Revised delivery forecasts prompt cutbacks at OEMs

 - December 1, 2008, 5:47 AM

Acknowledging the reality of today’s economic situation, aircraft manufacturers Cessna and Hawker Beechcraft have announced workforce reductions and revised delivery schedules. Avionics maker Rockwell Collins has also announced layoffs.

After Cessna parent Textron released its third-quarter results, Cessna chairman, president and CEO Jack Pelton warned employees that “changes to our 2009 production schedules, as well as reduced aircraft utilization, will result in a need to reduce our current workforce level.” Textron announced a revision in Cessna’s production schedule, lowering planned 2009 Citation deliveries to “up slightly” from the 475 planned deliveries for this year. Textron had previously expected Cessna to deliver 535 Citations next year.

In a letter to employees, Pelton noted that “continued signs of a slow-down” include softening in the piston-single business; slowing jet sales; increasing numbers of used aircraft globally; a slowing in the fractional ownership business; and customer access to financing impacted by the credit crisis. Pelton pledged that “aggressive cost reductions, redeployment of people, voluntary separations” and other measures would precede involuntary layoffs. “On the positive side,” he added, “our backlog as of today is in excess of $15 billion. We remain committed to delivering more than 500 [Citations] next year.” Cessna is also increasing production of the Caravan and expects to deliver 120 next year, up from 105 this year.

More Layoffs Coming
On October 31, Hawker Beech-craft chairman and CEO Jim Schuster informed employees that the company will lay off 5 percent of its workforce–about 500 people–as a result of “very serious challenges facing our company due to the unprecedented worldwide economic decline.” These challenges were reflected in third-quarter sales numbers, which were $783.3 million, down $87.7 million year-over-year, while profits slid from $62.1 million in the third quarter last year to $15.3 million in the same time frame this year.

Aircraft deliveries were significantly affected by the month-long strike of assembly workers in August. During the quarter, the company delivered 86 aircraft (34 jets, 33 turboprops and 19 pistons), compared with 106 during the same period last year. Hawker Beechcraft also booked a $25.3 million charge during the third quarter, “associated with increased costs to conform specific early-production Hawker 4000 units to the final type design and to establish standard production processes.”

Although Hawker Beechcraft had a $7.9 billion backlog at the end of the third quarter, production will drop, according to a company statement. “The change in aircraft production reflects anticipation of reduced demand for new aircraft, spares and maintenance services. The financial impact resulting from the planned reductions is not anticipated to be significant.”

Rockwell Collins announced a “cost-reduction plan” on November 10 that includes layoffs of about 300 employees (1.5 percent of the current workforce), “primarily in operations, and reducing the number of contract laborers by approximately 100, primarily in engineering functions.”

The airline business appears to be affecting Rockwell Collins’s bottom line more than business aviation. “Like many other companies,” said Rockwell Collins chairman, president and CEO Clay Jones, “we’re dealing with significant challenges in meeting our business objectives. These challenges include air travel declines resulting from the weaker global economy, delays and cancellations in several government programs and the prolonged Boeing strike.”

The company is also reducing discretionary spending and “delaying 2009 merit increases for management and the majority of employees for three months.” Rockwell Collins also lowered its research and development budget for next year.