AIN Staff

As Providence, R.I.-based Textron labors to reduce its debt and the size of Textron Financial (its unprofitable financial arm) it is looking to its other businesses– Cessna Aircraft, Bell Helicopter, Textron Systems, and those in its industrial group–to bring the parent corporation back on the road to profitability. Layoffs across the entire corporation have affected some 10,000 people (23 percent of total employees) with 275 laid off at the corporate level (40 percent of them). The corporation’s estimate for total revenue for this year is $10.6 billion. 
Last year its total revenue was $14.24 billion and in 2007 it was $12.615 billion. Textron Financial constitutes 4 percent of Textron’s current business, while Cessna provides 31 percent, Bell 27 percent, Textron Systems 19 percent and its industrial group the other 19 percent. The industrial segment includes E-Z-Go (golf carts), Jacobsen (lawn mowers for golf courses), Greenlee (tools for the woodworking and electrical industries) and Kautex (plastic gas tanks and other products for automobiles). Of these, only Cessna is exhibiting at NBAA. However, the Wichita builder of light and business airplanes decided this year, as a cost-cutting measure, to forgo its typically large booth in the exhibit hall and concentrate its efforts at the static display of aircraft at Orlando Executive Airport.
Cessna, in particular, has been under the gun to reduce costs as demand for new business jets dropped dramatically from its peak last year, the used-jet inventory jumped from 1,600 to 3,100 units from mid-2007 to mid-2009 (with the opposite effect on prices) and corporate, fractional and charter operators saw decreases in flight time of 30 to 40 percent. Cessna itself had to accept Textron’s cancellation in April of the development of the Columbus (designed to be Cessna’s entry into the large-cabin business jet market), a 50-percent reduction in staffing, seven weeks of a total company furlough this summer (in addition to longer individual product-line furloughs), the shutting down of its Bend, Ore. facility (obtained with Cessna’s $26.4 million acquisition of the bankrupt Columbia Aircraft in December 2007), the transfer of production of the Corvalis piston-single airplanes (formerly the Columbia 350 and 400) to Cessna’s facilities in Independence, Kan., and Chihuahua, Mexico, and the consolidation of 10 assorted facilities into the remainder of the company’s buildings. Through the second quarter of this year, Cessna had delivered 321 airplanes at a value of $1.233 billion; last year over the same time period, it had delivered 578 airplanes at a value of $2.156 billion (see table at right). The company expects to deliver a total of about 275 business jets this year, compared with 466 last year.
In a business update last month, Textron said that “recent data indicate early signs of economic stabilization” and the long-term outlook for business jet deliveries is strong. The parent corporation expects Cessna’s revenue this year will be about $3.3 billion and estimates that its compounded annual growth rate (CAGR) will be 6 to 9 percent from this year through 2013. (CAGR is the rate at which revenue will grow over a period of years, taking into account the effect of annual compounding.) Textron expects the recovery of corporate profits, the global market for business aviation and the introduction of new products will bolster Cessna’s position in the years ahead.
Even the Columbus may get another chance, according to CEO-elect Scott Donnelly (see box below right), who in an interview with Bloomberg News on September 25 said Textron may reconsider developing the Columbus. In a nutshell, Textron believes that Cessna’s “long-term growth drivers remain strong.”
Meanwhile, Bell Helicopter’s position appears somewhat stronger than Cessna’s. Bell obtains 26 percent of its revenue from its civil helicopters, 36 percent from its military aircraft and 38 percent from customer support. Its current order backlog is about $5.9 billion. The parent corporation expects Bell to earn revenues of about $2.9 billion this year and achieve a CAGR of 9 to 11 percent from 2009 to 2013. Bell laid off about 100 employees who were working on the now-terminated VH-71 presidential helicopter program.
While Textron sees demand for civil helicopters softening in the near term, it believes the current down cycle will be mitigated for Bell by the many different missions performed by helicopters and the various industries they serve. Bell’s strategies are to capitalize on its large fleet and the loyalty of its customers, focus on high-value customers and missions (such as energy and air medical) and obtain a greater share of support revenue. It also plans to continue improvements to and modernization of its aircraft, via its modular affordable product line (MAPL), with the Bell 429 model as the first MAPL step.
On the military side, Bell benefits from continued “strong and stable” U.S. government expenditures on rotorcraft. The hostilities in Iraq and Afghanistan are resulting in high aircraft usage and an increase in demand for parts and services. Because the future of some new military helicopter programs is uncertain, opportunities are created for service-life-extension programs for aircraft already in service. The Bell H-1 upgrade program and V-22 tiltrotor have the most promise for the company, according to Textron.
Also boosted by increasing military expenditures are several products within Textron Systems ($2 billion backlog), including AAI (Training &amp; Test Systems, Unmanned Systems), Marine Craft, Intelligent Battlefield Systems, Air-Launched Weapons, Tactical Information Solutions and Combat Vehicles. Estimated 2009 revenue for Textron Systems is $2 billion. Textron expects these companies to reach a CAGR of 8 to 11 percent from 2009 to 2013. Key programs are the Shadow unmanned aircraft system and armored combat vehicles.
Finally, Textron said its strategy for its industrial products companies is to implement “significant cost reductions to leverage position for future growth.” The three main industries served by these companies–golf, automobile and nonresidential construction– are all weak now, but have potential in the long term. Textron expects this group to achieve revenue of about $2 billion this year, and estimates its CAGR will be 9 to 11 percent from this year through 2013.&nbsp;

Textron banks on manufacturing to lead its return to profitability

As Providence, R.I.-based Textron labors to reduce its debt and the size of Textron Financial (its unprofitable financial arm) it is looking to its other b

2024 Corporate Aviation Leadership Summit

NBAA Convention News 2009

AIN Products

SUBSCRIPTIONS

RESOURCES

ABOUT AIN