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WASHINGTON — General Dynamics Corp. says plummeting sales of business and personal jets has forced it to cut production of the luxury planes, leading to layoffs of 1,200 workers and a reduction in company profit guidance for the year.
The company blamed a shrinking backlog at its Gulfstream Aerospace unit, as a drop in demand accelerated during February as the broader economic picture grew bleaker.
General Dynamics, based in Falls Church, Va., also cut its 2009 earnings guidance to $6 to $6.10 per share, down from $6.70 to $6.75 share because of the lowered expectations at Gulfstream.
The job cuts will be concentrated at Gulfstream's Savannah, Ga., plant, but will also occur at facilities in Appleton, Wis., Brunswick, Ga., Long Beach, Calif., and Dallas, according to General Dynamics spokesman Rob Doolittle.
Business jets are mostly used to ferry corporate executives or wealthy individuals in plush cabins outfitted with luxury amenities like cushy seats and wood-paneled interiors. Many models are pricey — General Dynamics' new G650, the longest ranging and fastest business jet that has yet to hit the market, will sell for around $60 million.
But demand for business jets has hit a wall in recent months, as the worldwide economic downturn and the seizing up of credit markets has led to a sharp drop in demand from struggling corporations. The planes also face a public relations challenge after becoming equated with corporate excess at struggling industries like automakers and financial companies.
As recently as January, General Dynamics said is was cautiously optimistic about Gulfstream sales despite the turbulent economic conditions. The company said sales would be lower this year than in 2008, but that it had orders for more of the bigger and pricier models, making up for a decline of its cheaper models.
However, General Dynamics said Thursday that the largest erosion its backlog came in large-cabin aircraft production and delivery. It now expects to work on 73 of the planes this year, down from earlier forecasts of 94. Gulfstream also said it will reduce production of its mid-size aircraft from a projected rate of 30 to 24 aircraft this year.
Company CEO Nicholas Chabraja said General Dynamics remains confident in the Gulfstream business.
"We continue to believe that Gulfstream's backlog provides a solid foundation for the business in this tough market environment," he said in a statement.
Company shares fell $2.25, or 5.6 percent, to $37.97 in morning trading.
