Outsourcing Also An Option

Cessna Aircraft is making preparations to both lower production and cut 1,200 jobs. But those aren't the only options being considered in Wichita (KS). The airplane maker also looking at whether to reduce some employee benefits. The Textron subsidiary is reviewing whether to outsource "some activities," Textron chief financial officer Ted French told the Wall Street Journal in Friday's edition. "Cessna has made some progress there, but there's more to be done."

Reduced Earnings Estimate

The conference call between executives of Textron Inc., Cessna's parent, and Wall Street analysts came after Textron reduced its earnings estimate.

On Thursday, Textron lowered its earnings outlook for this year as it faces economic uncertainty and the cancellation ofa significant number of business-jet orders. Cessna will also stop production for seven weeks in June and July and furlough roughly 6,000 workers. The company is acting to offset the effect on earnings, said Lewis Campbell, Textron chairman, president and chief executive.

Full-year earnings per share now are expected to be between $2.40 and $2.60, compared with an earlier estimate of $3.05. Cessna plans to deliver between 180 and 195 jets this year, instead of an earlier expectation of 220.

Nothing Firm Yet

No decisions have been made about any reduction in benefits at Cessna, officials said.The company is in an "analysis phase," said Textron spokeswoman Susan Bishop. "As these get decided on, certainly they will be communicated to employees."

Cessna has cut some of the costs associated with the way benefits are delivered to employees, said Cessna spokeswoman Marilyn Richwine. For example, workers can go online to view information on their pension plans. At the first of the year, Cessna changed the health care plans of nonunion represented employees. Richwine said she did not know of any future benefit changes.

What Will The Union Do?

Without a vote by Machinists union members, no changes can be made to benefits in the labor agreement. That agreement expires in September 2004. Richwine also said that Cessna is looking at outsourcing activities not related to building airframes.

When it comes to parts production and building airframes "we're, at this point at least, not going down that path as a definite direction," Richwine said. "We're still looking at what's the best thing for our customers, (and) how we can build the best possible product for the best cost and quality that we possibly can."

However, one of Textron's initiatives is to do more global outsourcing, Bishop said. That may mean a change in some suppliers, she said.

FMI: www.cessna.com