Hawker Beechcraft Announces Cost-Cutting Strategies

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Tuesday, February 24, 2009

Cutting costs is high on the agendas of many American companies, including those in our area. Hawker Beechcraft is one of those companies making cuts.

A recent memo to employees says, “Because of deteriorating economic conditions, Hawker Beechcraft will be carrying out cost-cutting measures.”

But some experts say cutting costs can do more harm in the long run.

Hawker Beechcraft carries a large debt from when Onex and GS Partners bought the company from Raytheon. Hawker has already announced 2,800 layoffs.

Company chairman Jim Schuster told employees in a memo that the company was prepared to carry out actions to drive down costs. Two of these measures include eliminating merit increases for 2009 and suspending tuition reimbursement.

The memo points out that some American companies have eliminated 401-K contributions, while others are freezing pension plans. According to the memo, Hawker hopes to avoid such measures.

“In the long-term, making these short-term cuts in costs are going to have little effect,” said Brian Rawson.

Rawson spent 20 years on the corporate side working for the Coleman Company before becoming a WSU management instructor. He says cost-cutting measures could have unintended negative effects in the long-run.

"Research says when the whole organization takes cuts to keep everybody at least partially employed that it builds much more resentment and causes your best performers to look elsewhere,” Rawson said.

Despite this research, some companies feel they must make cuts in order to survive the economic downturn.

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