Regarding Boeing

Here’s an unfortunate juxtaposition of headlines from today’s Everett Herald:

Economy hinges on Boeing, Snohomish County Executive Aaron Reardon says

Snohomish County’s best hope for weathering the economic crisis is to make sure the Boeing Co. keeps production of the 787 Dreamliner jet in south Everett, County Executive Aaron Reardon said on Tuesday.

Boeing predicts 10,000 total job cuts, reports $56 million loss

The Boeing Co. will lay off a total of 10,000 workers in response to challenging economic times, the company said Wednesday while reporting its quarterly earnings.

Boeing also reduced its net orders for its delayed 787 Dreamliner from 910 to 895. McNerney said he expects a “modest churn” of orders and cancellations for the jet this year.

Note that the 10,000 is a total that includes the 4,500 announced a few weeks ago.

(Noah Haglund & Krista J. Kapralos, Everett Herald, 01.28.2009)
(Herald staff, Everett Herald, 01.28.2009)

Update: Sheesh, as long as we’re on the subject of layoffs… Starbucks will cut 6,000 jobs, close 300 more stores

Starbucks will cut 6,000 positions worldwide over the next eight months, including about 700 non-store workers by mid-February.

The immediate cuts will include about 350 people at its headquarters.

(Melissa Allison, Seattle Times, 01.28.2009)

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

57 comments:

  1. 1
    David Losh says:

    Is there Bail Out money for Boeing?

  2. 2
    isotope66 says:

    How many of these are in Seattle

  3. 3
    Notorious ART says:

    Bail out Boeing! I can see it now, the government will start ordering planes that we don’t need. Kinda reminds me of Chrysler’s plan…

    http://globaleconomicanalysis.blogspot.com/2009/01/stupidity-has-no-bounds-chrysler-urges.html

  4. 4
    redmondjp says:

    Ommmmmm . . . . . . . ommmmmmmmmmmmm . . . . . . . . mmmmmmmmm

    Seattle . . . . . . . . . is . . . . . . . . . Special . . . . . . . . . (pink ponies pink ponies pink ponies)

    Dammit Oprah, it’s not working any more!!!

  5. 5
    jon says:

    Time will tell:

    EADS says won’t bid for Air Force One replacement

    http://uk.reuters.com/article/tnBasicIndustries-SP/idUKN2848280620090128

    Pentagon plans refueling tanker contract award in early 2010

    http://www.govexec.com/story_page.cfm?articleid=41888&dcn=todaysnews

  6. 6
    LeftOverpricedSeattle says:

    B-b-b-b-u-u-u-t-t-t-t-t…

    My real estate agent told me that Seattle is recession proof!!!!

    Seattle has Starbuck’s, Boeing, Nordstrom, Amazon, Microsoft…

    Plus, EVERYONE wants to live in Seattle….

    I wonder what all the people who thought I was crazy for selling up in Jan of ’07 think now?

    Just for the record, I intend to return to the West Coast in the next year. I honestly thought the rents would stay higher in the city I am moving to a lot longer than they did. Two years later and rents have dropped by almost a third so I am going to get in sometime in the late Spring or early Summer when more layoffs have occurred and people begin to leave in search of work and cheaper living elsewhere.

  7. 7
    anony says:

    Industry doesn’t get bailouts. Financial black boxes that move stuff around and magically create wealth get bailouts. You have to understand that production doesn’t come from factories, it comes from various tranches of securities and derivatives. That is what we value in America, and if you don’t agree get out!

  8. 8
    softwarengineer says:

    LUXURY LINER

    That sums it up, when money dries up whose got it to spend on luxuries.

    I’m seeing RT fares to LAX on travelocity for $145 lately….not red eye flights either….wait a few months, we’ll be able to fly to London for that soon…..

  9. 9
    LookingToBuyEndof09 says:

    Has anyone heard any estimates about how long it will take before layoffs at Boeing, MS, Starbucks, etc. start affecting house prices? I would assume that such layoffs would have an immediate impact on home prices if the laid off employees were paying month to month and had no savings. Any historical data?

