Cessna Cuts Jobs
Manufacturing free cash flow from continuing operations this year will fall to about $400 million, from a previous target of as much as $550 million, because of lower jet deliveries, the Providence, Rhode Island-based company said today in a statement. Profit, excluding some costs, will still be 55 cents to 65 cents a share this year, Textron said.
Demand for business jets failed to pick up even as the recession's effects eased. Results at the jet unit will bottom out this year as corporate earnings begin to rebound, Chief Executive Officer Scott Donnelly predicted in May. Cessna, which has cut half its workforce since 2008 to about 8,400, declined today to detail the reduced production levels.
"Meaningful recovery in bizjet production may not happen until 2012," Robert Stallard, an analyst with RBC Capital Markets in New York who rates the shares "outperform," wrote today in an investor note. "We think it is better to take action now versus oversupplying the market in the long run."
Textron gained 25 cents to $20.44 at 11:16 a.m. in New York Stock Exchange composite trading. The shares gained 7.3 percent this year before today.
Cessna's largest facility is in Wichita, Kansas, where it employs about 6,500 to build and maintain business jets and Caravan turboprop aircraft, followed by plants in Independence, Kansas, and Columbus, Georgia. The cuts will take place in multiple locations and will include both management and workers, Karen Gordon Quintal, a spokeswoman, said in an e-mail.
"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," Donnelly said in the statement. "Therefore, we are taking further production and restructuring actions at Cessna."
The job-cut announcement comes three days after assembly workers and mechanics in Wichita rejected a contract that would reduce health-care costs for the company and increase expenses for employees. The seven-year deal was ratified by default, because there weren't enough votes for a strike.
In July, Cessna told investors that it reduced the 2010 delivery forecast for its Mustang aircraft, one model of its business jets, to about 70 units from an earlier projection of 105 planes. During the call, the company didn't update its previous delivery forecast of 120 light-to-midsize jets.