Real Interesting

Cirrus business booms, Duluth works to keep it; AVIATION:Cirrus contemplates the next step for the company as it increases production.

BY PETER PASSI
1,198 words
8 June 2004
Duluth News-Tribune
English
© Copyright 2004, Duluth News-Tribune. All Rights Reserved.

Cirrus Design Corp. stands out as one of the Northland’s most stunning business success stories in the eyes of Tom Cotruvo, Duluth’s business development manager.

When the airplane manufacturer moved to Duluth from Baraboo, Wis., in 1993, the company brought with it a work force of 35 people. Today, Cirrus employs about 750 people in Duluth. That number has grown by about 40 people in the past few months, and the company continues to hire.

While Cirrus headquarters are in Duluth, it also employs more than 150 people in Grand Forks, N.D., where it operates a fiberglass composite shop. Originally, the company had planned to locate its operations entirely in Grand Forks, but Duluth convinced Cirrus’ founders, Alan and Dale Klapmeier, that Duluth would be a more suitable home.

Still, Duluth can’t assume it will have dibs on the jobs Cirrus creates in the future.

“We can’t take Cirrus for granted,” Cotruvo said. “We’re going to need to continue to work with them and use all the tools that are available to us as they look to expand.”

The company appears to be on the verge of another growth spurt. Demand for its airplanes has been building, and Cirrus has dramatically increased its production in recent months. During the first quarter, Cirrus knocked Cessna out of its long-held perch as the world’s largest producer of four-seat airplanes.

David Coleal, Cirrus’ chief operating officer, believes the company can continue to increase production within its current facilities. Cirrus completes work on two airplanes daily and soon expects to increase production from 10 to 12 planes per five-day work week. Coleal predicted that with improvements, Cirrus eventually could push its daily production to as many as six planes without needing to physically expand.

But there’s a potential wild card in the deck.

CEO Alan Klapmeier has made no secret of his interest in building a small jet.

He wouldn’t speculate on the timing for such a project, but Klapmeier said, “It is part of our long-range vision.”

If and when Cirrus launches into the personal jet business, Klapmeier said, the company will need additional manufacturing facilities.

“Duluth would be our first choice for expansion, but it’s not our only choice,” Klapmeier said.

He said Cirrus is approached weekly with unsolicited offers from communities hoping to lure the company away from Duluth.

REASONS FOR CONCERN There are obstacles to the significant growth of Cirrus in Duluth. Klapmeier said Cirrus’ base is hemmed in by facilities belonging to the Air National Guard.

Poor water pressure represents another problem for the company. Bill King, Cirrus’ vice president of business administration, said potentially inadequate water pressure could diminish the effectiveness of the company’s fire-protection systems and has been flagged as a concern by insurers.

Cirrus has installed a booster system that increases water pressure to buildings protected by sprinkler systems, but the larger that Cirrus’ operations become, the greater the challenge the company will face correcting the situation.

Cotruvo says Cirrus’ concerns can be resolved, however.

The Duluth Airport Authority owns 4.8 acres of land north and west of Cirrus’ building that could accommodate growth. If more property is needed, Cotruvo said, the city would work with the federal government to relocate a tank farm to the west of Cirrus as well as a building to the east that’s temporarily being used by the Air National Guard for maintenance and cold-weather testing operations.

“We’ve been working on a concept to create a campus-type configuration for Cirrus,” Cotruvo said. “The idea is to use Cirrus as an anchor to develop the aviation industry in Duluth.”

In anticipation of continued growth, the city successfully sought to include some property adjacent to Cirrus in the state’s Job Opportunity Building Zone program. The designation could temporarily exempt operations Cirrus builds there from property taxes, corporate income taxes and sales taxes.

As for water pressure, Cotruvo says there are ways to quickly address the issue with boosters, but he said, “Eventually, the city will probably need to look at a new water system to ensure adequate water service to the area.”

FLEXIBILITY IMPORTANT If Cirrus opts to seek greener pastures, it has proved itself capable of juggling operations at multiple sites.

Cirrus’ Duluth assembly plant leans hard on its Grand Forks facility 250 miles away. The plant produces almost all the fiberglass components that go into its planes.

John Hitchcock, Grand Forks production director, estimates his staff will deliver 95,000 parts to Duluth this year. He takes pride in his plant’s unblemished record of meeting Duluth’s demand for parts in a timely fashion.

