Duluth's aviation industry comes down to earth
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The manufacturing plant of Northstar Aerospace near Duluth's airport is clean, practically brand new, and cluttered with precision-made airplane parts. The company is one of Cirrus Design's major parts suppliers.
What's missing are the workers. There was just a skeleton staff on hand last week as Northstar President & CEO John Eagleton dug through bins of cockpit parts.
Drew Digby with the Department of Employment and Economic Development provides a range of Duluth area aviation jobs -- from maybe 1,500 directly tied to manufacturing to more than 4,000 reliant on the aviation industry.
The aviation sector has helped the area diversify away from dependence on the region's volatile iron mining and forestry industries.
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It used to be a lot busier at Northstar Aerospace, but it started cutting jobs a couple months ago, from close to 120 workers down to 40. That's when airplane sales starting diving for Northstar's No. 1 customer, Cirrus Design.
Now, Cirrus has furloughed almost 500 people after cutting another 175 two months ago.
Another of Northstar's major customers, New Mexico-based Eclipse Aviation, is in chapter 11 bankruptcy and down to half its workers.
Eagleton says when the economy tanks airplanes get a lot harder to sell.
"With the financial tsunami that happened on Wall Street and Washington the last two to three months, it affected all capital markets. Airplanes are purchased with discretionary funds, on the most part, and that kind of spending is just not taking place today," he said.
Eagleton sees an economic problem that goes way beyond aviation.
"The capital goods market lacks confidence with the buyers. They're just not spending the money, whether it's construction equipment, farm equipment, leisure/motor home equipment or airplanes," said Eagleton.
It's a setback for what's been Duluth's most encouraging new industry. Cirrus CEO Alan Klapmeier voiced the depth of the slump in a conference call last week.
"From an order point of view, we're off at least 50 percent for the month of November," said Klapmeier.
That led to the December layoffs, intended to clear out inventory before Cirrus manufacturing ramps up again in January. Klapmeier is trying to stay optimistic.
"While it's difficult for us to forecast what the first half of 2009 looks like, there will be reduced production. But we do feel good about where our products are going forward," said Klapmeier.
Cirrus continues work on a new small jet it hopes to begin producing in about two years. But even that project has slowed, although Klapmeier says Cirrus has not cut anybody developing the jet.
"Unfortunately, what it does mean is we aren't not ramping up as fast," said Klapmeier. "We're not adding new people as quickly as we would like, but we're still making good progress with the existing team."
Jim Skurla, of the University of Minnesota, Duluth's School of Economics and Business says the aviation sector hasn't turned out to be recession-proof.
"I think one of the theories was that, because it's kind of an expensive item, that the people purchasing these items wouldn't be affected by a recession so much. But that hasn't turned out to be the case," said Skurla.
Cirrus Design intends to resume full production the second week of January. And that's when companies like Northstar Aerospace will ramp up parts production.
But the long term may have a lot more to do with the national economy than anything these companies can control in Duluth.
