Rockwell Collins Plans More Cuts, Consolidation as Defense Cutbacks Loom
By Dave DeWitte, Reporter
CEDAR RAPIDS, Iowa - Job reductions of 1,000 are possible across Rockwell Collins on top of 250 in the past three months, the company's chairman informed employees Thursday.
Consolidation of facilities in Europe and reduction of some employee benefits are also part of the company's strategic plans to deal with market "headwinds."
The aerospace electronics company ends its fiscal year this week on a note of urgency, with earnings falling at the low end of its forecast, and sales for the next fiscal year expected to fall 3 percent.
In a memo to employees Thursday, Chairman and CEO Clay Jones pointed mainly to external factors, but also said the company has failed to manage some of the factors it could control, such as capturing new contracts.
Rockwell Colins has eliminated 250 positions companywide since August 1, and two major uncertainties will determine whether how many of the 1,000 positions slated for elimination actually must be cut.
One issue is whether Congress acts to halt budget sequestration, across-the-board federal budget cuts expected to delay, reduce or halt some defense contracts involving Rockwell Collins. About 350 of the 1,000 job eliminates are projected entirely due to sequestration.
"The other is a key commercial pursuit that, assuming we win, would largely offset the impact from sequestration," Jones wrote. "I’m hopeful that the overall reduction in headcount could be less, depending on how these two variables play out."
Rockwell Collins is the largest private employer in the Corridor, with about 8,700 in Cedar Rapids and 692 in the Coralville. A roughly equivalent number of employees work in other Rockwell Collins locations in the United States and abroad.
Pam Tvrdy, a spokeswoman for the company, confirmed the contents of the memo, but said the company's longer-term prospects remain strong. Tvrdy said the numbers are "a projection based on what we know today," and not finalized. She could not offer a schedule on when the cuts would be implemented.
Jones indicated the company is taking strategic actions to prepare it for better years forecast ahead, including an increase of 5 percent in research and development spending for fiscal 2013. He said the company is planning to reduce operating costs in established markets to increae investment in high-growth international markets.
The plans include "co-locating" various functions in Europe, primarily engineering, operations, shared services and the service centers in which Rockwell Collins performs many of its avionics upgrades, warranty and maintenance services.
Cutbacks planned also include lowering the company's matching contribution to employee 401(k) retirement savings plans from 75 percent to 50 percent of the first 8 percent of the employee contribution effective Jan. 1. The company will also lower the amount of unused vacation time employees can carry over from year to year, to a maximum of three weeks beginning in in fiscal 2013 and a maximum of two beginning in fiscal 2014.
Tvrdy said the phased approach will give employees time to use up vacation time they have accrued so they do not lose it.
Jones said the company's isn't eliminating its merit and incentive pay plans, which are based on employee performance.
Tvrdy emphasized that the company's longer-term outlook remains strong, with some large commercial production already on order and opportunities on the horizon to replace some of the potential defense losses.
What's On KCRG