Wouters Notes Significant Progress Over The Past Year, But Clouds Remain

In a memo released to all Cirrus employees Monday, CEO Brent Wouters said he is optimistic heading into 2010, and that the company is "planning conservatively for a modest recovery toward greater delivery volume and even greater market share." But, he cautioned that the recovery would still be slow, and that patience would be needed.

"You are aware that Cirrus made a purposeful decision to retain higher-than-demand staffing levels in manufacturing and manufacturing overhead to deliver on pending institutional orders," Wouters wrote.  "Although we continue to pursue these opportunities and feel very confident about favorable outcomes, we need to structure our manufacturing operations for the desired costs at today’s actual demand.  Expense levels in other areas also need to be refined further to achieve desired expense levels, but these changes will primarily focus on non-payroll expenses."

Wouters cited a number of factors for his optimism in the memo. Among them are that fixed costs have dropped 50%, inventory levels are down 58%, and liabilities have dropped 15%. But just as important, earnings improved 65% over March of this year on the same number of airplanes delivered. "All these measures illustrate that our business continues to strengthen as we emphasize the customer and product innovation," he said."

Wouters declared that the business climate has stabilized, and has even begun to improve, saying "(L)et’s leave behind the challenges of 2009 and move forward into 2010 with a growing sense of optimism."

Brent Wouters

But as a contrast, local Duluth television reports that Cirrus sent out more than 50 furlough notices to employees this week, most of them in the manufacturing area, and there was a report of a dispute over rent owed to the City of Duluth in the amount of $250,000. Wouters told Northland News Center that the furloughs were in anticipation of the 1st quarter of the new year, which is traditionally a slow time for airplane sales, and that he hoped to be able to recall those workers in the future. He also appeared live on the station to say Cirrus "made an arrangement with the city in advance to hold back payments" on the hangar it leases from the city. He said the city has been very cooperative in Cirrus' plans to spend the money for rent on the hangar, which Cirrus has since vacated, on employees and maintaining staffing levels in the company. "We haven't failed to make the payments," Wouters told the station. "And our intention is to make that payment as soon as we have available cash to do so, and we are entering that period now." 

FMI: www.cirrusaircraft.com