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Boeing plans to cut production of SC-made Dreamliner by half, report says

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Boeing Co. may announce new production cuts for its 787 Dreamliner program on Wednesday as the company faces declining demand due to the coronavirus. File/Grace Beahm Alford/Staff

Facing declining demand for new aircraft, Boeing Co. may cut production of the 787 Dreamliner jet it builds in North Charleston and on the West Coast by half, according to a report from Bloomberg

A cut could also come with reductions in employment and would bring the 787's monthly production rate into the single digits, according to the report, which cited unidentified people "familiar with the plans." 

The company is expected to announce the cut during its first quarter earnings call next week, Bloomberg reported Thursday. 

Boeing South Carolina spokeswoman Libba Holland said Friday that the company will not be commenting on the report.

Boeing has about 7,000 workers spread over several sites in North Charleston, making it one of the largest employers in the Lowcountry.

The company and its competitors and suppliers are facing a "new reality" brought on by the coronavirus pandemic, CEO David Calhoun warned employees in a letter this month. 

"It will take time for the aerospace industry to recover from the crisis," Calhoun wrote in the letter. "When the world emerges from the pandemic, the size of the commercial market and the types of products and services our customers want and need will likely be different."

Calhoun made a reference to balancing supply and demand as the industry goes through the recovery process "for years to come." 

With airlines facing an estimated $314 billion loss in ticket sales this year, purchasing new aircraft is no longer a priority.

Though Boeing hasn't publicly disclosed plans to drop the Dreamliner's production rate, multiple analysts have predicted the move in recent weeks. 

Jeffries analyst Sheila Kahyaoglu, for example, wrote in a March 31 report that she estimates four Dreamliners will be built a month in the near future, with a slight recovery to six per month early next year, according to a Forbes report.

The 787 program was being scaled back even before the COVID-19 health crisis. If another cut is announced Wednesday, it would mark the planemaker's third consecutive earnings report to include a reduction in Dreamliner output. 

During the 2019 third-quarter earnings call, it said production would be scaled back to 12 from 14 per month, citing trade tensions with China. Then in January, the company announced it would trim the rate again, to 10 from 12. 

It's unclear what the exact monthly production rate for the Dreamliner would be if a third cut is made. How the cut would be distributed between Boeing's two 787 production lines is also unknown.

Assembly of the Dreamliner is split between a wide-body plant in Everett, Wash. and the North Charleston campus, which builds all three versions of the 787. The longest, the 787-10, is assembled only at the South Carolina plant. 

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Briefly this month, the Dreamliner program was completely on hold as Boeing shuttered factories in the Pacific Northwest and North Charleston in response to the coronavirus.

The Washington state facilities reopened this week. The shutdown in South Carolina has continued. 

Wednesday marked two weeks since Boeing halted production at its Dreamliner campus in North Charleston and, with that, the end of the 10 working days' worth of pay the company promised during the shutdown. 

The company will be filing for unemployment assistance on behalf of its eligible workers starting next week. 

Boeing South Carolina employees were told to not file for benefits on their own. Doing so could “very likely significantly delay” when they receive aid, the company said.

Workers were encouraged to use paid time away benefits for April 23 — the day after suspended operations pay ended — since they will likely have earned too much this week to receive jobless benefits.

Employees who have been able to work remotely will continue to do so and will not be eligible for unemployment if their hours have not been reduced. The company has not specified how many workers in South Carolina have been off the job during the shutdown.

All Boeing employees, including those who collect unemployment, will continue to be covered by their health benefits. 

The planemaker's Washington state workforce went through a similar process when facilities there closed on March 25, two weeks before North Charleston stopped assembling Dreamliner jets. Once the 10 working days of pay were up, eligible employees in the Evergreen State could get jobless benefits.

About 27,000 Boeing employees went back to work this week when the company decided to resume production at its Seattle-area factories, including the plant in Everett, Wash. that builds Dreamliners. 

The company has implemented new safety procedures for its returning workers. Face masks, hand washing stations, staggered shift times and floor markings to maintain physical distance are being used, according to statements from Boeing.

The campus in North Charleston is “working to take similar precautions” when production resumes, spokeswoman Holland said. A reopening date has not yet been set for the local production line.

In the meantime, the “enhanced cleaning procedures” the company said it would complete during the shutdown are continuing at the site, Holland said.

Reach Emily Williams at 843-607-0894. Follow her on Twitter @emilye_williams.

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