When Piper Aircraft Inc. unveiled its new, top-of-the-line, single-engine turboprop amid great fanfare in April, there was some speculation that the Vero Beach-based company might hire additional workers to meet the expected demand.
Just three months later, Piper executives are deciding which positions to eliminate as they trim the company’s workforce by 15 to 20 percent.
So what went wrong?
Worldwide demand for Piper’s products slowed – especially in the European, Asian and Latin American markets – so much so that the company suffered its second consecutive quarter of declines in revenue, sales and deliveries.
In making its jarring announcement this month, Piper cited sagging first-quarter sales and economic uncertainty in the global marketplace as the reason it needs to reduce its payroll by more than 100 full-time employees, possibly as many as 150 workers overall, through layoffs and early retirement.
“As a direct result of the slowdown in sales, Piper Aircraft will adjust the production schedule for the remainder of 2015, as well as 2016,” the company said in a press release. “The downward revision of Piper’s planned production will require that the current workforce be reduced.”
Simon Caldecott, the company’s president and CEO, said Piper has “experienced a steady recovery since 2009” and has been enjoyed “relatively strong sales” of piston airplanes in the global training market.
“However, we are facing challenges and economic instability in several key regions of the world,” he said, adding, “We must better align production with current market demand.”
According to the General Aviation Manufacturers Association, worldwide sales of small aircraft – piston-engine airplanes, turboprops and business jets – were down more than 15 percent through the first quarter of 2015, when compared to last year’s numbers.
Global sales of piston-engine airplanes, such as Piper’s popular Archer III, Malibu Mirage and Seminole models, plummeted nearly 20 percent.
There was an 8 percent drop in the sales of turboprops, such as the Piper Meridian.
Even the once-enticing, businessjet market, which Piper flirted with before backing out in 2011, was off by more than 13.5 percent.
Total first-quarter shipments fell from 520 in 2014 to 441 in 2015, a 15.2 percent decrease. Total first-quarter billings slipped from $5.2 billion in 2014 to $4.5 billion this year, down 12.6 percent.
“The first-quarter numbers show that while our industry has been gaining traction over the past few years, we face some renewed headwinds in several regions of the world, including Asia, parts of Europe and Latin America,” GAMA President and CEO Pete Bunce said.
Bunce urged Congress, when it returns to Washington from its summer break, to reauthorize the Export-Import Bank, which he said is necessary to provide loan guarantees manufacturers need to close transactions with non-U.S. buyers.
He said 50 percent of aircraft deliveries made by general aviation manufacturing – all aircraft not built for military and commercial-airline use – are outside the U.S. in any given year.
“Reauthorization will keep manufacturers on a fair, level playing field to compete against businesses in the more than 60 other countries that have their own national export credit agencies, like the Export-Import Bank,” Bunce said, describing the current export market as “difficult.”
What’s especially troubling is that industry forecasting models historically project increased sales during the spring and summer months, Piper spokeswoman Jackie Carlon said.
“You look at the GAMA delivery numbers for the first quarter of this year and, for the first time since 2009, every segment of the industry is down,” Carlon said. “It’s the same root cause for everybody.
“We’re in a global marketplace and a global economy,” she added. “When there’s continued uncertainty, like we’re seeing in Europe and Asia, it affects everyone. People are less willing to spend.”
The bad news didn’t end there: Piper said its second-quarter sales remained sluggish.
“I think when the second-quarter numbers come out,” Carlon said, “you’ll see other manufacturers in the industry make workforce adjustments, too.”
Carlon said only 40 percent of Piper’s sales are outside the U.S., but the economic uncertainty overseas also impacts the company’s domestic customers, many of whom conduct business and/or are invested in foreign markets.
“Domestic sales are down a bit,” she said, “but we attribute that to what’s happening globally.”
Some aircraft dealers, she said, are experiencing backups in inventory.
“The planes are still selling,” she said. “We had a light first quarter on paper, but some of that was intentional because we knew we were rolling out a new product. But when things slow globally, it can become an issue.”
Clearly, it has.
With 760 employees – nearly all of them full-timers – at the time of this month’s announcement, Piper remains the county’s largest private employer and has financial incentives to not unnecessarily cut its payroll.
If Piper’s full-time work force falls below 650 before December 2016, the company would be required to repay some of the $3.3 million in economic incentives it received from the state.
Piper also is in the final year of a similar agreement with the county, which would be owed $500,000 if the company’s workforce dipped below 600 employees.
Despite this latest round of layoffs, “we will still be well above the requirements of our agreements with the state and county,” Carlon said, adding that the exact number of jobs lost should be known soon.
The company said it would work with the state unemployment and local job-placement groups to assist its displaced workers.
It was ironic, however, that the layoff announcement came so soon after the festive, red-carpet-style rollout of the M600 single-engine turboprop, the latest addition to Piper’s celebrated M-Class line.
The April launch generated so much excitement about the M-Class line that it prompted at least some speculation, even anticipation, that Piper might increase its workforce.
The M600, though, is still in the engineering and flight-test phase and won’t be certified for sale until late 2015 or early 2016.
“What we’re experiencing now is not the future of the industry,” Carlon said. “It ebbs and flows, just like the economy. We’ve got some great products, flight schools are still training pilots and we’re confident things will turn around.
“This will right itself,” she added. “Until that happens, we had to ask ourselves: How do we make sure Piper is a healthy company?”
