Eurocopter, the world's biggest civil helicopter maker, says it will slash costs by $300 million because of falling orders.
The company, a division of EADS, says the measure is part of a plan to boost productivity and invest in future products while slicing inventories to improve cash flow and stave off mass layoffs in its 16,000 staff operation.
The restructuring plan, set to take effect by the end of 2011, is dubbed Shape.
"Eurocopter has to save money in the short term in order to get through the crisis period," the company said in a statement.
The move is long overdue.
Analysts say the Airbus sister company should have attacked costs after the financial crisis dampened demands for civil helicopters.
The global financial slowdown has caused a sharp drop in spending on helicopters by companies and VIPs, mirroring a slump in jet orders.
Demand, however, from oil and gas companies has remained robust as energy prices rebound.
Citing a French brokerage, Defense News said "the market response (to the cost cut) was negative because although the statement confirmed previous news reports, it was not clear how much of the $300 million in reductions would flow to EADS and how much would go to boost Eurocopter's margins."
The company is projected to improve internal processes to provide sustainable revenues in the medium and long term. It is also expected to invest in new products to maintain long term competitiveness.
"Even in times of crisis, Eurocopter will continue to increase budgets f or the development of new products and services," the company said in a recent statement. It explained that research and development projects had increased by 40 percent in 2008 and 25 percent this year.
Eurocopter had sales of 4.4 billion euros last year, splitting equally between civil and military helicopters.
The company controls half the global civil market with models that include Ecureuil and Super Puma.
It also builds military helicopters such as the Tiger and the NH990, which has been partially delayed in production. Shrinking sales, however, in the civil sales market have impacted the defense side of the company's operation.
"The Shape program is much more than just a simple cost-reduction program," the company's Chief Executive Lutz Bertling was quoted as saying in Defense News. "With Shape Eurocopter will have the opportunity to make the essential profits and necessary cash available to continue to invest in its future."
Eurocopter's main rival is Italy's AgustaWestland and United Technologies Corp.'s Sikorsky in a worldwide market of more than $6 billion a year.
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