OEM layoffs continue as the recession deepens

Aviation International News » May 2009
All of the major manufacturers have announced plans to scale back production ...
All of the major manufacturers have announced plans to scale back production in 2009 to remain in line with demand. Many are implementing some alternative to layoffs to keep skilled employees on staff.
April 29, 2009, 7:21 AM

Among the major business aviation industry employers–aircraft manufacturers and primary vendors–total job losses due to furloughs, layoffs and attrition are now approaching 20,000, and it appears that number will grow as credit remains bogged down and the recession grinds on. All OEMs are finding that some customers are facing last-minute financing shortages right before the delivery of their business jet, putting further pressure on manufacturers’ production and delivery schedules.

The most recent round of layoffs came from Bombardier, Cessna and Gulfstream.

Bombardier said last month that it would deliver about 175 business jets this fiscal year, 25 percent fewer than the 225 it delivered last year. The result, it added, will be a further round of layoffs over the next nine months of about 3,000 employees at facilities in Canada, the U.S., Mexico and Northern Ireland. Bombardier had earlier (in February) announced layoffs of 1,360 workers.

At Cessna, chairman, CEO and president Jack Pelton sent an e-mail to employees announcing a downward revision of production schedules for 2009 and 2010 that will result in 2,000 more job cuts. Since November, the company has handed out pink slips to 4,600 workers.

Cessna also recently announced a halt to work on a 1.5-million-sq-ft facility being built in Wichita to meet what had been growing demand for aircraft production.
At the same time, the company said in March that it is accepting construction bids for a 600,000-sq-ft building for final assembly of its new Citation Columbus. Also included in the project is a 45,000-sq-ft facility in support of the Columbus project. The total cost of the investment is estimated at about $200 million.

Pelton also announced a company-wide two-week shutdown in July, rather than the usual one-week summer break.

In announcing production cutbacks in mid-March, Dassault Falcon CEO John Rosanvallon noted that the first quarter of this year was the second consecutive quarter in which the company posted negative net results, “meaning that [order] cancellations exceed new orders.” In the first three months Dassault logged a negative number of net orders–minus 27–due to numerous cancellations. The manufacturer delivered 11 Falcons during the period, compared with 15 in the same time frame last year. As a result, it is slowing the production rate. And with that, he added that more “adjustments” are expected in the form of cost cutting and layoffs.

Rosanvallon added that the French OEM is studying adjustments at its Little Rock completion center and at its U.S. headquarters in Teterboro, N.J. “There might be some adjustments, but they will not be as severe as we’ve seen at other OEMs.” The company has already implemented a hiring freeze for production employees and encouraged employees to take their vacations in an “accelerated” manner.

Gulfstream plans a company-wide layoff of 600 full-time employees and 600 contractors. The OEM has also announced the furlough of 1,500 workers involved in initial-phase manufacturing at its Savannah, Ga. facility, and there will be a four-week furlough of final-phase manufacturing workers affecting some 700 people in Savannah.

Gulfstream has further unveiled a reduction in weekly work hours from 40 to 32 in some departments within its service centers across the U.S., “depending on traffic flow through these centers and the work to be done.”

Layoffs Trickle Down
Layoffs have hit many of the direct suppliers to business aviation manufacturers, too. Pratt & Whitney Canada is planning to lay off 1,000 workers, about 10 percent of its total workforce.

Honeywell Aerospace “has taken no material census action related to current economic conditions.” However, said a spokesman, in the last several months the company has taken a series of steps to control its business costs and preserve jobs, including:
• a freeze on external hiring;
• reduction of overtime;
• release of subcontractors;
• reduction in sales, general and administrative expenses;
• a freeze in 2009 on merit increases for leadership;
• restricted travel;
• reduction in capital expenditures;
• re-allocation of employees to different locations or projects on interim assignments;
• implementation of reduced work weeks at some sites;
• and implementation of a set amount of unpaid time off among certain groups at sites where volumes are low.

No less telling is Duncan Aviation’s March decision to lay off 304 at its Lincoln, Neb., and Kalamazoo, Mich. plants, along with other satellite locations.
Duncan chairman Todd Duncan noted that market projections indicate activities will be significantly down for most, if not all, of this year.

According to industry consultant and analyst Brian Foley, founder of Brian Foley Associates of Sparta, N.J., “Only a handful of industry companies have made public their layoffs, and the truth is there is some big-time attrition going on.” He estimates that the industry workforce could be reduced by as much as 20 percent by the time the recession bottoms out.

Meanwhile, the layoffs are sending shivers of apprehension through an industry that recalls the last two economic downturns, when many of those laid off never returned once the economy improved and demand began to escalate. Even with analysts forecasting “a long, slow recovery,” the ramp-up will likely require more skilled employees than are available.

Recalling the scramble to replace skilled labor after the last economic crisis, some OEMs have made efforts to avoid that when the recovery begins. For example, Gulfstream’s furlough policy is “a way of saving jobs and achieving a reduction in production rates without laying people off for good,” according to a spokesman. During the furloughs, all benefits continue and those affected cannot be laid off or be subjected to a reduction in force while in furlough status. Eligible furloughed employees can also apply for unemployment benefits.

To avoid the layoff of experienced, skilled workers, employers are choosing a variety of alternatives, such as voluntary salary cuts and early-retirement buyouts. The goal is to retain at least that core of experience that will be so critical when the next ramp-up begins.

Thierry Dubois contributed to this report.

FILED UNDER: 
Share this...

Please Register

In order to leave comments you will now need to be a registered user. This change in policy is to protect our site from an increased number of spam comments. Additionally, in the near future you will be able to better manage your AIN subscriptions via this registration system. If you already have an account, click here to log in. Otherwise, click here to register.

 
X