United Technologies cuts spending, freezes hiring as the coronavirus takes its toll on the aviation industry
United Technologies Corp. on Tuesday announced cost-cutting in response to the sudden economic downturn, and a steep fall in its market value, brought on by the spread of the coronavirus.
Just weeks before it’s set to leave Connecticut for Massachusetts as the rebranded Raytheon Technologies Corp., the aerospace giant said it will suspend discretionary spending, including for research and development.
UTC also will freeze hiring and impose a “significant reduction” in capital investment in buildings and facilities, excluding safety-related spending. And it will defer annual merit increases for executives and salaried employees.
“These steps are difficult but necessary to protect UTC’s ability to weather this rapidly evolving crisis and are similar to the steps we took in past crises, representing a global shared sacrifice in the face of these challenging times,” Chief Executive Officer Greg Hayes said in a statement posted on the company’s website.
He cited “volatility and uncertainty” affecting UTC’s commercial aerospace customers.
“Global air traffic volumes have dropped severely, leading airlines to cancel flights and ground planes,” Hayes said. “This is having a direct and immediate impact on UTC’s commercial aerospace businesses, requiring us to take multiple steps to aggressively reduce costs.”
UTC’s aerospace businesses include jet engine maker Pratt & Whitney and Collins Aerospace, its sprawling unit that makes aircraft landing gear, cabin and cockpit equipment, flight systems and numerous other components.
The retrenchment marks a temporary reversal for UTC, which has spent tens of billions of dollars over the past decade bulking up its aerospace and defense business as it spins off its Otis Elevator and Carrier heating and cooling manufacturing subsidiaries. The economic downturn is expected to ease -- though no one knows when -- as public health officials get the upper hand over the coronavirus.
Cuts have been imposed elsewhere in the aviation industry.
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Boeing last week said it is suspending its dividend and General Electric Co. said Monday it will lay off 10% of its U.S. workforce,.
“The aviation industry is feeling the impact of this global pandemic most acutely,” GE CEO Larry Culp said.
UTC’s share price has dropped 44% since Feb. 7, a greater drop than the one-third fall in the S&P 500, an index broadly measuring the share performance of 500 companies.
The reduced share price has wiped out $54 billion in UTC’s market value, to $75 billion as of Tuesday, down from $129.5 billion on Dec. 31.
Shares of UTC rose 2 percent, to $88.71, in early trading Wednesday.
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