Cessna not halting jet production, just reducing level of output, CEO says

04/25/2013 6:40 PM

08/08/2014 10:16 AM

Cessna Aircraft CEO Scott Ernest reassured 400 Citation owners at a conference this week that, despite speculation, the company is not halting production on its jet products.

“Let me be clear,” Ernest said in a statement reiterating his remarks, “we are not halting production; we are simply reducing our production levels to meet current demand.”

Last week, Scott Donnelly, CEO of Textron, Cessna’s parent company, told analysts that Cessna is cutting production this year because of weak demand in its light jet products despite traditional leading economic indicators, such as corporate profits, looking better.

In a conference call with analysts, Donnelly said the company planned to “shut down various portions of the production line.”

The news came as Textron reported first-quarter results. In the quarter, Cessna turned in a disappointing $8 million loss.

Cessna now expects to deliver fewer jets this year than it did in 2012.

The challenge in reducing production schedules, Donnelly told analysts, is that material is already in-house.

“Clearly, one of the things that we’ll do as we go through the production change is we’ll build things out to logical points in their build cycle so those aircraft are sort of in an appropriate stage of work-in-progress before we shut down various portions of the production line,” Donnelly told analysts. “That just means we’re going to have inventory, clearly, that’s going to roll over to the end of year as opposed to going out in sold aircraft.”

The company expressed hopes that demand will recover as last year’s election and fiscal uncertainties move further into the background, Donnelly said. It also thought that the recent strength in the equity markets would have improved business confidence and thus business jet demand.

Customer inquiries and sales conversations were reasonably active during the first three months of the year.

But customers, especially those in the light jet segment, tend to be “small owners” that are deferring buying decisions reflecting continued concerns about the fiscal outlook.

Despite the sluggish market, “we’re still out there selling hard,” Donnelly said. “We’re going to do everything we can to sell aircraft.”

Cessna has not been building a backlog of orders.

Instead, “you take an order for an aircraft and you deliver the aircraft,” Donnelly said.

Cessna remains committed to Citation jet products, especially in the light jet segment, Ernest said in the statement.

“Citations lead the light jet segment, and Cessna is fully committed to our current products in that category,” Ernest said. “From the Citation Mustang up through the CJ4 and beyond, customers who turn to Cessna for aircraft solutions will continue to find a trusted partner who is focused on delivering reliable performance day in and day out.”

The company announced voluntary buyouts of salaried positions earlier this month to reduce costs.

It told employees last week that details about production cuts and workforce adjustments would be forthcoming.

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