Is Boeing’s Chicago headquarters headed for the chopping block?
Executives promise a thorough review of all real estate, meaning its 2001 decision to move to the West Loop could be revisited,
Citing an urgent need for downsizing and improved efficiency, Boeing’s top executives said Wednesday they would examine all real estate costs, promising a review so deep that it raises this question: How committed is the company to maintaining its headquarters in Chicago?
“We’re reviewing every piece of real estate, every building, every lease, every warehouse, every site to look at how we can be more efficient, and we will share our decisions as we make them,” Chief Financial Officer Greg Smith said on a conference call with stock analysts.
Smith and CEO David Calhoun did not speak about Chicago specifically and were not asked about it as they detailed a $449 million loss for the third quarter, but the sweeping nature of Boeing’s review suggests it could relocate or downsize the headquarters that landed here in 2001. The company said it has about 500 Chicago-area employees, some of whom will be affected by ongoing job cuts.
Worldwide, Boeing said it plans to trim its workforce by 30,000 people, or about 20%, by the end of next year. Smith said the job cuts and continued remote work for many employees should allow Boeing to reduce office space costs by 30%. He called it an “enterprise footprint optimization effort utilizing flexible and virtual workplace planning.”
Boeing spokesman Peter Pedraza offered no comment about operations in Chicago. The company is based at 100 N. Riverside Plaza.
The layoffs and other changes come as Boeing faces heavy losses in its core commercial jet business because of the pandemic’s affect on air travel. The company also has endured backlash from airlines and regulators over a software flaw in its 737 Max. The flaw was implicated in two fatal crashes when it pushed down the noses of the airborne planes and pilots were unable to override it.
Calhoun said he expects regulators to approve the 737 Max to fly again by the end of the year. But he said he doubts demand for air travel will return to 2019 levels for at least three years and will take longer to resume historic growth.
Boeing has major manufacturing operations in the Seattle area, in South Carolina, Missouri and elsewhere. Calhoun said large facilities could be affected by the realignment but he emphasized that moving production lines is complex and wouldn’t happen just because space is available somewhere else.
Chicago barely registers in the company’s global footprint but is a big part of the corporate image. Its move here was choregraphed to put Chicago in competition with Dallas and Denver. It separated corporate leaders from any one operating unit, including its defense and space systems, and was supposed to emphasize Boeing’s global nature and improve access to capital.
Transportation analyst Joseph Schwieterman, a professor at DePaul University, said Boeing’s activities in Chicago have never grown the way some boosters imagined years ago. “They planted roots in the city, but their soul is still in Seattle,” he said. “They’ve always had the aura of a two-headquarters company.”
He said financial pressures and management issues raised by the 737 Max may force Boeing to trim or move the headquarters. “The political dramas create pressure to tighten the organizational hierarchy for greater accountability,” Schwieterman said.
Critics didn’t like the $61 million package of state and local incentives extended to Boeing. The incentives have largely expired. Others who follow the company regarded the move as a head-scratcher, and it has come under periodic criticism since then.
A 2019 article in The Atlantic by financial writer Jerry Useem linked Boeing’s debacle with the 737 Max to the corporate realignment that moved the headquarters 1,700 miles from its largest installation. Useem said it was part of a radical culture shift at Boeing from being engineering-driven to a company dominated by people with MBAs.
Then-Chairman Philip Condit took public bows for the move to Chicago in 2001, but he left the company two years later amid scandals involving government contracts. Others assert his second-in-command, Harry Stonecipher, was behind the headquarters decision. He left Boeing in 2005 after an uproar over an affair with an employee.