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April 03, 2020 02:01 PM

TransDigm says COVID-19 crisis may lead it to cut work force by 15%

Scott Suttell
Crain's Cleveland Business
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    TransDigm
    TransDigm, a maker of components for aircrafts, said demand drop brought on by the coronavirus pandemic may cause it to reduce its work force by up to 15 percent.

    CLEVELAND—TransDigm Group Inc., a maker of aircraft components, said it will reduce its work force "by up to 15 percent" as a result of disruption in the aerospace and travel industries due to the coronavirus pandemic.

    Based on 18,300 employees the company said it had as of Sept. 30, the cuts could affect nearly 2,745 employees.

    In a news release issued April 2, the company also said it "anticipates implementing one- to two-week furloughs at many locations over approximately the next six months in response to business unit-specific situations."

    TransDigm is making these moves because it is "beginning to see significant decreases in demand across its commercial aerospace business and expects this trend will continue in the coming months."

    The company said laid-off U.S. employees will receive a "substantial" lump sum payment based on their tenure, and an additional $4,000 to defray expenses associated with health care and job search.

    TransDigm's senior management team "will substantially reduce their cash compensation" for the rest of the year, the company said in the release. CEO Kevin Stein is cutting his cash compensation by more than 50 percent, though the release did not specify the amount of the cut. Stein, in 2018, was paid a salary of $838,333, though his total compensation was over $23 million as a result of bonuses.

    Cleveland-based TransDigm could not be reached for comment.

    Members of TransDigm's board of directors also will forgo their annual cash board fees.

    TransDigm said it was withdrawing its financial guidance "given the unprecedented uncertainty around the ultimate impact of COVID-19 on global market and economic conditions."

    In a regulatory filing on April 2, TransDigm said it expects the pandemic "to have a significant adverse impact on its sales, EBITDA ... and net income for the third quarter of fiscal 2020 under the assumption that the COVID-19 pandemic will adversely affect its non-defense customers and their demand for its products and services during the entire third quarter of fiscal 2020."

    In 2019, TransDigm acquired Esterline Technologies Corp., a supplier of products to the global aerospace and defense industry, in a deal valued at about $4 billion. That was a year after it bought Esterline's Brea, Calif.-based Kirkhill business, a supplier of engineered aerospace elastomers. At the time of that deal, TransDigm said Kirkhill has annual revenues of about $90 million.

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