Re: Cessna profits plunge......OT (or is it?)

[Jay Honeck]

> Revenue at Cessna plunged to $620 million from $896 million
> in the year-ago quarter. Profit fell to $43 million from $94
> million on lower sales of Citation business jets.

Gee, there's a surprise. I sure hope you didn't have a bunch of money
invested, cuz virtually anyone familiar with Cessna's product-line predicted
a severe downturn.

After all, other than jets, all they have to offer is a bunch of 50 year-old
designs, albeit with new electronics in 'em. And with used jets virtually a
dime a dozen now in "Executive Controller," who's going to buy a new one?

Cessna put all their eggs in one basket -- the jet market. When that fell
apart, they had little to fall back on. Meanwhile, Cirrus churns out three
new airplanes a day, every day...

The market is efficient, but ruthless...
--
Jay Honeck
Iowa City, IA
Pathfinder N56993
www.AlexisParkInn.com
"Your Aviation Destination"

[C J Campbell]

"Nomen Nescio" ]> wrote in message
...
|
| "We expect a temporary decline in revenues in our aircraft
| segments this year and only a modest recovery in our other
| manufacturing markets," Textron Chairman Lewis Campbell said in
| a statement. "However, we expect the benefits of our
| transformation initiatives will result in earnings growth and
| solid cash flow."

You gotta love this excuse. Quick, somebody tell Textron that the recession
is over. Gee, Cirrus managed to innovate and even expand during the actual
recession. Cessna, with its far greater resources and experience, guessed
wrong. It wasn't for lack of trying, though. Cessna's dealers have been
screaming for more airplanes since 1999. The vast majority of manufacturers
saw the recession was coming to an end more than two years ago, and planned
accordingly. How smart do you have to be to know that all recessions have to
end within a few years? Apparently Textron's secret to "earnings growth and
solid cash flow" is to shut down their production lines and fire the
employees. Yeah, that will improve earnings and cash flow -- for awhile. It
is not a bad strategy if your goal is to liquidate the company.

"Temporary decline in revenues," indeed! I may be just an old bean counter
(guilty as charged), but even I know there are only two ways to increase
revenues -- you either sell more units or you charge more for each unit.
Charging more for each unit won't work if you have competitors producing
better products for about the same price, so I don't think Textron has a lot
of room there. But they are not going to sell more units, either -- after
all, they have made almost permanent reductions in production capacity. That
"temporary decline" smells awful permanent to me. The only thing temporary
about it is that it will last until either Textron goes out of business or
they get better management.

More of the same at Textron's other units. Zero innovation. The best any of
the units can manage is copying the innovations of others, a year or two
late, and with half the performance. Contraction in the face of soaring
demand. Canceling parts orders and laying off the labor force, then making
excuses instead of achieving even average performance. Well, excuses don't
buy lunch -- a little lesson that much of the rest of the aviation industry
could stand to learn. In every sector of aviation there appears to be bunch
of losers that are barely able to tie their own shoes, and a couple of
performers that seem to make money despite all the excuses the losers have.
It is as if an NFL team was trying to excuse its failure to make the
playoffs because their uniforms are the wrong color.

Textron's shareholders should have a little message for management. Try this
for a "transformation initiative:" You're Fired! Then get somebody who knows
how to actually communicate and run things like a business instead of a
social welfare agency for executive loons.

[Dan Luke]

C J Campbell wrote:
> In every sector of aviation there appears to be bunch
> of losers that are barely able to tie their own shoes, and a
> couple of performers that seem to make money despite
> all the excuses the losers have.

And why is this so? Because aviation businesses are almost all terribly
difficult to be successful in: only those who have love and devotion to
invest will be true winners, ala the Klapmeiers. Note I do not equate
mere survival (Mooney, Piper, Lycoming, Continental, etc.) with success.

The Textron/Cessna situation reminds me of the AMF/Harley-Davidson
situation of a few years back: a multi-group corporation owning a
business it didn't understand or really care about. AMF damned near ran
it into the ground, and a guy who loved Harleys saved it. Imagine the
hero (and cash) it would take to do that for Cessna's piston aircraft
business!

> ...run things like a business instead of a
> social welfare agency for executive loons.

