Cessna Aircraft will cut about 500 jobs in Wichita, company officials said Wednesday. Laid-off workers will be given 60-day notices in the next few weeks, according to an e-mail to employees from Jim Walters, Cessna´s senior vice president for human resources.
"These actions are regrettable but necessary to ensure our long-term stability and success," Walters said.
The announcement comes just six months after state, city and county officials approved an incentives package worth tens of millions of dollars so Cessna would build its Citation Columbus plant in Wichita.
Company spokesman Doug Oliver said the plant, which had its groundbreaking last month, is an important part of Cessna´s future.
When the plant begins production in 2014, he said, there will be 1,000 people working there, as promised.
"This is short term, right here, right now," he said of the layoffs.
"You have to have an eye on the future and continue to invest in new products. We just have some near-term challenges to get through."
In addition to the layoffs in Wichita, where Cessna employs 12,000 people, the company also will lay off 165 employees at its Bend, Ore., plant. The cuts will come through involuntary and voluntary layoffs.
Contract labor could also be cut.
"It would not be unusual to see a number of contract employees have their contracts not renewed," Oliver said.
The reductions come as Cessna -- the city´s largest private employer -- adjusts its production schedules for the coming year amid a softening global economy. Company officials warned employees last week of a work force reduction.
"We have now finalized the production schedule for 2009 and supporting annual operating plans," Walters said in the e-mail.
Cessna is the second general aviation company in Wichita to announce layoffs this month. Hawker Beechcraft cut 5 percent of its work force on Friday -- about 490 people-- as it lowered production targets for 2009, a result of the credit crunch and a turbulent economy.
In April, the Kansas Legislature rushed through a bill in the final week of the session that gave Cessna up to $ 33 million to build the new Citation Columbus plant in Wichita.
The city of Wichita and Sedgwick County together gave Cessna $ 10 million more.
Several area legislators said Wednesday there was no conflict between this week´s job cuts and the subsidies.
"In all honesty, my first thought was, ´Wow, we just approved a ton of money for this company and now they are going to lay off,´ " said Rep. Jason Watkins, R-Wichita.
But he said he quickly reached the conclusion that Cessna was reacting to short-term conditions, while funding the Columbus plant will create jobs in the long term.
Cessna would have built that plant somewhere, Watkins said, and he wanted it to be here.
Oliver said the company was caught by the speed of the recent economic downturn and wasn´t acting in bad faith when it sought the money last spring.
"This has come on a lot faster and been lot more global than anybody could imagine," he said.
"In order to be mad, you would have to think that Cessna knew the economy was going to tank."
Oliver said the aircraft industry relies heavily on new products every few years to drive demand. Without new designs, he said, Cessna would begin to lose sales and market share.
During the 2001-03 downturn, Cessna laid off 3,000 workers, but it continued to spend money on new products.
During that time, Cessna developed the Citation Mustang, XLS and CJ3. Today, Oliver said, those models account for 60 percent of the company´s $ 15 billion backlog.
Cessna had planned to deliver a record 535 business jets in 2009, up from this year´s shipments of about 475 planes.
The company had been staffing for that level of production, officials said.
Now some customers scheduled to take shipment of aircraft in 2009 want to defer delivery. In some cases, the planes are partially completed.
So Cessna has scaled back its delivery schedule to slightly more than 475 for next year, the company said.
"We have to match the work force to the production levels," Oliver said.
Slowing deliveries will allow Cessna to avoid the $ 100 million in costs it would take to increase production to higher levels next year, Textron chief financial officer Ted French told analysts last week. Textron is Cessna´s parent company.
´People are worried´
Anthony Parker, a sheet metal worker, has been at Cessna for 2,5 years.
"The economy is bad, things are not good," Parker said.
"Yes, I am worried. Oh man, it´s all we talk about.... You can´t work when people are worried. It´s sad."
If there is any good news from Wednesday´s announcement, Parker said, it´s that company officials have indicated they will give 60-day notices, which would allow workers to stay employed until early next year.
"I think everybody is just trying to get through the holidays," he said.
Terry Weeks, a 10-year Cessna veteran, has been laid off before. He said he has come to expect that during his aviation career.
"All you can do is wait it out and keep working like you normally do," he said.