Textron job cuts ‘not so surprising’: Brian Foley
The decision by Textron Inc., parent of Textron Aviation, to cut 1,950 jobs, as part of restructuring due to Covid-19, is no surprise, Brian Foley, founder, Brian Foley Associates (BRiFO), told Corporate Jet Investor.
In a filing with the U.S. Securities and Exchange Commission on Thursday ( June 18th) Textron Inc. said that it will reduce its operating expenses by between $110m and $130m through “headcount reductions, facility consolidations and other actions in response to the economic challenges and uncertainty resulting from the Covid-19 pandemic”.
According to Foley the announcement is no shock given numerous other layoffs by business aviation players: “On the heels of Bombardier’s recent 2500 layoffs and Gulfstream’s 699 last month on top of 446 last October,” said Foley. “Cessna’s ‘rolling furloughs’ enacted this spring by Textron Aviation were just a harbinger of things to come. Other non-North American manufacturers have been quietly laying off in a more stealthy manner. The publicly-traded companies were among the first to jettison to both appease investors and boost executive stock performance-based compensation.”
The cuts at Textron represent 6% of the firm’s total workforce. Currently, it is not clear how many of the job cuts will be at Textron Aviation, the parent of Cessna and Beechcraft, which together employs more than 12,000 workers.
The filing stated: “In the Textron Aviation segment, with lower volumes expected in the near term, we will initiate indirect and direct workforce reductions as we align our cost structure and production levels with demand.”
The reality of lower production volumes – up to 30% – is another reason why Foley said the job cuts come as no surprise. “These cuts are not all that surprising as manufacturers faced a complete closing of their production lines and anticipate 2020 business jet deliveries to decline 25%-30% due to this pause. Everyone’s in a scramble to sell any remaining 2020 delivery positions to avoid being stuck with unsold, high carrying cost whitetails at year-end.”
In April, Textron Aviation said its first-quarter profit tumbled 97% year-on-year to $3m due, in part, to an idle factory floor and minimal aircraft sales amid the global coronavirus lockdown.
Rolland Vincent, President, Rolland Vincent Associates, like Foley, told Corporate Jet Investor that the Textron cuts have come as no surprise having been one of the first firms to furlough this year and seeing their order backlogs eroded from deferrals by NetJets and other ‘less commercial’ customers.
Vincent said: “This is and has always been a highly cyclical business; other OEMs are almost certain to have to follow, especially if end-user demand does not rebound in Q3 / Q4 this year. Overall, their order backlogs have only represented a few months of production, so they have limited degrees of freedom at times when end-user demand softens, as it has now, of course.”
Vincent added: “I imagine that many of the affected employees are production-related; Textron Aviation is the volume player in the market, focused on turboprops, light and medium jets. They have the largest in-service fleet by far, so we expect few impacts on employment in their customer service network. They have already trimmed back their engineering team after certifying the Citation Longitude; they have 2 in-development turboprop aircraft (SkyCourier and Denali) that they are working on, so in general we would expect any cutbacks to occur in their production areas in Wichita, KS.”