  10. 10
    Robert says:

    Let’s all press for another stimulus package.

    I think every company in the NWshould have ability to tap in to a new distressed fund that the Fed would create. Any company that brings losses should be immediately eligible for funding.

    After things stabilize then the Fed will take out the fund.

    But the fund is necessary otherwise people get laid off. They don’t bring in tax revenue and cost the state. So let’s all push for another stimulus after this one.

  11. 11
    deejayoh says:

    um, I don’t think there are any redeye flights to LA. It’s a 3 hr flight in the same timezone…

  12. 12
    David McManus says:

    Surely, you jest.

  13. 13
    Scotsman says:

    I’m going to the Boat Show, gonna buy a nice superyacht for entertaining. That will guarantee my business operates at a loss for years to come. Then I’m gonna apply for some federal bailout funds. The application is actually online. Woo-Hoo!

    Thank you, President Obama, and all his supporters, for paying for my boat.

    Life is good!

  14. 14
    WestSideBilly says:

    Supposedly about half.

  15. 15
    Interloper says:

    These job losses are certainly tragic for those affected.

    In the end conventional wisdom in Seattle will say that the economy brought the housing market down, when it’s actually the other way around.

    People will forget that the economy was just fine in July of 2007 when (inconceivably) Seattle home values began declining.

  16. 16
    Son of Samattle says:

    The mindset of EVERY company right now if to CUT COSTS!! I remember back in 2001/2002 I worked at a place where they turned off all the heat, all the lights, cut the water(had to drive to the nearest restaurant to use the john), and they unplugged the refrigerators. All we had for light were pc monitors. And they Cut many peoples hours to part time.

    There is still a lot of dead weight employees and conveniences that most places have YET to shave. Now I dont foresee most places going to the drastic measures my office went through, but most places will do some of those things.

  17. 17
    Groundhogday says:

    Actually, we will see some synergy. Housing brought the economy down everywhere which negatively impacted the profits of Boeing and Microsoft, which will negatively impact local housing, etc…. Nothing like an economic death spiral to start off the new year!

    But you are right about the Realtors telling us 15 years from now that housing never goes down except for these weird cases when then economy brings everything down (and real estate still beats the stock market). They will certainly get causality reversed…

  18. 18
    Groundhogday says:

    Is it legal to cut off the toilets?

  19. 19
    Groundhogday says:

    It will take a while… live off credit cards and relatives, stop making payments, 6 months minimum for foreclosure, banks have to resell. We probably won’t see the full impact for a year, though psychologically it will put some pressure on sellers this spring.

  20. 20
    David Losh says:

    The thought about down sizing or using the economy as an excuse to cut expenses makes a lot of sense to me.

    We still have a Port, Third Runway, Adobe, Amazon, Nintendo, Building Material supplies, Paccar, and more companies I know I’m leaving out.

    Seattle is special because we are a working man’s town. As a commenter said in the 1980s you could own for the amount you could rent for with a 5% down payment.

    Real Estate has been cheaper here because our employment based was wage earners rather than financiers with the mad money. We are not the silicon valley hipster, but loggers.

    In that regard the very diverse, low budget jobs Seattle has a reputation for will lower the price of housing more than anything else.

  21. 21
  22. 22
    Son of Samattle says:

    (“Is it legal to cut off the toilets?”, “Yes”)

    Oh that little hiccup.

    Their rationale was, they werent being “cut-off” or “closed” but just no water was coming in to them(wink-wink). The mindset was “who would want to use a bathroom with unflowing water” and if people started complaining to officials, they would probably favor the employer when lots of people were being laid-off at that time anyway.

    I was told by a manager there that they were saving money doing all of these wild “cut-backs”. Not long before I was laid-off myself.

  23. 23
    b says:

    Well, its rapidly looking like Seattle will become a total clusterfuck. Housing bubble or not, hope I have a job next year…

  24. 24
    Thomas B. says:

    I would like to renew my prediction that Starbucks will be bought out by the end of 2009. It’s too much of an attractive takeover target and the market is ripe for consolidation. Yum Brands is my bet, but McDonalds may buy them out just to spite them.

