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Tue, Jan 14, 2003

Piper's Cuts Were Related to Textron's Trouble

Year Was Bad Enough for Industry; Then the 540 ADs Hit

We reported that Friday was the final day of work for a number of New Piper employees. When we first reported the story over the weekend, we didn't have too much to go on, other than the few employee-generated reports we were able to confirm. We had a talk with Mark Miller on Monday, though, and he confirmed most of our story.

Not the usual reasons:

Mr. Miller told us, "The cuts were across the board, 150 people; but unlike earlier downsizings (which were due to the slow industry economy and the effects of September 11), this one is directly due to the shortage of Textron Lycoming engines (540s) and the backlog it caused."

Deliveries hit hard:

"Our original projections for 2002 deliveries was 331," Miller said. "When the year continued sluggish, we revised that to to 305, about mid-year. We were on track with that number, and even experienced some renewed interest in the Saratoga and Mirage; then the bottom fell out, when the engine recalls hit."

The engine: it's a critical thing.

"Many of the airplanes we had already built," Mark told us " -- the engines had to be replaced. Our piston airplanes coming down the line needed new engines." It was bad in Vero Beach; it hurt the dealers, to some extent, even more: "This also made airplanes in our dealers' hands, unsaleable," he explained.

It's rough on the showroom floor. Dealers have floor-planned demonstrator machines, new aircraft, that they can't fly, as they wait for the replacements from Textron Lycoming. [The six-cylinder (540 inch) Lycomings were hit with a series of critical ADs, mostly crankshaft-related, starting in late Summer. Airplanes with the affected serial numbers -- esentially all the new-airplane stock -- can't fly, until the folks in Williamsport get the repaired/rebuilt/replaced engines to them --ed.]

Miller continued, "Essentially, our dealers have been holding their inventory; we've been talking to Textron Lycoming, to help repair damage done to our name -- we're all [6-cylinder Cessna too --ed.] in the same boat. Dealers have started to get replacement engines; but the year was so bad -- our 305 (delivery forecast) became 291." The number is down to 252 for 2003.

Who went home?

"It's office, as well as line workers; some managerial, some engineering," Miller told us. "What's paramount is to stay profitable, to stay strong, and to make sure we're not cutting future product development. The cut was done on a 'relative ranking' basis -- seniority isn't the only criterion."

"A sad day..."

"We've lost skilled, hard-working people," Miller said. "We'd hire them back in a minute, if we could; we'd recommend them highly to anyone else. We had to make these painful cuts, to remain strong and viable. This is a sad day for us; but if we didn't take this action, we'd have to cut into the bone of future product. We hope the industry turns around soon."

It's not getting good enough, fast enough, for Piper. "There have been some policies at Textron Lycoming, that we're not entirely happy with, like some of the changes in their alternative travel policy" the spokesman said. "We've been working hard as a bridge between our dealers and Textron Lycoming -- our dealer body has seriously contemplated filing suit -- and we're trying to make up for some serious damage here."

Some 850 employees remain at New Piper's facilities, and no additional cuts are anticipated.

FMI: www.newpiper.com

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