WASHINGTON —

The new unit, Boeing Integrated Defense Systems (BDIS), will be headed by Jim Albaugh, president of Boeing’s Space and Communications group. The new organization replaces the space operation, based in Seal Beach, Calif., and Boeing’s Military Aircraft and Missile Systems division, St. Louis, which together posted $23 billion in revenue in 2001, according to Boeing officials.

Jerry Daniels, who has been president and chief executive officer of the military aircraft and missile group for the past two years, will retire from Boeing once the two groups are combined, which is expected by the end of the year, officials said.

Speaking July 10 in a press conference at Boeing’s Chicago headquarters, Boeing Chairman and Chief Executive Officer Phil Condit said future defense systems will feature increasingly close links between space capabilities and aircraft, ships and land-based platforms.

"The military wants to build integrated systems," Condit said. "For us, this says we’re into parts of the military where we haven’t been before."

Boeing’s space business includes Boeing Satellite Systems of El Segundo, Calif., which builds satellites for commercial as well as government customers. That business is unlikely to change under the new organizational structure, Condit said.

Boeing officials considered separating the commercial and military sides of Boeing Satellite Systems, but ultimately decided there is enough in common between the two to justify having the commercial business within an organization that is heavily defense-oriented, Condit said. Boeing uses similar satellite platforms for many of its defense and commercial programs, he said.

BDIS will be headquartered in St. Louis and be one of just two remaining major Boeing divisions. The other division builds commercial aircraft.

Condit said he does not expect the changes to result in layoffs. He also rejected the idea that Boeing chose to reorganize in response to Northrop Grumman Corp.’s pending acquisition of TRW Inc., saying he had been considering the move for about a year.

The combination brings together programs ranging from fighter jets and high-tech battlefield management systems to satellite launches and missile defense under the direction of Jim Albaugh, who had run the space unit.

Jerry Daniels will resign his current post as head of the St. Louis-based military unit after a transitional period, Chicago-based Boeing said. The merged unit will be based in St. Louis.

The combination will not cause any charges or job cuts, Boeing Chairman Phil Condit said.

"In simple terms, we are aligning our business today with the way we believe future systems are going to be designed, acquired and maintained," Condit said in a statement.

The California-based space and communications unit has been cutting thousands of jobs at its satellite-making arm, which has failed to meet financial targets this year.

The new integrated defense systems subsidiary will employ 78,600 workers, more than the company's flagship commercial jet unit, which is currently firing about 30,000 workers and slashing production amid a steep airline slump. Currently, Boeing employed 70,246 workers at its Seattle-based jetliner unit.

The new defense unit will also produce nearly as much revenue as commercial jets in 2002 and will take the lead in 2003, analysts said.

The combined space and defense units brought in $23 billion in 2001, while commercial jets yielded $35 billion. But Boeing expects jet deliveries to fall to 380 this year from 527 in 2001.

The military unit turned a $1.35 billion profit in 2001 on revenues of $12.5 billion. Space and communications reaped revenues of $10.4 billion last year but earned just $619 million in profits.

Chairman and CEO Phil Condit said the realignment, announced Wednesday, is a strategic shift reflecting the trend toward more integrated defense systems. He said it will have no impact on jobs or on Boeing's top money-generating business, commercial airplanes.

The internal merger, to be completed by year's end, combines Boeing's St. Louis-based military airplanes and missile systems unit with its Seal Beach, California-based space and communications division. The newly created Integrated Defense Systems unit will be based in St. Louis.

Its president and CEO is Jim Albaugh, 52, who has headed the space and communications unit. Jerry Daniels, president and chief executive officer of the military aircraft and missiles division since 2000, is retiring but will help Albaugh in the merger transition, Boeing said.

"Integrated solutions - joining network-centric information with integrated military air, land, sea and space-based platforms - is the direction modern defense systems are moving," Condit said.

"We are aligning our business today with the way we believe future systems are going to be designed, acquired and maintained."

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