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Cessna boss Pelton: 700 layoffs are result of a stalled recovery

Cessna Aircraft told employees today that the company is cutting 700 jobs as weakness in new aircraft orders continues.

All of the layoffs will be in Wichita.

Cessna CEO Jack Pelton notified employees in a letter. Cessna also has had to adjust its production schedule downward.

"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," Pelton said in the letter. "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."

Cessna must continue to lower its cost structure to remain competitive, Pelton said.

The news comes three days after Machinists union members at Cessna rejected the company's offer of a contract but voted not to strike. Without the strike vote, the contract was accepted by default.

Layoffs will come from hourly and salaried employees, said Cessna spokesman Bob Stangarone.

There are no details when 60-day layoff notices will be distributed, he said.

The company has 8,600 employees, including 6,200 in Wichita.

That figure is down about half from November 2008 when the company employed 16,000, including 12,000 in Wichita.

Since, late 2008, Wichita's aviation industry has lost more than 12,000 jobs.

Robert Stallard, an analyst with RBC Capital Markets, said because of the recent build-up of white tails at Cessna, or planes without customers, some adjustments should be expected.

"We think it is better to take action now versus oversupplying the market in the long run," Stallard said in a report today. "Aggressive cost actions and productivity improvement at the trough should help boost margins when volumes return."

Stallard thinks that business jet production may not make a meaningful recovery until 2012.

Cessna's parent company, Textron, issued a statement saying it's seeing solid performance in most of its other businesses, but it has not yet seen a discernible improvement in business jet order activity.

"Therefore, we are taking further production and restructuring actions at Cessna," Textron chairman and CEO Scott Donnelly said in a statement.

Cessna CEO Jack Pelton's letter to employees

"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. 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."

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