“We’ve never stopped the line,” Hitchcock boasted, noting that a stopped line would cost the company about $1,000 per minute.

As Cirrus’ production has increased, pressure on its Grand Forks plant has intensified. Hitchcock said fellow workers met the challenge, working together to streamline operations and boost efficiency.

A $3 million investment in new tooling also has helped to increase production. Cirrus’ engineers spent more than 40,000 hours redesigning and refining the 310-horsepower SR22-G2. The same redesigned fuselage and many additional improvements will be incorporated into the new 200-horsepower SR20-G2 by mid-July.

In the doors alone, the redesign enabled Cirrus to eliminate 100 parts and shed 23 pounds. As a result of these kinds of improvements, the SR22-G2 is 4 to 6 knots faster than the original SR22.

Klapmeier considers the SR20 and SR22 works in progress. He said staff members next plan to look at a redesign of the airplane’s wing.

“If we just kept building the same airplanes for the next 40 years, we could make lots of money,” Klapmeier said. “But in our view, we wouldn’t be a successful company.”

FOREIGN MARKETS While North America remains Cirrus’ largest and most important market, Klapmeier said the company continues to look at opportunities abroad.

John Bingham, executive vice president of sales and marketing, said Cirrus has been strengthening its European sales force and also has made inroads in Australia and New Zealand. Cirrus also is looking at employing representatives in South Africa, Brazil and the Dominican Republic. Eventually, Bingham also hopes to sell Cirrus planes in China, but the country lacks the basic infrastructure to support private civilian air traffic.

“When general aviation opens up in China, we definitely want to be there,” he said.

As foreign sales grow, Cirrus will search out ways to better serve overseas markets.

“From a company point of view, we’re constantly in development,” Klapmeier said. “We’re always looking at what the next product should be, but we’re also looking at ways to improve our delivery system.”

As part of that effort, he’s exploring the possibility of establishing an assembly plant in Europe.

In reply to:


CEO Alan Klapmeier has made no secret of his interest in building a small jet.

He wouldn’t speculate on the timing for such a project, but Klapmeier said, “It is part of our long-range vision.”


That is a very interesting article. On a side note, I wonder what “long-range” means?[:)]

In reply to:


In the doors alone, the redesign enabled Cirrus to eliminate 100 parts and shed 23 pounds.


Hmm, maybe they left out the latching bit.

Nice to hear that they’re looking toward the very light jet category in the future. I thinking Cirrus for five years, Diamond Twin for three years, THEN a small jet for me! Gotta keep building time. =)

-Dane

In reply to:


That is a very interesting article. On a side note, I wonder what “long-range” means?


I looked at the MooneyDX and flew it as well. Very fast, sleek and solid flying aircraft. Then I took a demo ride in the Cirrus…What a great flying airplane!! Not to mention all the other positive items… I am sure glad I picked the Cirrus… The support has been great!! I would be really worried about support since Mooney needs Life Support…

In reply to:


Nice to hear that they’re looking toward the very light jet category in the future. I thinking Cirrus for five years, Diamond Twin for three years, THEN a small jet for me! Gotta keep building time. =)
-Dane


Dane: I may be the only person on these forums that is not chomping at the bit for Cirrus to jump into the light jet market. Let’s see the current players with aircraft under development are:

Eclipse
Cessna
Diamond
Adam
Honda
Safire

Oops! Safire just joined Vantage as a early casualty. That is a lot of companies competing for a relatively small market in a low volume business. Cessna is certainly the 800 lb. gorilla and with their experience and backing, no one can count them out. Honda is the Godzilla but does it really have any interest? Diamond seems to have a track record of coming to unproven market with new planes where and when no one else feared tread. Adam seems to be on a solid track, and Eclipse is certainly the emotional favorite among the GA crowd, but with a sales price that cannot possibly generate operating profits let alone an ROI. If I am not mistaken, I have left at least one company off the list and I also think I heard of a new company or two that has recently announced plans.

I don’t know much about business and even less about designing and manufacturing jet aircraft for a new market segment, but I do know that it will cost each and every company a boatload of cash, maybe two boatloads to get their product certified and into production. I would bet that at least two of the remaining companies will fail in the next 24 months. We are down to two major jet manufacturers, two or three major commuter aircraft manufacturers, about 5 players in the corporte market, and 5 significant players in the GA market. How many can possibly survive? I am sure that one or more enterprising companies will be able to find a new company with a certified product in desparate need of cash to pick up on the cheap after a couple hundred million of R&D dollars have been spent.

