Layoffs continue at major OEMs

 - March 31, 2009, 5:48 AM

In December last year, aircraft manufacturer Gulfstream Aerospace laid off “a number of contract employees” and advised that at the end of the first quarter 2009 it would consider the possibility of full-time employee layoffs. Two months into this year, parent company General Dynamics announced a reduction in force that comprises 1,200 workers, including approximately 600 contract personnel.

The decision, said General Dynamics in a statement, is “a result of deterioration of the [aircraft] backlog, particularly during the month of February, and continued weak demand [that has made it] necessary to cut large-cabin aircraft production and green-aircraft deliveries from a projected 94 to 73 business jets in 2009.”

Just a month earlier, Gulfstream had said it planned a production cutback in its midsize cabin line– G150, G200 and G250–from 69 airplanes last year to 30 this year. At the same time, the company expected a production increase this year for the large-cabin line–G350, G450 and G550–from 87 airplanes to 94. A company source said that while the production cuts represent a considerable reduction in terms of total aircraft, the high profit margins for the large-cabin aircraft means “it will not unduly affect our financial performance.”

He added, “We have no plans for reductions [in force] in our Savannah facility or any of our other large-cabin facilities.”

Gulfstream said it is implementing these measures “in an effort to both stabilize [the] backlog of aircraft orders and level-load production over 2009 and 2010.” Effects of the reduction will be felt across the entire company.

“Despite the current challenges, we continue to believe that Gulfstream’s backlog provides a solid foundation for the business in this tough market environment,” said General Dynamics chairman and CEO Nicholas Chabraja.

“As a direct result of the action we have taken at Gulfstream, General Dynamics is updating its guidance with respect to earnings for 2009,” he added. “We are lowering that guidance from the previously stated range of $6.07 to $6.75 per share to a range of $6.00 to $6.10.”

Industry-wide Layoffs
Gulfstream’s major competitor, Bombardier Aerospace, has also announced a cut in production of its Challenger 605 and smaller Learjet lines, as well as the layoff of 1,360 workers that began in February. The Canadian OEM, however, said it has no plans for similar cutbacks in its large-cabin Global 5000 and Global Express XRS, and in fact is planning to hire about 230 interiors specialists at its Montreal center, where it outfits the Global line.

Hawker Beechcraft, blaming the crumbling economy, tightening credit and the negative public portrayal of business aviation, expects to lay off as many as 2,300 employees by year-end. In an address to employees earlier this year, chairman and CEO Jim Schuster commented, “While I wish I could commit to you that this will be our final action, I cannot do so at this time.”

Cessna Aircraft had announced layoffs totaling 4,600 employees in late 2008, roughly 13 percent of its workforce. A company source said a majority of those workers had left by the end of last month and that the remainder would be gone by the end of this month.

More recently, in an e-mail to Cessna employees, CEO Jack Pelton said furloughs could be expected for workers on the Citation CJ, Citation Sovereign and Citation X lines. Pelton also noted that “economic issues facing us today” have resulted in an extension of engineering development work on the new Citation Columbus by “at least six months.” There are, however, no additional layoffs planned with regard to the extension. Cessna continues to anticipate certification of the Columbus in 2013.

Pelton also said the Wichita-based OEM is “planning targeted furloughs in production of workers on the Citation CJ, Sovereign and Citation X lines.

Otherwise, Cessna moved forward with flight testing of the Citation CJ4 and expects to begin deliveries “as originally promised, early next year.” As production ramps up with the CJ4, the OEM will end production of the Citation Encore+, the last of which is expected to come off the production line this summer. The company has revised its total Citation production forecast for 2009 down from the original 535 airplanes to 375.

Dassault Falcon has not yet announced layoffs, but the French OEM is looking at cuts in prod-uction despite an anticipated increase in aircraft deliveries from 72 in 2008 to 90 in 2009.

Approximately 70 percent of the world’s business jets are manufactured in Wichita, the home of Cessna Aircraft, Hawker Beechcraft and Bombardier’s Learjet production and completion facilities.