  25. 25
    TheHulk says:

    The stock markets went up today, thanks to financial stocks. Plenty of knife catchers day trading these days I guess. What the hell are they thinking? The govt is going to come up with a “bad bank” and all the assets will be off the hook for zero losses? The govt is either going to purchase the assets at a heavy discount or going to get preferred stocks in the financials.

    I absolutely hate it when the CNBC anchors start saying “When will this turn around”. You are supposed to be reporters, not cheerleaders you dimwits. The only person among all those nutjobs who seems to make any sense (and seems impartial) is Rick Santelli.

  26. 26
    Mkkby says:

    Just watch. These same companies will announce more layoffs in 3-6 months. Cost cutting usually starts with small, incremental moves. Then it gains momentum when the actual savings don’t make a great difference. This is just the shot across the bow.

    As for the housing market… remember when the early price declines were blamed on the media for printing bad news? Now the news is really grim and right in everyone’s face. More sellers will grasp the reality and price their houses for quick sales. Then the negative feedback loop kicks in… lower home values => more foreclosures => more bank losses => credit contraction => less consumer spending => fewer jobs => still lower home values…

  27. 27
    Enginerd says:

    4500 will be in BCA and the other 5500 will be other in business units. Almost all BCA jobs will be in in the Puget Sound while the 5500 other jobs will be spread throughout the country/world. The Puget Sound has a jobs from all business units so the actual number could be higher than 4500.

    Overall it is ~6% reduction in the total international workforce.

  28. 28
    Mkkby says:

    Hulk,

    There was a news report many years ago — during the dot com recession. Basically it said CNBC knows their ratings are higher during bull markets. The conclusion becomes obvious… they try to engineer bull markets because it’s profitable for them. Never mind that it’s unethical to con impressionable people into money-losing investments.

    Sounding a little like the real estate industry, banks, or just about any other company you’d care to name?

  29. 29
    economist says:

    There is always bail out money for Boeing. It’s called the defense budget.

  30. 30
    economist says:

    The immediate impact is from people not buying who otherwise might have, not from existing homeowners who may have to sell.

  31. 31
    Sniglet says:

    CNBC knows their ratings are higher during bull markets. The conclusion becomes obvious… they try to engineer bull markets because it’s profitable for them. Never mind that it’s unethical to con impressionable people into money-losing investments.

    I don’t think there is anything devious or conspiratorial going on. The simple fact is that most investors lose interest in financial news when the economy is in a tailspin. Most people don’t like to be reminded of how much they are losing in their investments.

    It only makes sense that the financial media will hire staff who mirror, and represent, the views of their audience. So why should we be surprised when the talking heads on CNBC make the SAME comments that their audience holds?

    Heck, the talking heads are likely starting to worry about their very livelihoods. With all the major advertisers cutting budgets (e.g. auto manufacturers, financial firms) and declining viewership, it might not be long before heads start rolling.

    Actually, one of the signs we will be reaching a bottom of this downturn is when CNBC goes off the air altogether.

  32. 32
    EconE says:

    Funny that I see the (former?) WAMU tower lit up like a christmas tree from bottom over the last couple weeks.

    Every floor…and seemingly every light. Never seen anything like it. I’m used to seeing a few floors here and there lit up in the downtown office buildings but every one?

    Perhaps energy savings aren’t on their list of priorities with all the cash their new owners have now.

  33. 33
    Robert says:

    What about the Fed just coming in and buying all the houses undergoing foreclosures and all houses that have been on sale for the last 6 months. It would pay whatever the asking price of the seller? This way all the distressed houses would be off the market and could potentially spark a rally again. The builders sniffing that there are fewer houses on the market would start building again like crazy. And the Fed would just keep buying new houses.

    Same thing is with big companies like MSFT or Boeing. The Fed could start buying software or planes to keep the local demand strong. Who knows maybe even they could start buying Starbucks coffee.

  34. 34
    economist says:

    Robert Mugabe is on Seattle Bubble!

  35. 35
    Dave says:

    Via OSHA I don’t think it is. I”ll check my books at work and get back to you.

