous downturns, he said, Boeing believes its backlog of 3,734 pending orders will enable it to "build through to the next ordering cycle."

Write to J. Lynn Lunsford at lynn.lunsford@wsj.com