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By Bill Goldston |
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September 22, 2010 - Textron Inc. reported that it is adjusting aircraft production schedules and reducing headcount at its Cessna business unit due to continued weakness in new aircraft orders. Textron is the parent company of Bell Helicopter, Cessna Aircraft Company, Jacobsen, Kautex, Lycoming, E-Z-GO, Greenlee, and Textron Systems. Cessna is to cut 700 employees which will affect 11 percent of its workforce and it will include hourly and salary employees at its Wichita plants. "While we are seeing solid performance in most of
our other businesses, we have not yet seen a discernable improvement in
business jet order activity," said Textron chairman and chief executive
officer Scott C. Donnelly, "Therefore, we are taking further production
and restructuring actions at Cessna." On Tuesday Cessna CEO Jack Pelton sent out letters to employees stating "Dear Cessnans, the gains made in the first half of the year in the global economy have stalled, and Cessna?s performance continues to mirror the lackluster economy. While cancellations have slowed, the recovery and growth we expected to see throughout the year have not materialized, and the timing of any recovery remains uncertain." |
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"This requires
additional adjustment to our production schedules, and more than ever,
cost is critical to our competitive position. We must continue to lower
our cost structure to remain competitive. These continuing challenges
have forced us to make the difficult decision to announce an additional
work force reduction of 700 employees. This was not an easy decision and
not easy news to bring to Cessnans. I know you have questions and
concerns regarding these reductions, and we will work diligently to
ensure we communicate the full impact to employees as soon as possible.
"Our strategy is
to defend and protect our current markets while investing in products
and services to secure our future, but we can do this only if we succeed
in restructuring our processes and reducing our costs. This is not the
responsibility only of one organization or department; it means every
Cessnan must keep a watchful eye on costs, focus on continuous
improvement and quickly and decisively eliminate processes that do not
add value. "It is not easy to bring news to you of further reductions, but our ability to compete now and in the future leaves us little choice. I know these are hard times, but we will get through if we work as one team, each of us playing an important role." |
Textron
Inc. reports that it still expects 2010 earnings per share from
continuing operations excluding special charges to be in the range of
$0.55 to $0.65. Manufacturing free cash flow from continuing operations
for the year is now expected to be approximately $400 million, compared
to a previous target of $500 - $550 million, reflecting lower expected
jet deliveries.
Higher finance
receivable liquidations at Textron Financial should more than offset the
lower expected cash from manufacturing operations, as the company now
expects to reduce receivables by $2.4 billion this year, up from its
previous target of $2.0 billion and its original target of $1.6 billion.
During the third quarter, the company repaid the $665 million balance
remaining on the Textron Inc. $1.25 billion bank line. The company
continues to be on track to reduce net debt below $5.5 billion by the
end of the year. Textron plans to issue third quarter financial results
on Wednesday, October 20, 2010.
In 1992, Textron
Inc. bought Cessna and, after passage of the
General
Aviation Revitalization Act of 1994, resumed production of the
piston-engine 172, 182, and 206 designs.
In 2007, Cessna
had been involved in a public controversy regarding the contracting of
production of the Cessna 162 SkyCatcher to the Shenyang Aircraft
Corporation of the People's Republic of
Cessna received a
high degree of negative feedback from 162 customers and potential
customers regarding this decision. Complaints centered around the recent
problems with Chinese production of other consumer products, China's
human rights record, exporting of jobs, and China's less than friendly
political relationship with the USA.
The backlash
surprised Cessna and resulted in a company public relations campaign to
try to explain the decision from a business perspective and assured
customers that quality of the aircraft would not be compromised. The
reaction to the explanations and assurances has been overwhelmingly
negative, although a small number of customers have applauded the
production in
In 2008, Cessna
announced that a total of 665 jobs would be cut at its
In January 2009,
the company announced 2,000 additional layoffs, bringing the total to
4,600. The job cuts included 120 at the In
April 2009, the
company announced that it was suspending the Citation Columbus program
and closing the
In early June
2009, Cessna announced that it would layoff an additional 700 salaried
employees, bringing the total number of layoffs to 7600 or more than
half the employees.
In December 2009,
the company announced that it will close its three
Cessna's parent
company Textron posted a loss of $8M USD in the first quarter of 2010,
largely driven by continuing low sales at Cessna, which were down 44%.
Cessna's workforce remains 50% laid-off and CEO Jack Pelton stated that
he expects the recovery to be long and slow. |
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