Cessna Aircraft told employees Tuesday that the company will cut 700 jobs — 11 percent of its work force — as weakness in new aircraft orders continues.
The layoffs will come from the company's hourly and salaried workers, said Cessna spokesman Bob Stangarone. All of the job losses will be in Wichita.
There are no details on when 60-day notices will be issued, he said.
The news came three days after Machinists union members at Cessna voted down a strike and accepted Cessna's seven-year labor contract by default.
The layoffs were expected, said Marty Reicher, a sheet metal mechanic at Cessna for 13 years. There had been rumors on the plant floor for several weeks. But Reicher said he still couldn't believe the announcement was made so soon after the contract vote.
"We were feeling bad enough about accepting that contract," he said. "Now they're just kicking us while we're down."
The contract vote had nothing to do with the announcement, Stangarone said.
"We face enormous cost pressures from the market in what a customer is willing to pay for an aircraft, and from the competition where some (manufacturers) have significant labor cost advantage," Stangarone said.
"To get our company in line with economic reality, we are doing a number of things to reduce our costs across the board."
CEO Jack Pelton notified employees in a letter about the cuts and the need to adjust Cessna's 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 employs 8,600 workers, including 6,200 in Wichita. That figure is down about half from November 2008 when Cessna employed 16,000, including 12,000 in Wichita.
Since late 2008, Wichita's aviation industry has lost more than 12,000 jobs.
Everyone is nervous, Reicher said, because people don't know yet which job classifications are going to be affected.
Some of his colleagues said Tuesday that maybe it's a good thing the union didn't strike. Getting a layoff notice in the mail while on strike "would have been even worse," Reicher said.
Teresa Vasquez, a 36-year employee who works in tooling, is worried about jobs, and not only from the economic downturn. Cessna is moving work to Mexico.
"The company continues to dismantle Cessna piece by piece," Vasquez said.
"The governor (and) Washington has to step in and try to save aviation," she said. "They're continually moving work out that will never come back."
Cessna has recalled about 500 people this year, said Steve Rooney, Machinists union District 70 directing business representative.
Some of the 500 are hourly workers represented by the union.
"Some just recently walked back in the door within the last month," Rooney said.
The layoffs are disappointing, he said, considering the union accepted a contract by default to help the company remain competitive.
"Obviously, it isn't enough with the announcement of them laying off 700 people," he said.
Cessna must continue to lower its cost structure to remain competitive, Pelton said.
Textron, Cessna's parent company, issued a statement Tuesday 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.
There are no details on how many business jets Cessna now plans to deliver this year, Stangarone said.
In the first half of 2010, Cessna delivered 244 planes, compared with 321 in the first half of 2009. Cessna delivered 578 planes in the first half of 2008, before the downturn hit the industry.
Cessna recorded a loss of $21 million in the first half of 2010 on sales of $1.07 billion, down from a profit of $138 million on sales of $1.64 billion a year earlier.
It ended the quarter with a $3.7 billion order backlog, down $400 million from the end of the first quarter.
Robert Stallard, an analyst with RBC Capital Markets, said in a report to investors that downward adjustments to the production line should be expected because of the recent buildup of white tails — or planes without customers — at Cessna.
Business jet production may not make a meaningful recovery until 2012, he said.
"We think it is better to take action now versus oversupplying the market in the long run," Stallard said. "Aggressive cost actions and productivity improvement at the trough should help boost margins when volumes return."