1600 Workers, Columbus Development, Bend (OR) Plant -- All
Suffer Economy's Wrath
ANN is monitoring
reports of more aggressive cost-cutting at GA giant, Cessna
Aircraft. What we know so far is this... about 1600 jobs are being
eliminated, the Citation Columbus program is being suspended with
applicable deposits returned, and the former Columbia plant in
Bend OR is being closed.
Jet deliveries are expected to be 20 per cent less than
originally forecast and that will affect cash flow drastically...
hence the cost-cutting-- and it is unlikely that we have seen the
last of the jet order cancellations that are rocking this company.
It is also unlikely that we have seen the last of such
workforce reduction measures, as curtailing the Columbus
development program (among other issues) is reported to pose as
many as 700 more losses by the summer. In the meantime, though, a
number of Citation programs and the SkyCatcher LSA program
survive... for now.
Among the not-so-pretty stats from Textron's analysis of the
most recent quarter:
- Cessna’s revenues decreased $477 million in the first
quarter from the same period last year. This decrease primarily
reflects the delivery of 69 business jets compared to 95 during the
same quarter last year, partially offset by higher pricing.
- Segment profit decreased $117 million primarily due to the
lower volume and higher inventory write-downs for used aircraft.
These items were partially offset by a $50 million pre-tax gain on
the sale of a customer maintenance tracking service and pricing in
excess of inflation.
- Cessna backlog at the end of the first quarter was $13.0
billion, down $1.5 billion from the end of 2008, reflecting 92 net
cancellations during the quarter.
A memo from CEO Jack Pelton pretty much sums up the
decision-making process, and is reproduced below:
Late yesterday, Textron released its financial results for the
first quarter of the year. They reiterated, as we told you at the
end of March, a continued decline in global demand for our
aircraft, which in turn requires us to reduce our production rates
for this year and next. That also means a reduction in revenue that
will require us to be very strategic in our investments to ensure
the long-term success of Cessna.
Our primary near-term objective is to focus on our strengths and
protect our core products in the light and mid-size business jet
market segments, our leadership position in the single-engine
piston and turboprop product segment, and our world-class customer
support. This strategy brings with it more hard decisions, but
necessary in this trying economy.
To ensure our focus is
on our strong products in existing markets, we are suspending our
development of the Citation Columbus. This was a very difficult
decision, but critical to sizing our business to the realities of
today's market. We looked at every possible scenario before coming
to this decision. We still feel this is a program with great
potential and one we will pursue when the market recovers.
Today, it is critically important to support the markets
we compete in by strengthening our existing product line and
support services. Our strategic investments will be in these areas.
To that end, we will continue programs such as the Citation CJ4 and
the 162 SkyCatcher. We also will continue to work on research and
development of numerous yet-to-be-announced new products, all of
this while exploring new ways to strengthen our customer support
The reduced production rates, regrettably, require another
reduction in the work force as I told you in my last memo a few
weeks ago. We began today issuing layoff notices to approximately
1,600 Cessnans at every level of the company. As we have done in
the past, these colleagues will remain on the payroll 60 days. As
we re-evaluate our requirements in the coming weeks following the
changes in our product development plans, we will issue additional
layoff notices within the salaried work force - up to 700 - by
mid-June. This sizes our work force for our currently planned
production in 2010.
Quickly reducing the number of aircraft we produce is somewhat
more involved than simply slowing our operations. It will require
us to extend the planned companywide employee furlough to four
weeks, running June 22 through July 19. This companywide furlough
will coincide with various assembly line furloughs already
instituted to match production to demand. This action is required
to remove the aircraft and the associated costs from this year's
We will still have the people on duty we need to support
customer deliveries, customer service and a few programs and
operations that must continue uninterrupted. The rest of us are
expected to take part in this furlough unless notified by your
supervisor. Additional information regarding the furloughs will be
A key part of our activity is cost reduction and that will
include consolidation of facilities. We continue to look at a
number of options, but some decisions have already been made. While
very painful to share, we will be closing the facility in Bend
(pictured below-Ed.) and moving that assembly line to Independence.
This is not a result of any dissatisfaction with the Bend
operation, but is driven by the need to consolidate facilities for
I will be meeting today with the Cessna Leadership Team to share
details of the state of the market and the economy and of our plans
to weather the downturn. They will, in turn, be cascading this
information throughout the company in smaller meetings to continue
to promote open dialogue through this difficult period.
There doesn't seem to be a lot of good news for Cessna right
now, but times will change. That does little to lessen the pain and
disappointment brought on by what we're all going through. For
those employees who will be leaving Cessna, I want to thank you for
your dedication and hard work. For those who will remain, we need
to work together to ensure we continue the highest level of service
to our customers, survive this economic recession, and prepare for
the days when we begin to grow again.