Strike impact costs Textron around $50 million in revenue
October 28, 2024
Textron’s third quarter 2024 results have been adversely impacted by recently-resolved strike action, affecting revenues by approximately $50 million (and Textron Aviation segment profit by around $30 million), with the financial legacy of the work stoppage anticipated to run on into the next quarter.
Textron Aviation’s revenues for the quarter were $1.3 billion, essentially unchanged from the same time last year, with the business segment’s profit down from $160 million to $128 million year-on-year.
“In the third quarter, Textron Aviation experienced a strike upon the expiration of its existing labour agreement with bargaining unit employees that was recently settled with the ratification of a new five-year contract,” confirmed Textron chairman and CEO Scott C Donnelly. Nevertheless, the four-week work stoppage will continue to contribute to “inventory headwinds” as Textron looks to rebuild an inventory it can “burn through and sell in ‘25”.
With direct labour equating for around 10% of Textron’s costs, “our focus at this point will be making sure we can drive the right productivity and efficiency to compensate for that,” added Donnelly. (Under the life of the new five-year contract, workers will benefit from aa 31% general wage increase, alongside an 11% wage increase immediately upon ratification. Subsequent 4%, 5% and 6% increases will follow in 2025, 2026 and 2027, respectively).
Textron Aviation delivered 41 jets in the quarter (up from 39 in Q3 2023), although commercial turboprop deliveries were down from 38 to 25. Backlog at the end of the quarter stood at $7.6 billion, up $162 from the previous quarter – with Donnelly believing that the updated M2, CJ3 and new CJ4 product offerings will continue to prove popular. “The number of updates, which are pretty significant in terms of capability of the aircraft and safety, particularly with launching Autoland across all those single pilot jet platforms, is driving strong demand,” he highlighted – with the ongoing investment in new products contributing to over $1 billion of new orders placed within the quarter.
Under the terms of the new contract – ratified a week ago– the workforce has five days to return to work, with Textron expecting to be at full representation as of Monday 27 October. “We’ve spent … a lot of time here over the last four or five weeks continuing to work with our supply chains,” confirmed Donnelly, concluding: “our complete focus right now is getting everybody back in the door and getting the factory up and running… hopefully more efficient than it’s been over the past few years”.
Looking to next year, “despite the interruptions that we’ve had here in 2024, I think that our plan in terms of expanding capacity and delivering more product … is still on track,” Donnelly added. “We had a ramp plan that was co-ordinated with suppliers and our own internal resourcing and staffing”.
