Continuing cost cutting, Hawker lays off 350

 - November 29, 2010, 10:26 AM

In a letter to Hawker Beechcraft employees on October 22, chairman and CEO Bill Boisture laid out plans for the Wichita OEM’s latest employee cuts, which will affect both salaried employees and management.

Noting that actions taken over the past 12 to 18 months have already had “a significant impact on our company,” Boisture added, “These decisions and actions are intended to sustain and improve the company’s financial strength and improve competitive capability during a difficult time for the business aviation industry.”

The latest of these actions was notification of approximately 350 salaried employees that October 22 was their last day of employment with Hawker. That number is in addition to the layoff of 800 workers that was announced earlier. Those layoffs will begin in January.

The Hawker Beechcraft board of directors has approved the following layoff schedule for the larger group:
• Completion of the third and final phase of the outsourcing of Logistic Center operations by January 2011, reducing employment by 45.
• Movement of operations out of Plant II no later than May 2011, resulting in a reduction in employment by approximately 30.
• Movement of electrical and upholstery from Building 94 no later than July 2011, further reducing employment by 80.
• Movement of operations out of Plant 1 no later than August 2011 and as a result a reduction by approximately 450 employees.
• Movement of King Air-related back-shop operations out of Plant IV no later than August 2011, reducing employment by approximately 195.

Work from these shops, according to Boisture, will be transferred to third-party suppliers and to the company’s operations in Mexico.

He further pointed out that in the past 24 months, reductions in benefits affecting salaried, non-union employees of Hawker Beechcraft have saved the company approximately $4.5 million in healthcare insurance costs and $5.7 million in matching 401(k) contributions. Further, “Our salaried, non-union employees have also foregone annual merit salary increases that have saved the company an additional $15 million.”

Boisture noted that management has also taken a hit. “In addition to personally taking part in the above cost-cutting measures, the management team…has shown its commitment to building this company for the future by investing $6 million of their own money in the company’s stock,” he wrote. “Today [October 22], [members of] the senior leadership team have joined me in committing to build a more sustainable, profitable enterprise by reducing their base salaries by 10 percent.”

The executive added, “I voluntarily reduced my contractually established pay by 10 percent in 2009 and elected to take half of my management incentive in shares of stock.”

These and other cuts, he said, have provided for “a major investment” in training and product development. The result of that training and development, he added, has been an improvement in quality and reduction in scrap and re-work.
Hawker has also invested in training more than 500 employees in the Super Vision program to improve teamwork on the shop floor, saving the company “several million dollars annually.”

Machinist Union Rejects Hawker Contract Offer

Despite a recommendation by its executive council to approve the contract offer by Hawker Beechcraft in mid-October, the machinist union membership voted to reject, effectively halting negotiations until the current contract runs out in August 2011.

The union had hoped to reach an early agreement with Hawker that would forestall the possibility of the manufacturer moving additional jobs out of Wichita.

“In addition to the proposed incentive package from the State of Kansas, we presented the union with our best offer and are disappointed with the outcome of the vote,” said chairman and CEO Bill Boisture.

Kansas governor Mark Parkinson had offered, and Hawker had accepted, an incentive package for product development, workforce training and tuition reimbursement for Hawker and its employees in Wichita. The agreement was contingent on the successful conclusion of a new, long-term labor agreement between Hawker and the union.

The incentive is still available if the two parties reach a new long-term agreement, according to the governor’s press secretary.

Hawker held out little hope for such an agreement. Boisture has said, “There are no plans to go back to the negotiating table with the union. The company will continue exploring all options…to remain profitable and competitive in this smaller market.”