What?! That's un-American!
--
Dan
C172RG at BFM
(remove pants to reply by email)

[TaxSrv]

"Dan Luke wrote:
>
> And why is this so? Because aviation businesses are almost all
terribly
> difficult to be successful in: only those who have love and devotion
to
> invest will be true winners, ala the Klapmeiers. Note I do not
equate
> mere survival (Mooney, Piper, Lycoming, Continental, etc.) with
success.

I'm reading Donald Pattillo's book, "A History in the Making: 80
Turbulent Years in the American General Aviation Industry." Compared
to the past going back to 1920, the GA insdustry has been relatively
stable in recent years. In fact, it was so bad in the early days, that
one would have difficulty looking at only the GA industry to determine
when the Great Depression occurred. Remarkable also is how very old
the problems are where demand for small planes is very price
sensitive, new designs are often a unit sales success but financial
loss, and the availability of much cheaper, good used planes depresses
demand.

Fred F.

[C J Campbell]

"Dan Luke" > wrote in message
...
| C J Campbell wrote:
| > In every sector of aviation there appears to be bunch
| > of losers that are barely able to tie their own shoes, and a
| > couple of performers that seem to make money despite
| > all the excuses the losers have.
|
| And why is this so? Because aviation businesses are almost all terribly
| difficult to be successful in:

Every field of business is terribly difficult. No excuse. If you can't stand
the heat, get out of the kitchen. What I said about aviation can be applied
to almost every other field of business. There may be exceptions, but I
can't think of any right now.

I have had just about enough of the idea that aviation is somehow different
than other businesses, that ordinary business principles don't apply to
aviation, that the only reason to get into aviation is that you love it,
etc. Well, here's a news flash: people succeed because they work hard, use
their imaginations, keep costs to a minimum, and charge enough for their
labor and capital to get a reasonable return. They try to sell a product
that people actually want. Loving your work makes all that a lot easier, but
it is not totally necessary. Nevertheless, I'll bet that Bill Gates loves
his job.

Now, there is no question that people want to fly. Look at what they put up
with in order to do it. The customer in this industry is generally treated
like crap. The whole message from the time he walks in the door is, "We
don't value our jobs very highly, and we think even less of you. At best,
you are an inconvenience. At worst, a dangerous criminal."

[TaxSrv]

"C J Campbell" wrote:

> I have had just about enough of the idea that aviation is somehow
different
> than other businesses, that ordinary business principles don't apply
to
> aviation, that the only reason to get into aviation is that you love
it,
> etc.

But that's why Pattillo's book is so fascinating. Those are the
people who have formed the GA companies from day one, and when they
brought in talented nonflyer execs to try to turn things around, it
generally failed. Business principles do apply, namely a low
unit-demand, handmade product in a fickle market, where customer
demand can't be predicted until you've spent enormous money to show
them what it will be like is a big gamble. The fact that there's a
historical shortage of less romantic investors who may otherwise
determine that toilet plungers will be more profitable tells me there
have been many such people reaching an objective conclusion for a long
time now. To argue otherwise means GA is uniquely a profit
opportunity going unnoticed by nonflying investors and executives who
do know what they're doing.

Fred F.

[Dan Luke]

"C J Campbell" wrote:
> Every field of business is terribly difficult. No excuse. If you can't
stand
> the heat, get out of the kitchen. What I said about aviation can be
applied
> to almost every other field of business. There may be exceptions, but
I
> can't think of any right now.

Then why is it that there is currently only one innovative, successful
American company building piston GA airplanes? Lancair may make it two,
but they're not there yet. How far is the market from the end of pent up
demand?

If it's no worse than any other businesses, building light aircraft must
be a deep secret from entrepreneurs. IMO only lovesick dreamers would
ignore other opportunities and invest the money necessary to turn
Cessna's piston business into a real winner. Such people may exist, but
putting them together with a talented, similarly driven CEO who could
pull it off would be little short of a miracle.
--
Dan
C172RG at BFM
(remove pants to reply by email)

[Tom Sixkiller]

"Jay Honeck" > wrote in message
news:gDASb.189493$xy6.974561@attbi_s02...
> > Revenue at Cessna plunged to $620 million from $896 million
> > in the year-ago quarter. Profit fell to $43 million from $94
> > million on lower sales of Citation business jets.
>
> Gee, there's a surprise. I sure hope you didn't have a bunch of money
> invested, cuz virtually anyone familiar with Cessna's product-line
predicted
> a severe downturn.
>
> After all, other than jets, all they have to offer is a bunch of 50
year-old
> designs, albeit with new electronics in 'em. And with used jets virtually
a
> dime a dozen now in "Executive Controller," who's going to buy a new one?
>
> Cessna put all their eggs in one basket -- the jet market. When that fell
> apart, they had little to fall back on. Meanwhile, Cirrus churns out
three
> new airplanes a day, every day...
>
> The market is efficient, but ruthless...

