Hexcel Corp. is reducing its workforce by several hundred people, eliminating overtime, and cutting the base pay of all of its board members by 50% in the face of the COVID-19 epidemic.
The announcements were included in the Stamford firm’s first-quarter financial results, which found net sales drop to $541 million from $609.9 million in the first quarter of 2019. Quarterly net income plummeted to $42.4 million from $72.2 million year-over-year.
“First quarter results were negatively impacted primarily by the continued grounding of the Boeing 737 MAX and effects of the COVID-19 pandemic,” Hexcel Chairman, CEO and President Nick Stanage said. “The 737 MAX continues to be a headwind with no production at this time.
Hexcel manufactures and markets lightweight, high-performance structural materials, including carbon fibers, specialty reinforcements, and other fiber-reinforced matrix materials, honeycomb, adhesives and composite structures used in commercial aerospace, space and defense and industrial applications.
“The COVID-19 pandemic forced temporary closures at a number of our plants as well as customer plants,” Stanage said. “These impacts led to reduced sales and overhead absorption challenges. Going forward, we anticipate significant declines in demand within the aerospace and industrial markets that will challenge us for the remainder of the year.”
Hexcel is “is acting decisively to realign our operations in this rapidly changing business environment,” Stanage said, which includes:
- Eliminating contract labor and overtime while reducing discretionary spending to essential items only.
- Reducing the company’s total workforce to align operations with customer demand.
- Reducing base pay for Stanage and cash compensation for each member of the board of directors by 50% until further notice.
- Implementing temporary salary reductions and unpaid furloughs for all salaried employees whose jobs are not eliminated.
- Suspending its 401(k) match on employee contributions until year end.
- Suspending its employee stock purchase plan through year end.
- Suspending its dividend and pausing its stock buyback program; both of those decisions will be reviewed quarterly.
Hexcel has permanently laid off 288 employees in Washington state and furloughed 50 workers in California, with another 300 or so positions expected to be eliminated in the coming weeks. No layoffs have been announced in Stamford.
Earlier this month, Hexcel and Fort Collins, Colorado-based Woodward Inc. called off their $6.3 billion merger effort, citing the coronavirus crisis. Woodward has furloughed 11% of its full-time workforce, and expects to cut another 4% by year’s end.