Friday July 20, 6:21 pm Eastern Time

Boeing outsourcing some Wichita work (UPDATE: adds stock price, byline)

By Chris Stetkiewicz

SEATTLE, July 20 (Reuters) - Aerospace giant Boeing Co. (NYSE:BA - news) said on Friday it would shift some airplane modification work to outside vendors and would try to find work for the 500 employees who currently perform the work in Wichita, Kansas.

Next April Seattle-based Boeing will stop installing certain hardware on 747 wide-body passenger jets being converted to freighters, a program running well below capacity as a result of shrinking orders in recent years, the company said.

Some 700 Boeing workers who currently build the conversion kits will retain their jobs.

``The people that were actually doing the modification work on the airplanes will either be perhaps transferred to the military side of the operation or some other area here at Wichita,'' Boeing spokesman Fred Solis said. ``We don't anticipate any layoffs at this point.''

Officials at the International Association of Machinists and Aerospace Workers (IAM) District 70, which represents 11,000 Boeing workers in Wichita, did not immediately return a phone call seeking comment.

Boeing's Solis said the company would uphold all agreements in its contract with the IAM.

On the New York Stock Exchange, Boeing shares rose 40 cents to $56.79, a gain of 0.7 percent. By contrast, the Dow Jones industrial average, which includes Boeing, fell 0.3 percent.

The 747 conversion program can deliver up to 12 freighters a year but has only had enough orders to ship three a year over the last three years, raising the cost of each plane and making Boeing less competitive against rivals.

``The facility can do 12 a year and to be really efficient that's where it needs to be,'' said Boeing spokeswoman Anne DeAngelis.

With revenues from its traditional commercial jet business stagnating in recent years, Boeing has sought to diversify into such areas as maintenance and modification, including military work.

Boeing has also shifted work on several programs either within its far-flung manufacturing empire or to outside partners in an effort to boost productivity and profits and fend off hard-charging rival planemaker Airbus SAS [ARBU.UL].

Last March it said it would move the assembly of its 757 narrow-body jet fuselage to Wichita from Renton, Washington, and move some sub-assembly work to Italy's Alenia , an action that sparked a lawsuit by the Seattle-area machinists.

Later in March Boeing announced it would move its headquarters from Seattle, ultimately choosing Chicago for its new home, and said it would trim 500 workers from its 1,000-strong corporate staff.

Last week Boeing said it would consolidate commercial jet electrical wire assembly work at its Everett, Washington, plant, uniting 1,700 scattered workers and closing an aging Renton building badly damaged in a Feb. 28 earthquake.

And earlier on Friday Boeing said it would likely lay off workers at Kennedy Space Center in Florida in a realignment of its human space flight and exploration programs.

From 1998 to 2000 Boeing slashed nearly 50,000 jobs from a peak payroll of 238,600, but has slowly rebuilt its work force more recently, buying a handful of new businesses, including the satellite-making arm of Hughes Electronics (NYSE:GMH - news).

As of July 1, Boeing employed 199,400 people, including 17,300 in Kansas, its third-largest base after Washington state and California.

At the 1998 peak, Boeing employed more than 22,000 workers in Kansas.

-- Anonymous, July 21, 2001