Boeing to End Production of C-17 Due to Lack of Funds

LOS ANGELES – Boeing Co. (BA) said Friday it will begin shutting down production of its C-17 cargo plane, the last to be built in Southern California, because Congress has not funded new purchases.

The decision could affect thousands of Boeing workers in four states and thousands of others employed by companies that supply parts for the C-17.

The Chicago-based company said it has told its suppliers and subcontractors to stop work on planes beyond those already on order. Boeing said it has enough orders to continue production through the middle of 2009.

The company has spent millions to keep its supply line active, in hopes Congress would authorize new purchases. But Friday, Boeing said it could no longer afford to keep the program going.

"The C-17 is one of the Defense Department's most successful acquisition programs ever," said Ron Marcotte, vice president and general manager of Boeing Global Mobility Systems. "But we can't continue carrying the program without additional orders from the U.S. Government."

The decision affects long lead-time items purchased from suppliers, many of which have to be ordered as long as 34 months in advance.

The company left open the possibility that it could continue production if it receives new orders.

"This move will be the first step in an orderly shutdown of the production supply chain, should no further orders be received from the U.S. government," Boeing said in a press release.

The move could ultimately affect 5,500 Boeing employees in California, Missouri, Georgia and Arizona who are directly tied to the C-17 program. Thousands more work to support existing planes. Boeing this week signed a contract to provide support and spare parts for the Royal Australian Air Force's C-17 fleet.

But the decision will first hit the 25,000 employees of the nearly 700 companies in 42 states that supply parts and systems for the plane, Boeing said.

The giant cargo plane, nicknamed the Globemaster III, has been used since 1991 to airlift heavy equipment and transport troops. Supporters say its ability to land on short dirt runways has helped take the load off supply trucks that come under heavy fire in Iraq and Afghanistan.

Production could be restarted if Congress approves funding, which could happen as early as next month. But restarting the supply chain would be costly and add millions of dollars to the cost of each plane — about $154 million each.

The C-17 plant is the last major airplane factory left in Southern California, which once was a center for aircraft production. Earlier this year, Boeing delivered its last 717 passenger jet, also built in Long Beach.