Friday, September 24, 1999

GEAE: Expected slowdown spurs hourly worker job cuts

The Cincinnati Enquirer

        An expected slowdown in new orders coupled with billion-dollar demands for engine development programs has triggered a new round of hourly worker job cuts at GE Aircraft Engines in Evendale, including elimination of 44 today.

        And the largest jet engine maker cautions that it faces further job cuts in the future.

        “We anticipate there are going to be (additional job cuts),” said Rick Kennedy, GEAE spokesman, adding it was premature to say how many or when they would occur.

        “You are going to see these incremental declines as softness in the business continues.”

        Mr. Kennedy confirmed Thursday that GEAE in the past few weeks has eliminated about 60 jobs in the Evendale plant's structures department, which machines the metal used for jet engine assemblies.

        That includes 44 workers who will be terminated today, said Wayne Reynolds, president of United Auto Workers

        Local 647, which represents 1,260 hourly workers at the Evendale plant.

        Those cuts come on top of the termination of 79 workers in two waves during June and July, Mr. Reynolds said. Those cuts were part of several hundred jobs that GEAE said in March would be eliminated, mainly at its Lynn, Mass., plant.

        Overall, GEAE's Greater Cincinnati employment is 8,406, down from about 8,500 earlier this year. The difference reflects some additional hiring in GE's growing engine services business, Mr. Kennedy said.

        GEAE isn't alone in cutting jobs. United Technologies Corp., parent of GE rival Pratt & Whitney, this week said it plans to trim its worldwide work force by 9,000 jobs because of the slowdown in the aerospace industry. Those cuts include about 1,500 at Pratt, the company said.

        Mr. Reynolds said GEAE managers have forecast the number of labor hours needed next year in the structures area will drop by about a third, from about 600,000 hours to 400,000 hours.

        “That's got to mean a reduction in bodies,” Mr. Reynolds said, although GE hasn't indicated how many.

        GEAE, as part of a global sourcing effort by the parent General Electric Corp., has been seeking steep price cuts from subcontractors, which typically perform about 60 percent of engine assembly work.

        In some cases, Mr. Kennedy said, GEAE moved subcontractor work to foreign suppliers, or it has helped vendors set up operations offshore.

        Moving vendor work to foreign suppliers has two benefits, he said. It keeps GEAE's costs down and reflects the fact that a growing share of sales are to foreign airlines.

        GEAE has also recently sourced some low-tech engineering analysis work with foreign firms, including one in India. Mr. Kennedy said that hasn't eliminated any engineering jobs in Cincinnati but has freed up engineers for development work.

        Still, Mr. Reynolds said the union, which has agreed to changes in job classifications and other work rules to preserve jobs, is irate about the cuts because of the subcontractor work being shipped to foreign suppliers.

        “Over 30,000 hours (of work) has been farmed out to two plants in Mexico,” Mr. Reynolds said. “If they just kept that work here, those jobs wouldn't have to be eliminated.”

        One contract grievance the union filed with the company over the job cuts has gone through the three-step grievance procedure, and GE has refused to arbitrate the dispute. Two other grievances are still pending. The upshot is that the union could strike over the issue, although Mr. Reynolds said the union has no plans to do so. The union's current contract doesn't expire until next summer.

        Mr. Kennedy said GEAE finds itself caught between a shrinking order book for engines and heavy engine development costs funded out of operating profits. The only way to make up the difference is to cut costs, he said.

        GEAE faces annual engine development costs approaching $1 billion, he said. That includes development work on a derivative version of its high-thrust GE90 engine, which in July was picked as the exclusive power plant for a longer-range version of the Boeing 777, dubbed the 777-200X and -300X, debuting in 2003.

        GEAE also is funding development of new versions of its CF34, regional commuter jet engine family, and TECH56, a three-year, multimillion-dollar effort to develop new technologies for its best-selling CFM56 engines, produced jointly with Snecma of France.

        At the same time, GEAE officials have repeatedly cautioned that the boom in new commercial jet orders is peaking.

        Production of CFM56 engines, split mainly between Evendale and Snecma's Villaroche, France, plant will peak this year at 1,084 engines and decline next year, Mr. Kennedy said. The Evendale plant produces all the engine cores for the CFM56 engines and splits final assembly with Snecma, which does all the engine fans and small compressors. The UAW isn't impressed by the need for additional cost cutting.

        “GE's expected to make something like $10 billion in profits this year,” Mr. Reynolds said. “That's more than any other company has made. How much more competitive than that can you get? You're already making more profit than anyone else.”


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