By Gopal Ratnam
Gulfstream, the business-jet making unit of General Dynamics Corp., said today it would spend $500 million and add 1,000 jobs in Savannah, Georgia, to meet a growing market for large-cabin aircraft.
The investment, to be spread over seven years, will pay for building plants for large-cabin planes like the G650 along with maintenance capacity for all models, Joe Lombardo, president of Gulfstream, said in a telephone interview. New hires in technology and engineering will be followed by manufacturing and service jobs, Lombardo said.
“We are already seeing more demand for our large-cabin, long-range aircraft and are having a pretty good year so far,” he said. Sales for the G650, which typically carries 8 passengers and as many as 16, will be driven by international demand, he said.
Gulfstream’s planned expansion and recruitment program comes a month after a survey commissioned by avionics maker Honeywell International Inc. said the recovery in the global business-jet market may occur in late 2011 and accelerate in 2012, a year later than a previous estimate.
Honeywell’s forecast that large-cabin aircraft like the G650 will “pace the recovery, and the mid-cabin and smaller planes will follow,” is “pretty accurate,” Lombardo said.
Gulfstream, which announced a five-week production furlough in July 2009, is seeing a recovery aided by China as well as the Middle East and Brazil, Lombardo said. “Asia Pacific is a strong market right now and will continue to be that way,” he said.
North American Market
Still, “we have not given up on North America,” Lombardo said, pointing to orders from major corporations that recently purchased Gulfstream aircraft. He declined to name the customers.
For the quarter that ended in September, Gulfstream booked “more orders than we had in any quarter since the downturn began in 2009,” Lombardo said in a statement. Service centers are seeing more volume because flying hours are rising, he said.
Orders for the G650 have held steady at 200, he said.
Gulfstream’s expansion has been aided by the company’s ability to “still generate enough cash” even in a “tough economy,” Lombardo said.
General Dynamics, based in Falls Church, Virginia, reported cash of $1.84 billion as of Sept. 30. The shares rose 5 cents to $66.55 today at 4:02 p.m. in New York Stock Exchange composite trading. They have fallen 2.4 percent this year.
‘Excellent News’
“Gulfstream’s expansion is excellent news,” Georgia Governor Sonny Perdue said in an e-mail. Other companies also have announced “major new locations and expansions here recently,” he said.
The companies adding employment in Georgia include Systemax Inc., a Port Washington, New York-based maker of electronics that has announced 400 jobs in the state, and the U.S. unit of solar-power equipment maker Mage Solar Gmbh of Ravensburg, Germany, which plans to hire 350 people, said Heidi Green, commissioner of Georgia’s Department of Economic Development.
The state is providing incentives to Gulfstream of about $34 million, including tax credits and benefits, in exchange for job training, Green said in a phone interview. Gulfstream’s planned hiring is a 15 percent increase over its current levels, she said.
Falling Deliveries
The October forecast by Honeywell relied on a survey of 1,200 corporate flight departments worldwide. The Morris Township, New Jersey-based company said global deliveries of business jets probably will fall to 675 to 700 planes in 2010 and stay at fewer than 700 next year, down from 849 in 2009.
The slump has hurt Textron Inc.’s plane-making unit, Cessna, which announced in September that it would slash 700 more jobs after cutting half its 16,000-person workforce since 2008.
Gulfstream’s fleet of larger-cabin jets has seen demand recover faster than makers of smaller-cabin planes like Cessna, which faces increased competition from other manufacturers, Lombardo said.
Bombardier Inc., based in Montreal and the largest maker of business jets, unveiled two long-range models on Oct. 16 to take on newer planes from Gulfstream.
“It’s not surprising to us that the competition would want to get into the segment where the G650 is going to be, because it’s a growth market,” Lombardo said. “We don’t feel it’s going to hurt our ability to sell.”
Source: BLOOMBERG
Date: 2010-11-15