Cirrus Aircraft looking at comeback after a rough few years

For 12 years, Cirrus Aircraft has won international recognition for its unique composite-bodied propeller airplanes.

Features such as advanced electronics and a full airplane parachute helped make the Cirrus SR-22 the best selling general aviation airplane since 2002. But a worldwide recession has the airplane manufacturer lacking for customers.

Once cranking out 16 aircraft a week, Cirrus now produces half that or fewer.

Although company officials predict a turnaround this year, Cirrus has clearly been in survival mode, guarding cash. It even withheld rent payments owed both the city of Grand Forks North Dakota, and Duluth's economic wing, the Duluth Economic Development Authority.

The company owes nine months back rent, said David Montgomery, Duluth's Chief Administrative Officer.

"I am fairly confident that we're going to come to a good resolution on this that will protect the interests of DEDA and the city," Montgomery said. "I feel we will get this resolved."

With cash tight, the company has changed its operation.

Cirrus no longer produces a fixed number of airplanes. Instead, it manufactures planes based on orders, chairman and co-founder Dale Klapmeier said. During some weeks, eight airplanes come off the line; during others, just three.

"We can't afford and don't want to afford to have airplanes sitting at the end of the line completed without an owner," Klapmeir said.

To make fewer airplanes, Cirrus needs fewer workers. The company had about 1,100 employees in mid-2008. Today, it has 559.

The hard times also grounded the company's new flagship product -- a seven-passenger jet called the Vision SF50. Klapmeier said jet design and engineering continues, but Cirrus is not investing in production equipment.

"We're taking it as fast as we can, given our financing," he said. "As you can imagine when we go from 700 airplanes a year to 300 airplanes a year everything is so drastically affected. That affects the development time frame for the jet as well."

To make matters worse, some early jet investors have withdrawn their deposits -- draining more of the cash stream supporting the project.

Despite all those difficulties, company officials are smiling. They see rays of hope this year, coming mostly from overseas markets.

The company gathered its world-wide sales force in Duluth last week to coordinate sales strategy. Dealers came to frigid Duluth from England, Russia and the Mideast.

Stephen Maltby, whose Brisbane, Australia, dealership serves Australia, New Zealand and much of Asia, said his company has had a good year reassembling and selling airplanes that arrive in ships.

"Fortunately Australia got through the recession in reasonable shape. We actually improved sales in 2009 over what we did in 2008," Maltby said.

Cirrus officials expect slow improvement this year in the United States. But they're predicting a real rebound in the offshore market as the company has deals in the works.

"If we win a few of those deals this business could be as much as 50-percent higher in 2010," president and CEO Brent Wouters said. "So the range of possibilities is much wider than it has ever been, but that's because we have planted so many seeds.

"We're just not sure when those deals will come to fruition."

Brian Foley, an aircraft industry investment adviser, said Cirrus is doing the right thing to survive the downturn by focusing on its core propeller driven products and going slow on the jet.

"I think they've hit their down," said Foley, who predicts the company will start to rebound this year.

"They're one of the best positioned general aviation companies going today," he said. "They're a safe bet."

That would be good news for home communities like Duluth and Grand Forks -- and the dozens of other businesses that depend on Cirrus Aircraft.

Gallery

Fullscreen SlideshowPrevious Slide

1 of 1

Next Slide