Whadaya wanna bet that when they go back to full production, a "large
portion" is done off-shore?

[Dude]

It seems to me that there must be a lot of risk in the small piston plane
market.

This means that a company without a high degree of ability to accept risk
will eventually fail a critical gut check. The question is - Can a public
company stand the risks it takes to be number one?

I believe Cessna simply will not do what it takes to win in this business
because it has become too risk averse. It may survive, but I don't see it
thriving. Strangely, its the same attitudes that kept them in business all
this time, that may now be their downfall. Until the recent entries of new
players, Cessna was king.

Cirrus has done well, and much of it is due to the passion of the founders.
I may be mistaken, but I believe that the investors are likewise passionate.
They are not presently trading the stock on an exchange, are they? If not,
then the company is still reasonably closely held.

What about the rest?

Also, someone mentioned American companies. I understand that the Canadians
are all about tax incentives to attract manufacturing companies, and they
have grabbed a few that way.




"C J Campbell" > wrote in message
...
>
> "Dan Luke" > wrote in message
> ...
> | C J Campbell wrote:
> | > In every sector of aviation there appears to be bunch
> | > of losers that are barely able to tie their own shoes, and a
> | > couple of performers that seem to make money despite
> | > all the excuses the losers have.
> |
> | And why is this so? Because aviation businesses are almost all terribly
> | difficult to be successful in:
>
> Every field of business is terribly difficult. No excuse. If you can't
stand
> the heat, get out of the kitchen. What I said about aviation can be
applied
> to almost every other field of business. There may be exceptions, but I
> can't think of any right now.
>
> I have had just about enough of the idea that aviation is somehow
different
> than other businesses, that ordinary business principles don't apply to
> aviation, that the only reason to get into aviation is that you love it,
> etc. Well, here's a news flash: people succeed because they work hard, use
> their imaginations, keep costs to a minimum, and charge enough for their
> labor and capital to get a reasonable return. They try to sell a product
> that people actually want. Loving your work makes all that a lot easier,
but
> it is not totally necessary. Nevertheless, I'll bet that Bill Gates loves
> his job.
>
> Now, there is no question that people want to fly. Look at what they put
up
> with in order to do it. The customer in this industry is generally treated
> like crap. The whole message from the time he walks in the door is, "We
> don't value our jobs very highly, and we think even less of you. At best,
> you are an inconvenience. At worst, a dangerous criminal."
>
>

[ArtP]

On Mon, 02 Feb 2004 07:21:54 GMT, "Dude" > wrote:


>Cirrus has done well, and much of it is due to the passion of the founders.
>I may be mistaken, but I believe that the investors are likewise passionate.
>They are not presently trading the stock on an exchange, are they? If not,
>then the company is still reasonably closely held.

Cirrus has done well by taking risks with the customers. The basic
design is great but the devil is in the details. They lack good detail
design, testing, and quality control. While the COPA web site
indicates the quality control is improving, the early users are
swinging in the breeze with high maintenance and planes that lost 50%
of their value in 2 years.

The stock is publicly traded, it is not on the NYSE because the
company cannot meed the financial requirements for being listed.

[TaxSrv]

Dude wrote:
> ...
> I believe Cessna simply will not do what it takes to win in this
business
> because it has become too risk averse. It may survive, but I don't
see it
> thriving. Strangely, its the same attitudes that kept them in
business all
> this time, that may now be their downfall. Until the recent entries
of new
> players, Cessna was king.
>
> Cirrus has done well, and much of it is due to the passion of the
founders.
> I may be mistaken, but I believe that the investors are likewise
passionate.
> They are not presently trading the stock on an exchange, are they?
If not,
> then the company is still reasonably closely held.
> ....

We can't look at Cessna single production as a financial entity by
itself. The profit is in the jets, the singles are likely a division
of a corporation which is a subsidiary of the big parent company.
Money is no controlling factor. If they want a full product line,
then 172/182s make sense, and some auto mfrs lose money on each
compact they sell.