Aside from the technological hurdles, the competitive pressures and limited market size, I see the insurance aspect as another challenge the manufacturers will have to overcome.

I would hate to see Cirrus bet the farm and lose.

Speaking of aircraft manufacturers, what just happened to Mooney? Did I just her that the new owners, the company that invested millions in trying to design and manufacture the Jetcruiser, (first a twin turbo prop pusher that morphed into a jet), then bought Mooney, lowered the prices, at least temporarily, to compete with Lancair and Cirrus, only to fail to generate the cash flow needed to service the debt? Did I hear that a French company, a marginal player at best, bought the assets and assumed the debt? When will someone put a bullet in that company’s head and put it out of its misery?

Economic Darwinism, the grim reaper of the free market!

In reply to:


Speaking of aircraft manufacturers, what just happened to Mooney? Did I just her that the new owners, the company that invested millions in trying to design and manufacture the Jetcruiser, (first a twin turbo prop pusher that morphed into a jet), then bought Mooney, lowered the prices, at least temporarily, to compete with Lancair and Cirrus, only to fail to generate the cash flow needed to service the debt? Did I hear that a French company, a marginal player at best, bought the assets and assumed the debt?


The first bit’s right. They went Ch 11 after the Dopps ran the place into the ground, screwing over their
service centers at the same time by leaving them with lots of unpaid warranty bills (and the owners too).
Then they did lower the prices but that seemed to last long enough for them to just sell the planes which
were already on the production line at the time.

Then the prices went way way up again.

A few months (or more) ago they introduced a glass cockpit and I thought they were getting good orders
for it. Then I lost track. I remember every quarter they were selling 2-5 planes and a guy called Nelson Happy
from Mooney was saying how great things were.

I think those planes cost too much now (although someone just said they bought an SR22 for $400K,
which is starting to get up there a bit, Cirrus needs to watch the price a little … )

In reply to:


That is a very interesting article. On a side note, I wonder what “long-range” means?


In reply to:


I looked at the MooneyDX and flew it as well. Very fast, sleek and solid flying aircraft. Then I took a demo ride in the Cirrus…What a great flying airplane!! Not to mention all the other positive items… I am sure glad I picked the Cirrus… The support has been great!! I would be really worried about support since Mooney needs Life Support…


Gary,

That first quote is from me but I didn’t mention anything about Mooney. What I was talking about is what long-range means as it applies to Cirrus’ plan for a jet. Five years, ten years, next year. [;)]

I asume you are responding to Marty and Roland. That said, I am sure glad you picked the Cirrus over the Mooney, as well. The Mooney is a great airplane, but the design is aging (it will always be a classic) and I think that the Cirrus gives you a lot more for your Moon…I mean money. [:)]

I also agree that it could potentially get a little scary on the support front with them.

Let’s see…if you include “pro-shop built” kits, then you also left off Maverick Jets, which seems to be DOA now as well. I understand that the fellow who did the initial design on that jet is now in the early early stages of pursuing a certified jet.

Less far along, but alive and kicking is Aerocomp (http://www.aerocompinc.com/), who continues to make a popular line of kit singles from 172 size to Caravan size. They are building an 8 place pressurized jet “kit”. Personally I see the professional builder route as risky…and that some day you might be grounded if the FAA ruled that having a shop build 51% isn’t the same as you building 51%…

In the long long shot category, I’ve thought it would be ideal if Beech would revive the Paris Jet…long certified, and purchased from Morane-Saulnier ages ago. People are taking these fully certified Vietnam era 4 person jets, refurbishing them and fitting them with new avionics…and leaving them with a sleek personal twin jet for $350-500k. The only real problem is that the Turbomeca Mabore engines burn an average of 125 gph. Ouch!

Beech (or someone with deep pockets) could take those certifications (circumventing much of the average 50-100M in cost), replace the engines with modern fanjets and avionics and have a new, certified 4 place twin jet for sale within a few years. Speculation, but interesting. Paris Jet info with good links -->> http://www.flycfa.com/paris/

Marty