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Moog plans job cuts in aircraft and space units

Moog Inc., facing stagnant sales in its aircraft business and the prospect of lower revenues in its space and defense unit, is making significant cuts in its workforce.

The Elma motion control equipment maker has informed workers that it is eliminating 5 percent of the jobs within its aircraft group and that it plans to cut staffing within its space and defense unit by about 10 percent in early November.

The job cuts were outlined in a memo from John Scannell, Moog’s chief executive officer, that was obtained by The Buffalo News.

The memo did not say how many jobs would be eliminated by the cuts, but the impact likely will be felt at Moog’s operations at its Elma complex, which employs about 2,500 people. Moog’s Elma complex is heavily involved in the company’s aircraft business and its space and defense work.

Ann Luhr, a Moog spokeswoman, said Friday she would not comment on the cuts.

Scannell, in the memo, said the job cuts at the two units were “in response to challenges in their business outlook.”

In the aircraft group, Scannell said Moog’s revenues are not growing, while its mix of sales is changing. The company’s sales for new military aircraft have slowed because of reduced military spending, while commercial aircraft revenues have increased because of new aircraft, such as the Boeing 787 and the Airbus A350, that use Moog components.

But Scannell also said in the memo that Moog must absorb high costs in the early stages of those programs as production ramps up, while it takes time for the lucrative market for replacement parts to develop. While Moog has invested heavily in research and development efforts for new commercial aircraft over the past decade, the pace of new aircraft development is slowing, which means Moog’s R&D spending “will revert to more normal levels.”

Scannell said Moog’s space and defense group over the past two months has “seen a dramatic reduction in our sales forecast” for the fiscal year that began earlier this month. He said the drop was mainly due to unexpected delays and cancellations in orders for space hardware.

“This lower forecast means there will be less work in the coming year and, as a result, we need to reduce staffing by about 10 percent within the group,” he wrote.

Scannell stressed in the memo that Moog, which earned a profit of $118 million during the first three quarters of its fiscal year, is financially healthy and that “the long term future is bright.”

“Unfortunately, we find ourselves today in a relatively difficult economic period. Several of our markets are stagnant and in those markets, our customers are not growing,” he wrote. “As a result, we are forced to make painful internal adjustments to ensure we remain financially healthy and can continue to invest for the long term.”

Moog said in July it expects its sales to reach $2.65 billion this year, up less than 2 percent from the previous year. It forecasts that its profits would rise by about 37 percent to $165 million, or $3.65, per share, up from $120.5 million, or $2.63 per share, during the previous fiscal year.

The company also said it expected its sales during the current fiscal year to rise by less than 2 percent to $2.69 billion, with profits rising by about 10 percent to $181 million, or $4.25 per share, from their projected levels during the fiscal year that just ended. Moog is scheduled to release its fourth-quarter earnings on Friday.

email: drobinson@buffnews.com