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MTU Cuts Jobs to Boost Profitability Amid Growth in New Engines

MTU Aero Engines Holding AG (MTX) said it will eliminate jobs and cut costs to boost profitability as the German manufacturer predicted strong growth in sales of new engines next year.

About 100 positions will be eliminated over the next four years, either through voluntary departures or by not filling vacancies, MTU said today in a statement. Production jobs won’t be cut as the company has to meet increased demand. MTU had 8,729 employees at the end of September.

The manufacturer started a program to boost performance that will stretch into 2014 after profitability was hampered by investment in new aircraft engines, including the geared turbofan that Pratt & Whitney (UTX) is developing for planes such as the Airbus SAS A320neo and Bombardier Inc. (BBD/B) CSeries. Spare-parts sales also have slowed as airlines look to control costs.

“The aim is to continue to ensure a sufficient cash flow, against the backdrop of the upfront costs we incur for the successful new engine programs,” said MTU Chief Financial Officer Reiner Winkler, who will become chief executive from next year. The company wants to retain “flexibility” to take stakes in emerging engine programs, he said.

Shares in the German enginemaker traded down 0.7 percent to 71.98 euros as of 1:20 p.m. in Frankfurt. The stock has returned 6.6 percent this year including reinvested dividends, compared with 34 percent for the Bloomberg Europe Construction and Engineering Index.

More Turbines

Commercial engine sales will see percentage growth in the mid-teens next year, driven by demand for more turbines with Airbus SAS and Boeing Co. (BA) increasing jet production, said the company, which is holding an investor day in London. The more profitable spare-parts business will see mid-single-digit growth, MTU said. Maintenance activities should grow at high single-digit percentage rates while military activities are set to decline slightly.

Research and development expenses will be flat with the exchange rate likely to be unfavorable, the company said. Capital expenditure will be higher in the next two years as MTU works on new powerplants.

MTU, based in Munich, will also trim other costs in the savings program, which it’s dubbed Cash for Future. Travel and marketing expenses will be carved down and the company will also explore ways to reduce production costs, it said.

To contact the reporter on this story: Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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