Cirrus doesn't enjoy that luxury, and capital is from private
investors and lenders. The recent infusion of $100 million was mostly
to pay debts, and a recent local news article hints they still have
liquidity problems. So if Cirrus is still losing money, as quite
possible, it really matters. If Cessna loses on a 172 (bet in most
years not), it's just like a Dodge Neon in a full product line.

Cessna may not even view themselves in substantial competition with
Cirrus. Beyond flight schools, there may be a significant number of
buyers loyal to the high-wing brand and/or those who think a plastic
airplane is just wrong. Marketing strategy is a matter of judgment in
what they may view as a niche market. Are flight schools buying SR-20s
much at all?

Fred F.

[ArtP]

On Mon, 2 Feb 2004 08:04:42 -0500, "TaxSrv" > wrote:

>Are flight schools buying SR-20s
>much at all?

Considering insurance companies are balking at quoting low time pilots
without an IFR rating and yearly factory authorized training, I would
think that a flight school would have little use for the plane.

[Dave Stadt]

"Dude" > wrote in message
...
> It seems to me that there must be a lot of risk in the small piston plane
> market.
>
> This means that a company without a high degree of ability to accept risk
> will eventually fail a critical gut check. The question is - Can a public
> company stand the risks it takes to be number one?
>
> I believe Cessna simply will not do what it takes to win in this business
> because it has become too risk averse. It may survive, but I don't see it
> thriving. Strangely, its the same attitudes that kept them in business
all
> this time, that may now be their downfall. Until the recent entries of
new
> players, Cessna was king.
>
> Cirrus has done well, and much of it is due to the passion of the
founders.
> I may be mistaken, but I believe that the investors are likewise
passionate.
> They are not presently trading the stock on an exchange, are they? If
not,
> then the company is still reasonably closely held.

Cirrus is riding the new plane bubble. Time will tell ahow they do and they
will need to come out with something new when the market for the present
model becomes saturated. Certainly one would rather be in Cessnas financial
position than that of Cirrus. Cirrus had to sell their soul to stay in
business.

[Dude]

Wow, with all this bad news about Cirrus, should buyers be concerned?

I thought they had to be doing well selling so many planes. I still think
the investors have got to be aviation fans more than Wall Street types, but
we may never know.

As for flight schools, it seems that Diamond is getting more and more of
that business, but I hear the owner has some serious pockets.


"Dave Stadt" > wrote in message
...
>
> "Dude" > wrote in message
> ...
> > It seems to me that there must be a lot of risk in the small piston
plane
> > market.
> >
> > This means that a company without a high degree of ability to accept
risk
> > will eventually fail a critical gut check. The question is - Can a
public
> > company stand the risks it takes to be number one?
> >
> > I believe Cessna simply will not do what it takes to win in this
business
> > because it has become too risk averse. It may survive, but I don't see
it
> > thriving. Strangely, its the same attitudes that kept them in business
> all
> > this time, that may now be their downfall. Until the recent entries of
> new
> > players, Cessna was king.
> >
> > Cirrus has done well, and much of it is due to the passion of the
> founders.
> > I may be mistaken, but I believe that the investors are likewise
> passionate.
> > They are not presently trading the stock on an exchange, are they? If
> not,
> > then the company is still reasonably closely held.
>
> Cirrus is riding the new plane bubble. Time will tell ahow they do and
they
> will need to come out with something new when the market for the present
> model becomes saturated. Certainly one would rather be in Cessnas
financial
> position than that of Cirrus. Cirrus had to sell their soul to stay in
> business.
>
>
>
>

[TaxSrv]

Dude wrote:

> Wow, with all this bad news about Cirrus, should buyers be
concerned?
>
They shouldn't be. The type certificate, documentation, and tooling
are worth a lot of money. Were the present owners ever to sell,
someone else comes in with eagerness, and the existing product base
must be supported. If it follows the model of the Grumman AA-5x's,
that means acquire, raise price significantly, run into troubles, sell
out, new company raises price even more. Current FAA registrations
show only about 16 in U.S. ownership other than the new Tiger
Aircraft, after more than two years of production. Arguable reason -
price?

Fred F.

[RevDMV]

IMHO, Cessna should do what Cirrus did and bring in some folks who
have experience in JIT ,TPS(Toyota Production System) and other
inovative automotive manufacturing systems.

