Cirrus Design Corp. let go of 100 workers this week in a wave of cuts that company president and chief operating officer Brent Wouters said would be completed Thursday afternoon. The Duluth-based airplane manufacturer trimmed the size of its workforce by about 8 percent through the reductions.
"We're dealing with some straight-forward realities," Wouters said. "We're in a difficult economic environment that has impacted the aviation business. We're not selling as many airplanes as we'd hoped to this year."
The cuts will result in the loss of 71 jobs in Duluth and another 29 in Grand Forks, where Cirrus produces composite components for its airplanes.
Following the staff reductions, Cirrus employs 1,230 people company-wide, including 980 in Duluth and 250 in Grand Forks.
Wouters said Cirrus needed to improve the efficiency of its operations, adding, "I think we'd lost a little sight of that in recent years."
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Cirrus had planned to boost its production from14 to 16 airplanes per week this year, but Wouters said the company chose to continue operations at its previous capacity, because of weaker than anticipated sales.
The General Aviation Manufacturers Association reports that sales of piston-engine airplanes through the first six months of 2008 were down nearly 16 percent from the same period last year.
Cirrus shipped 239 airplanes during the first half of this year -- 10.8 percent fewer than it did during the first six months of 2007.
Cirrus isn't the only local firm that has experienced the effects of a downturn in demand for small airplanes. Last week, Northstar Aerospace, a Duluth-based supplier of aircraft components to Cirrus and other manufacturers, cut its work force by 15 percent, reducing its staff to about 85 people.
John Eagleton, Northstar's president and CEO, said the reduction was necessary because Eclipse Aviation, one of the company's clients, had temporarily cut production to about 20 percent of its previous level. He remains confident Northstar will be able to recall most laid off workers by early next year.
Wouters, too, expressed optimism that demand for Cirrus' airplanes will rebound in time as the economy steadies.
He also said Cirrus is positioning itself to serve a broader market with the pending introduction of a two-seat sport airplane called the SRS and a five- to seven-seat jet called the Vision SJ50. Cirrus already produces the best-selling four-seat airplane in the world, the SR22.
Although no release date has been established for Cirrus' new jet, Wouters said the company has received about 500 jet orders so far, each accompanied by a $100,000 deposit. The resulting $50 million in seed money has proven sufficient to cover development costs to date, Wouters said. Consequently, he said the jet project, while costly, did not factor in Cirrus' recent decision to cut staff.
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Wouters expects the lower-cost SRS to hit the market in 2009. He said staff is working aggressively to ready the sport plane for production in hopes that it will give Cirrus a stronger foothold in the training market.
"We need it yesterday," Wouters said of the SRS. "I think it will be a big market opener for us."
Wouters considers it unlikely that further cuts will be needed at Cirrus, but he said there are no plans to restore the positions eliminated this week in the event of an upturn.
Terminated workers will be offered one week of severance pay for every year of past service to Cirrus, Wouters said.
Duluth Mayor Don Ness took a long view.
"Obviously, we would prefer they would have a steady increase in employment up there, as they have for the last 15 years," said Ness, who was notified about the layoffs earlier this week. "But in business there are cycles and there are times for expansion and times for retrenchment, and most recognize that. That company is a very strong and vibrant company with tremendous upside and this is a momentary respite in their growth that will prepare them even better for the really exciting opportunities that will be coming very soon."
Despite this week's staff reductions, Cirrus today employs 52 more people than it did at the end of 2006.
