Boeing Co. is shifting its attention in Canada to its Winnipeg plant to supply parts for a new generation of larger aircraft, saying it will be halting production of its smaller 717 plane and closing its historic Toronto site.
Over the years, the Toronto facility has built wings for various models of McDonnell Douglas Corp. commercial aircraft, with the 717 being the latest contract. Boeing acquired McDonnell Douglas in 1997 and took over responsibility for the short-haul 717 planes.
About 350 Toronto layoffs will take effect by mid-July, shaving 23 per cent of Boeing's payroll in Canada. Boeing's sites in Winnipeg, Arnprior, Ont., and Richmond, B.C., will remain open since they do work on other Boeing aircraft and projects.
Yesterday's announcement is part of the aircraft maker's decision to absorb $615-million (U.S.) in writedowns.
Chicago-based Boeing said the pretax charge, amounting to 48 cents a share, will be booked in the fourth quarter, taking into account the cancellation of the 100-seat 717 aircraft program and higher cost estimates for its U.S. Air Force 767 tanker program.
Jerry Pickard, parliamentary secretary for Industry Minister David Emerson, said the government would not have provided financial help to Boeing for its Toronto plant because that operation wouldn't meet Ottawa's criteria.
Ottawa is poised to launch a $1-billion aerospace strategy, but Mr. Pickard said the federal money -- including that in Industry Canada's Technology Partnerships Canada -- is aimed at projects that involve new research or technology. "Boeing has cancelled that aircraft, so it's obsolete in their mind," he said.
Stephen Fisher, manager of the Malton factory near Toronto's Pearson International Airport, said the financial impact of closing one of two Ontario sites will be a small part of the total writedown, but he acknowledged the pain felt by employees being laid off.
Since opening in 1938, the Toronto site has had its share of boom times, with thousands of workers kept busy with high-profile orders such as the Avro Arrow in the 1950s.
Toronto has contracts to supply other Boeing projects, "but they're not large enough to sustain a business at this site," Mr. Fisher said. "The employees have known that this is a tough business to be in."
The company employs 800 people in Winnipeg, 300 in Arnprior and 50 in Richmond.
Boeing's Winnipeg plant will be supplying parts -- wing-to-body connections and main landing-gear doors -- for the new 7E7 Dreamliner commercial aircraft, which will have between 200 and 300 seats. The 7E7 is scheduled to begin production next year, with deliveries starting in 2008.
"Our future focus is on the 7E7," said Allan DeQuetteville, Boeing's vice-president in Canada. He said he's optimistic Canadian operations will recover from the Toronto setback.
"We're very bullish on the 7E7 and it portends good things for Winnipeg," said Mr. DeQuetteville, who added that the company doesn't think it makes sense to revamp the Toronto site, so it isn't seeking any funding from Ottawa.
"Toronto is a specialist wing manufacturer and it's pretty hard to convert it to do something else in the short term," he said. "In the big picture in Canada, clearly Boeing is still committed in a major way."
With dwindling demand for the 717, Boeing chose to cancel that aircraft's production next year at the assembly site in Long Beach, Calif., taking a pretax charge of $340-million, or 27 cents a share, including severance packages and supplier termination fees.
Air Canada, WestJet Airlines Ltd., Jetsgo Corp. and Canjet Airlines do not have any 717s in their fleet.
Montreal-based aircraft maker Bombardier Inc. will be deciding later this year whether to proceed with plans for its C-Series long-range jets seating 110 to 135 passengers, so the cancellation of Boeing's 717 will reduce competing aircraft in the 100-plus seat range.
"With the 717 leaving that portion of the market, it creates more room for us and our proposed product," said Bombardier spokesman John Paul Macdonald.
Boeing's Toronto workers were upset when Air Canada chose last year to award contracts for regional jets to Bombardier and Brazil's Embraer SA, said Doug Tyler, plant chairman of Local 1967 of the Canadian Auto Workers, which represents more than 240 of the employees affected. The CAW lobbied Ottawa to help prop up the Toronto plant as orders plunged in recent years, but to no avail, he said.
Nearly 200 Canadian subcontractors supply components, parts and services to Boeing plants. All told, Boeing estimates that it contributed $1-billion (Canadian) to Canada's economy last year in direct and spinoff benefits, but the Toronto plant's closing would reduce the annual economic impact by 10 per cent to $900-million.
The closing of the Toronto site came as a surprise, given indications of a recovery in 2005 for the aerospace sector, said Louis Thériault, an associate director at the Conference Board of Canada.
Earlier this week, the board issued a rosy forecast for the next several years for Canada's aircraft and aircraft-parts manufacturers. Yesterday, Mr. Thériault said he would be revising his outlook downward only slightly, taking into account the Toronto plant's shutdown.
"It's not good news for Toronto, but it won't change our forecast dramatically," he said, pointing out that Canada's aerospace industry will still have more than 50,000 employees.
Boeing shares rose 28 cents (U.S.) to $50.91 yesterday on the New York Stock Exchange.