Finmeccanica will furlough 1,500 workers due to a slow-down in production that is centered mainly around its aeronautical activity, although its defense electronics, space and railway businesses have also been impacted.

Worst hit is Alenia Aeronautica, which is suffering with a production decline in both the Boeing 787 and the Airbus A380, while maintenance, repair and overhaul orders have dried up almost completely.

As a result, around 1,500 Alenia workers will be told to cease working for several months, although they will continue to be paid by the government and will not lose their jobs. Labor unions are discussing a range of solutions to further soften the effects of the work stoppage, including mandatory vacation leave and rotating plant shutdowns.

Up until now, Finmeccanica has been able to cope with the global economic downturn without resorting to layoffs because it has performed better than many other companies in the aerospace and defense business, notably thanks to a diversified portfolio.

In addition to the furloughs, the company is preparing a range of other initiatives to reduce costs, says CFO and deputy CEO Alessandro Pansa. Pansa says measures will include a €100 million ($140 million) reduction in investment and steps to rationalize activities, beginning with the merger of Alenia Aeronautica and its Alenia Aermacchi affiliate. Alenia Aeronautica has already incorporated two subsidiaries, Alenia Composite and Alenia Aeronavali.

A more comprehensive reorganization of the defense electronics sector also is envisaged. Finmeccanica will divest more activities to focus on its core business. One move will involve the sale of Finmeccanica’s 50% stake in the joint venture EMA, an Italian company that produces aircraft engines parts and subassemblies, to Rolls-Royce, giving the British contractor full ownership. The value of the transaction has not been disclosed. Finmeccanica also plans to sell its share in Ansaldo Energya or, alternatively, to float part of its stock, probably some time later this year.

Chairman and CEO Pier Francesco Guarguaglini is confident that 2010 will bring sufficient new business to allow Finmeccanica to reabsorb the furloughed workers. New activity in South America and Brazil, in particular, are expected to drive recovery.

Molynx UAV Photo credit: Alenia Aeronautica