Cirrus obtained hired several ex-NUMMI(New United Motor Manufacturing)
people who have helped streamline the manufacturing and part supplier
chain. I remembering seeing early production floor pictures from
Cirrus and it resembled a local EAA chapter meeting more that a
production floor. It you see photos of the floor mow it's obvious that
there specific workstations and a real flow to the process.

[TTA Cherokee Driver]

ArtP wrote:

> On Mon, 02 Feb 2004 07:21:54 GMT, "Dude" > wrote:
>
>
>
>>Cirrus has done well, and much of it is due to the passion of the founders.
>>I may be mistaken, but I believe that the investors are likewise passionate.
>>They are not presently trading the stock on an exchange, are they? If not,
>>then the company is still reasonably closely held.
>
>
> Cirrus has done well by taking risks with the customers. The basic
> design is great but the devil is in the details. They lack good detail
> design, testing, and quality control. While the COPA web site
> indicates the quality control is improving, the early users are
> swinging in the breeze with high maintenance and planes that lost 50%
> of their value in 2 years.

My club has a few dreamers that keep suggesting we should look into
getting some Cirruses (our current high-end planes are Mooneys).

I sure hope our board doesn't fall for that mistake.

[ArtP]

On Tue, 03 Feb 2004 17:04:41 -0500, TTA Cherokee Driver
> wrote:


>My club has a few dreamers that keep suggesting we should look into
>getting some Cirruses (our current high-end planes are Mooneys).
>
>I sure hope our board doesn't fall for that mistake.

The plane is now 2 years and 1 month old. I just got 3 "mandatory"
SB's (2 for the parachute and one for the starter). The estimated cost
is over $1,000. This is just after the 2nd annual ($2,000 and 6
weeks).

[Dude]

While new Mooneys are expensive, they sure are nice. I sat in one at an
open house they other day. Sweet!


"TTA Cherokee Driver" > wrote in message
...
> ArtP wrote:
>
> > On Mon, 02 Feb 2004 07:21:54 GMT, "Dude" > wrote:
> >
> >
> >
> >>Cirrus has done well, and much of it is due to the passion of the
founders.
> >>I may be mistaken, but I believe that the investors are likewise
passionate.
> >>They are not presently trading the stock on an exchange, are they? If
not,
> >>then the company is still reasonably closely held.
> >
> >
> > Cirrus has done well by taking risks with the customers. The basic
> > design is great but the devil is in the details. They lack good detail
> > design, testing, and quality control. While the COPA web site
> > indicates the quality control is improving, the early users are
> > swinging in the breeze with high maintenance and planes that lost 50%
> > of their value in 2 years.
>
> My club has a few dreamers that keep suggesting we should look into
> getting some Cirruses (our current high-end planes are Mooneys).
>
> I sure hope our board doesn't fall for that mistake.
>

[TTA Cherokee Driver]

Of course ours are not new, far from it :)

That's why the financial folly of starting to buy $300K airplanes is so
apparent, even if the Cirruses were great and reliable planes.

Dude wrote:

> While new Mooneys are expensive, they sure are nice. I sat in one at an
> open house they other day. Sweet!
>
>
> "TTA Cherokee Driver" > wrote in message
> ...
>
>>ArtP wrote:
>>
>>
>>>On Mon, 02 Feb 2004 07:21:54 GMT, "Dude" > wrote:
>>>
>>>
>>>
>>>
>>>>Cirrus has done well, and much of it is due to the passion of the
>
> founders.
>
>>>>I may be mistaken, but I believe that the investors are likewise
>
> passionate.
>
>>>>They are not presently trading the stock on an exchange, are they? If
>
> not,
>
>>>>then the company is still reasonably closely held.
>>>
>>>
>>>Cirrus has done well by taking risks with the customers. The basic
>>>design is great but the devil is in the details. They lack good detail
>>>design, testing, and quality control. While the COPA web site
>>>indicates the quality control is improving, the early users are
>>>swinging in the breeze with high maintenance and planes that lost 50%
>>>of their value in 2 years.
>>
>>My club has a few dreamers that keep suggesting we should look into
>>getting some Cirruses (our current high-end planes are Mooneys).
>>
>>I sure hope our board doesn't fall for that mistake.
>>
>
>
>