Raytheon to Cut 450 Jobs at Kansas Unit

06 April 2001

Raytheon Co., the No. 3 U.S. defense contractor, said on Wednesday it plans to eliminate 450 jobs at its Kansas-based aircraft unit, where program delays, pricing pressure and higher production costs hurt operating profits last year.
Raytheon on Monday told workers at the Wichita, Kan.-based aircraft business that 10 percent of the unit's managerial and administrative staff will be laid off, a spokesman told Reuters. The aircraft unit's total work force is about 18,000, with 10,200 employees based in Kansas.
``(Raytheon) is trying to get ahead of indications of a softening economy,'' Raytheon spokesman David Polk said. ``This does not affect the manufacturing work force at all. ...So far, sales are reaching projected levels.'' Raytheon's aircraft unit, which generated $3.2 billion in revenue last year, makes business and commuter planes as well as trainer aircraft for the U.S. military. The job cuts are expected to take effect later this month.
Raytheon officials did not provide any information on how much the job eliminations would save the company or whether they would have an impact on its earnings.
Meanwhile, Raytheon's aircraft business also is considering plans to scale back contract workers and other expenses, Polk said.
Faced with a debt load in excess of $9 billion, Lexington, Mass.-based Raytheon, maker of the Patriot missile, put the aircraft unit up for sale last year, but no deal ever materialized.
``It's pretty clear they're stuck with the unit for the medium or long haul,'' said Richard Aboulafia, an aerospace analyst at The Teal Group. ``... It's pretty obvious (Raytheon aircraft) has issues.''
Operating income as a percentage of sales at Raytheon aircraft slipped last year due to a number of reasons: higher production costs, narrower spreads on customer financing, price pressure on commuter planes and contract adjustments on a fixed plane order, according to Raytheon's annual report. In addition, Raytheon aircraft last year struggled with gaining certification for its new business jet, the Premier I, and costs associated with its new T-6A Texan II military training aircraft.
Last month, however, the Premier I gained approval from the U.S. Federal Aviation Administration, more than a year behind schedule. Raytheon said it has more than 300 orders for the $5.3 million business jet, which features a composite fuselage and swept wings.
``Premier could be the one that sweeps the field.'' Aboulafia said.
Other aerospace analysts have speculated that Premier's certification would make Raytheon aircraft more attractive to prospective buyers. At the end of last year, Raytheon aircraft reported a $4.4 billion backlog of airplane orders.

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