Rockwell Collins to Cut 6% of Jobs as Defense Sales Drop
Rockwell Collins Inc. (COL) said it plans to cut about 6 percent of its workforce in the next year as the aerospace manufacturer’s defense revenue falls amid curtailed U.S. military spending.
The maker of products including cockpits and radios expects to let 1,250 employees go in the fiscal year through September, Chief Executive Officer Clay Jones said in an interview. About 250 have already been given notices, he said.
Of the 1,000 left, he said about 350 are tied to the U.S. deficit-cutting process called sequestration. Other defense contractors including Boeing Co. (BA) are also cutting jobs to prepare for the $500 billion in additional defense cuts slated to go into effect in January unless lawmakers agree on an alternative deficit-reduction plan.
“If we can avoid sequestration altogether and sanity is restored in Washington, and it’s not just a kicked can which doesn’t help us much, we could avoid those” 350 cuts, he said.
The process would reduce Rockwell Collins’s revenue from military programs by about 10 percent next year, Jones forecast.
Rockwell Collins, based in Cedar Rapids, Iowa, which cut about 800 jobs over the past 12 months, notified workers last month of the additional reductions planned, said Pam Tvrdy- Cleary, a spokeswoman. The company employed 20,500 people at the end of the fiscal year through September 2011.
Jones said as many as 300 of the fired workers may be able to get new jobs in the commercial segment of the business, which made up 45 percent of sales last year. Planemakers are boosting production to work off record backlogs of orders from airlines anxious to save money with more fuel-efficient jets.
Commercial aviation is a bright spot in the overall U.S. jobs market. Firings by North American companies at home and overseas have totaled more than 150,000 so far this year, more than the 131,000 job cuts in the same period in 2011, according to data compiled by Bloomberg.
Rockwell Collins’s research and development spending in its commercial business will increase by about $120 million, or 30 percent, this year as the company works on new projects it’s won, Jones said.
The company posted net income of $152 million, or $1.06 a share, in the fiscal fourth quarter, compared with $175 million, or $1.13, a year earlier, it said in a statement today. Revenue declined 2.3 percent to $1.27 billion.
Earnings were hurt by charges of $29 million for employee severance costs and $28 million in asset impairment charges, primarily related to the write-off of accounts receivables resulting from the bankruptcy of business-jet maker Hawker Beechcraft Inc., Rockwell Collins said.
Excluding those charges, profit was $1.32 a share, beating the average analyst estimate of $1.11 a share, according to data compiled by Bloomberg.
The past fiscal year was “one of the most unpredictable in our public history as a company,” Jones said on a conference call with analysts. He’s reorganizing European operations and focusing on ways to bring commercially based products to military programs, he said.
Jones reiterated last month’s forecast that earnings from continuing operations in fiscal 2013 will be $4.30 to $4.50 a share, on revenue of $4.6 billion to $4.7 billion. That compares with profit of $4.15 a share on sales of $4.73 billion in fiscal 2012. The company has said its guidance included the potential effects of sequestration.
The business-jet market will probably be flat this year, which will also weigh on earnings, Jones also said.
Shares in Rockwell Collins rose 1.9 percent to $54.30 at 4:15 p.m. in New York. The stock had previously fallen 3.7 percent this year.
The company last month named Kelly Ortberg as president, saying the 63-year-old Jones would continue as chairman and CEO. Jones declined to say today when he plans to retire. The company doesn’t have a set retirement policy, he said in the interview.
“We have a robust succession-planning program at this company, and it’s beginning to manifest itself,” he said on the call.
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