B/E Aerospace is to close seven manufacturing sites and plans to shed 500 jobs as part of a major restructuring that will cost the US cabin interiors specialist $70 million.
The Florida-based company revealed details of the move while announcing a deal by which it will reduce its commitment to thein-flight entertainment sector through the sale of a majority share to Sextant Avionique .
B/E's rationalisation programme follows a rapid expansion which has seen it make seven acquisitions over the past nine months. This expansion, says the company, has left some products obsolete and caused a "misalignment" of its manufacturing, research and engineering capacities.
"The restructuring plan is intended to lower our cost structure significantly and to improve our productivity and long-term competitive position," says B/E chief executive Robert Khoury. "The learning curve associated with the large number of new product introductions is putting pressure on our gross and operating margins."
B/E says cost cutting will result in consolidation of its operations and facilities, reducing its workforce by 8% and rationalising its product offerings over 12 months. Margins are unlikely to improve until fiscal year 2001, it says.
The US company predicts that the financial crisis in Asia and cuts in widebody airliner production will dampen its growth rate "for several years", although it expects to achieve modest increases in revenue as a result of aftermarket aircraft refurbishment programmes.
The company's inflight entertainment (IFE) deal with Thomson-CSF subsidiary Sextant effectively signals a move away from a sector in which B/E has struggled to deliver on promises of new equipment.
The French avionics specialist will acquire a 51% stake in B/E's IFE business for an initial purchase price of $62 million, with the final price to be determined by the operating results of the joint venture over its first two years, within a $47-87 million range.
B/E says it will reduce its bank borrowings using the proceeds from the transaction, which (subject to regulatory approval) is to be completed by 28 February. The new company, Sextant In-Flight Systems, will be based at B/E's Irvine, California, site.
Products offered include the BE2000 multichannel individual passenger video system, various audio systems and the Multimedia Digital Distribution System interactive entertainment system.
The investment follows forays by other avionics specialists into the IFE sector - notably Rockwell Collins' purchase of Hughes-Avicom International.
Source: Flight International