Brutal Conditions Continue to Victimize Industry
It's becoming a familiar story as the pandemic's lingering effects create conditions that adversely affect economics at major aviation entities like Textron... which is admitting that more layoffs are on the way.
According to a mandated public/legal filing with the Securities and Exchange Commission, Textron is preparing to take as many as 1,950 jobs off the roster -- totalling another 6% of the workforce. This affects several divisions within the Textron organization.
"In June 18, 2020, the Board of Directors of Textron Inc. approved a restructuring plan to reduce the Company’s operating expenses through head count reductions, facility consolidations and other actions in response to the economic challenges and uncertainty resulting from the COVID-19 pandemic. The restructuring plan primarily impacts the TRU Simulation + Training business (TRU) within the Textron Systems segment, and the Textron Aviation and Industrial segments.
At TRU, there has been a substantial decline in demand and order cancellations for flight simulators in light of the expected long-term impact of the pandemic on the commercial air transportation business. Accordingly, TRU will cease manufacturing at its Montreal, Canada facility, resulting in the production suspension of its commercial air transport simulators. As a result, we will incur charges for severance, contract terminations, facility closures, asset impairments and an inventory valuation write-down, considering the current market conditions. TRU will continue to service and support its installed base of commercial air transport simulators and to manufacture flight simulators for other fixed wing aircraft and rotorcraft at its Tampa, Florida facility.
In the Textron Aviation segment, with lower volumes expected in the near term, we will initiate indirect and direct workforce reductions as we align our cost structure and production levels with demand. In the Industrial segment, the impact of the pandemic on global air travel has significantly reduced demand for the airport ground support equipment produced by the Textron Specialized Vehicles (TSV) business. Due to the overall negative impact of the pandemic on this business, we will take further actions to streamline operations across TSV, consisting primarily of head count reductions and facility rationalizations, to reduce its overall cost structure."
The SEC Filing also states that, "In the second quarter of 2020, we expect to incur pre-tax special charges related to this restructuring plan in the range of $110 million to $130 million. Severance and related costs for this plan are estimated to be in the range of $60 million to $70 million. Asset impairment charges, which are largely related to facility closures, are estimated to be in the range of $30 million to $35 million, and contract termination and other facility closure charges are estimated to be in the range of $20 million to $25 million. The restructuring plan will result in the elimination of up to 1,950 positions, representing 6% of our workforce. Additionally, we will record a non-cash inventory valuation charge in the range of $50 million to $60 million. Cash outflows will occur in 2020 and are estimated to be in the range of
$80 million to $95 million. We anticipate that this plan will be substantially completed by the end of 2020."
The apportionment of the cuts has yet to be fully determined, while Wichita, which has 9000 Textron employees readies for more bad news.
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