  36. 36
    Charles Dean says:

    Yes, I suppose unnaturally low interest rates, banking deregulation, the Iraq war, overinflated stock prices, high gas prices, unregulated credit default swaps and irresponsible management of hedge funds didn’t have anything to do with our economic decline.

    Apparently this is the anti-pink pony. The idea that the housing market is the only cause of all of our problems.

  37. 37
    old ballard says:

    yes, also from people in general spending less because their afraid their next.

  38. 38
    darth_z says:

    How about the Fed just uses helicopters to drop money from the sky for everyone to pick up and spend? We don’t need to worry about jobs or employment or anything else. I feel that more and more people are seeing that this is the end game. Remember that the nickname of Ben Bernanke is “Heli Ben”

  39. 39
    The Tim says:

    I don’t think Boeing makes helicopters. Better drop the money from tankers, instead.

  40. 40
    Interloper says:

    I don’t think we’re saying that.

    The point is that people will retroactively point to job losses in the local economy (the subject of this thread) as the reason housing prices declined, when it’s really only an accelerant to a fire that was already burning. As Groundhogday succinctly put it, people will get causality reversed.

    Yeah, there are other factors contributing to the job losses, but if housing values were still rising instead of plummeting, other events like the credit freeze/slowdown of capital and subsequent decline of the stock market would not likely have unfolded in the same way.

  41. 41
    anony says:

    Boeing makes a lot of helicopters. Particularly ones like the Chinook which would be suitable for dropping large sums of Benjamins on bank’s headquarters.

    http://en.wikipedia.org/wiki/Boeing_Helicopters

  42. 42
    The Tim says:

    Oh, well, there you go then. Perfect.

  43. 43
    Groundhogday says:

    Well misery loves company, apparently. Calculated risk just posted the Philly Fed data showing declining economic activity in all 50 states for December… the first time this has happened in the 30 years they’ve been collecting this data. WA state is a deep red color on the map, indicating that we are particularly screwed (along with 30 other states).

    http://www.calculatedriskblog.com/

  44. 44
    anony says:

    If the fed goes through with their plan of monetizing treasury bonds, they effectively are buying Boeing planes, through the Military. Probably software too.

  45. 45
    jon says:

    Hmm, maybe not. Paper is about .1 mm thick, so you in a stack of money you get 10^4 $100 bills per meter, or $1M/m, or in more convenient units, that is $1B/km. $800B is going to take a lot of helicopters.

  46. 46
    Groundhogday says:

    Thanks interloper. The key point is that the housing bubble/bust was a major factor if not the largest factor in the current economic and financial bust. But Realtors will later talk about falling home prices as purely a consequence of the economic bust… a fundamental reversal of causality.

  47. 47
    yeslerhill says:

    “Seattle is special because we are a working man’s town. ”

    *falls on the ground in shock*

    My good fellow, I’m not sure what Seattle you are talking abt?! Seattle is *special* because the city is full of debt-burdened yuppies, and increasing numbers of former technosoftic industry employees.

    Seattle hasn’t been comfortable affordable home for the working class/middle class in 20, 30 years.

  48. 48
    Dave says:

    OSHA 1910.141(b)
    1 Potable water
    i Potabel water shall be provided in all places of employment for drinking, washing of the person, cooking, washing of foods, washing of cooking/eating utensils, washign of food preparation or processing areas, and personal service rooms.

    So assuming you have an admininstration that actually enfirces OSHA (Bush did not – indeed they hampered investigations) – that water shutoff woudl cost the company $70,000.00. They would probabaly get a warning first.

    Every employer has to provide water – to the point if you lose water technically you have send everyone home.

    Also – think sprinkler systems.

  49. 49
    Scotsman says:

    Amen.

  50. 50
    MacAttack says:

    The poll is especially timely, as my salary was cut 10% yesterday “until conditions change.” If you want me to buy anything other than the necessities, I’m sorry, but it better be a screaming deal. I don’t begrudge the cut (the execs took more than that) but I’m buying nothing. NOTHING. Time for the fat cats to step up.

