Cirrus business booms, Duluth works to keep it; AVIATION:Cirrus contemplates the next step for the company as it increases production.
BY PETER PASSI
8 June 2004
© 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.