It's more than just wages.....

The US has a growing problem with workforce "life skills". There is a lot of "on the job" training in aviation. For those of us who own manufacturing businesses, we see it everyday. Even though the unemployment rate is high, it's still difficult to find employees we're willing to invest in due to an increasing population with poor life skills.

Today, the American worker is better, but not enough better. Cessna is making the decision now because they're in the low point of the current business cycle. They're probably faced with doing it sometime anyway, and it easier to implement when sales are slow.

There are solutions, and I'll bet we'll eventually deal with it. I have a feeling there are some tough times ahead before we buckle down. Unfortunatley, we won't face the necessary changes until we have to.

I suspect it has a lot more to do with high cost union jobs here. And tax laws that allow companies to keep profits offshore and avoid taxation. Those monies should be repatriated at 0 tax as long as they are paid out in dividends, R&D, of plant and equipment investments.

I am not sure how high of a cost union wages in Wichita are. The 2010 contract included a 4% pay cut, a 160% hike in healthcare premiums with a 5K deductible, and teminating the pension plan for a 401(k). We all know the stock market is flat for the decade. Textron's 2011 annual report stated health care costs rose 9% last year, and they expect 5% annually till 2021.

Also, now there is a 3 tier wage scale, with the new hires at 15.79 an hour and the most experienced worker with 10 years seniority topping out at 30.57.

So, 30K on the check for a new hire, and 58.5K for a 12 year grade A employee. Is that "high wages" for someone who builds machines that travel at 600 MPH?

Then, 3 days after ratifying this agreement, Cessna lays off 700 workers (11%) in Wichita.

Their CEO Scott Donnelly made 8.7M in 2010. Thats 150 times his "highly paid" most experienced workers and 290 times his new hire rate. It doesnt say what his health premiums are. Am I the only one who sees the disconnect here?

http://www.examiner.com/peace-and-freed ... na-wichita
http://ll774.blogspot.com/

China is protectionist: if you want to sell there you have to include them in the production process. We are more lassez-faire and do not require that.

You have to look at it from a customer perspective, not what's fair, etc. It all backs up from there.

Cessna owned the small bizjet market for years and their game has changed. A guy who wants a Citation X, a Gulfstream 550, or a Global Express will pay a premium ('cause that's he wants), so the manufacturers of larger jets are able to keep a little pricing power.

It's a different game in the small to mid sized jets. It has hard pricing points where much is sold to the fractional guys who are very experieinced buyers. Cessna's products are getting surrounded by Embraer and very soon HondaJet. NetJets recent big order went to Embraer. A $100,000 or so in selling price is a big deal. It's all about cost.

It's not happy times at Cessna.

http://aero-news.net/index.cfm?do=main. ... b263989ae8

China is not just a cheap place to build stuff. Thanks to our endless appetite for imported crap and a tsunami of T-bill IOU's, China:
1. is sitting on an ocean of dollars...
2. ...so they can afford expensive stuff like corporate jets, making them...
3....one of the brightest market prospects for business aircraft in the world.
They're just deploying their humongous cash assets the way any good capitalist country would. We're the ones who have eaten our seed corn. And the current president has about as much to do with that as someone who steps on a pile of crap. He didn't make it. He didn't leave it unpicked up. But it's on his shoe just the same.
Politics.
Robin White

How fast what they assemble travels isn't relevant. Should Cessna workers make 10x what Ford workers make because their airplane goes faster than the car does? Should the jet workers make 3-4x the piston guys?

How expensive they are compared to suitable alternatives is what's relevant, IMO.

If your argument is "those alternative sources of labor are unskilled, lacking in willingness to do the job, or something else critical to the job and unrelated to where they live", it's a strong argument. Even, "we need a manufacturing base for national defense eventualities" is stronger than what seems to me to amount to "union assembly line workers USED to make a very good living when the US was the only or primary high quality skilled manufacturing locale in the world. Even though there are now many other locations in the world where quality manufacturing can be done more cheaply, we believe that companies owe us the continued high standard of living that we enjoyed before."

Am I happy that my airframe and engine company are now foreign-owned? Not especially, but that beats the alternative of them being out of business.

Compared to China wages, they are in fact high.

Compared to China wages, they are in fact high.

Late reply, but well said Nick.