  51. 51
    Groundhogday says:

    Me too.

  52. 52
    David Losh says:

    I of course disagree. I think the cocktail clowns have ruined my town for the past twenty years. I was talking with a lawyer last night who had his office in Fremont for years, he moved to Ballard as the lesser of two evils.

    Are those neighborhoods destroyed? Maybe. Kind of like Columbia City was decimated, or Pioneer Square?

    Twenty years are a blip on the screen. The question is will Fremont hold the current yuppie values? I don’t think so. I think the Suzy Burke brick office buildings were priced per square foot for new, but as leased space gets more plentiful down town more people will move there.

    OK you don’t like down town condos, maybe they are over priced, but if I were a young lawyer I for sure would rather live at South Lake Union than Fremont or Ballard, if it were a choice.

    People moved here for tech jobs that are still available in sunny climates. Finance? Forget about it. Bio Tech is best in North Carolina. When it’s done we are a cold weather climate with working docks, taverns, and warehouses. We might even brew beer again.

  53. 53
    wreckingbull says:

    Mac Attack

    I am sorry to hear your news. It sounds like you are seeing the bright side of the situation, that you still retain 90 percent of your salary, but it still sucks.

    Your story is unfortunately a common one. I don’t understand how people can see posts like yours, know that it is happening everywhere, and think we are at the cusp of hyperinflation. Fewer dollars chasing the goods and services. Period. You can’t force people at gunpoint to borrow and and spend.

  54. 54
    Scotsman says:

    Except that Fisherman’s Terminal has filled up with yachts, Tacoma took a good chunk of the port business, Boeing is moving out of town, The trucking business is gone, and while we do have lots of old piers ,the EPA and friends have made it illegal to have anything on the waterfront except restaurants. No beer, no paper, no logging- where do all these working people work? And where can they afford to buy a house?

    Nope, Seattle is the home of the Eddie Bauer yuppie. Unfortunately, even Eddie Bauer is in trouble. And now Seattle is waking up in its condo dream to discover that someone forgot to take last night’s garbage out… and the sushi is starting to reek.

  55. 55
    TheHulk says:

    The bad news continues…
    http://seattlepi.nwsource.com/business/397994_boeingrussia30.html

    An order for 15 dreamliners was cancelled. As air traffic drops worldwide, I would expect to see more cancellations.

    On a bright note, amazon did really well the last quarter, but I am sure that is of little comfort to many retail stores. Many retail stores missed the “below expectation” earnings this holiday season and plenty are filing for bankruptcy.

  56. 56
    David Losh says:

    There is only the future.

    Fishing and logging are gone, no doubt about that, but we will continue to trade globally. All of the jobs that were here before are still here. Trucking is still viable and will be for years to come, It’s amazing there is nothing else but the rail road lines are inadequate.

    Boeing will be here for more years as an assembly plant. Microsoft will continue to thrive here even if it contracts in other parts of the world, the same for Starbucks.

    What’s missing is the hanger ons. The people who make money by representing the dream. The mid level or upper management “dead weight” may need to move on.

    I think everybody forgets it was merely ten years ago when things went completely wacky. A place I’m starting work on on Monday was bought for $165K ten years ago and rented for the mortgage payment. Today it rents for $1900.

    Rents just kind of stayed the same while prices went nuts. It is called unsustainable appreciation. This site was based on that term, but it is a Real Estate Industry term. It’s a blip on the screen and highly reversable. The banks, lenders, and investors need to take that loss rather than us.

  57. 57
    Charles Dean says:

    I guess my point is, why did house prices get overinflated? A housing bubble like this would’ve happened at anytime in the past had lending been that easy and irresponsible. I think it’s important to think of what the root cause of overinflated housing prices was. It was banks being too lax, investment companies being allowed to become banks, lax regulations, etc.

    If those in charge of the money had been responsible and so on and so forth, then the run up in housing prices wouldn’t have happened since mostly only reasonable loans would’ve been made.

    Saying that it was just one thing that caused all of our economic hardships on one thing misses the point. Not seeing the forest for the trees.

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