BEND, Ore. – Cessna Aircraft Co. announced plans Wednesday to close a manufacturing plant in Bend that it bought nearly 18 months ago for $26 million, its hopes for a turnaround dashed as buyers canceled airplane orders and put off purchases.
The closure will compound unemployment problems in Bend, where the jobless rate soared to 17 percent in March, nearly doubling in just 12 months.
Bend’s jump in unemployment was the second highest among the nation’s 372 metropolitan areas, according to a U.S. Labor Department report released Wednesday.
Bend for years has been the center of the central Oregon real estate and construction boom, largely fueled by retirees from California. Many of them bought vacation or retirement homes in high-end rural developments called destination resorts, which the state began allowing in 1984 as an exception to land-use laws that otherwise aim to preserve rural land from development.
The credit crunch and falling home prices have made it harder for retirees to cash out of their existing homes. Part of the area also features easy access to skiing, mountain biking, hunting, fishing and golf. But as unemployment rises, state analysts have cited weakness in the service and entertainment sectors.
Roger Lee, executive director of the nonprofit Economic Development for Central Oregon, said losses in construction jobs have battered the area, with the impact rippling through retail and service sectors. The region’s unemployment rate also has been affected by a growth in the labor force. State officials believe that is due to spouses going back into the job market to keep households afloat and retirees returning to work to supplement damaged retirement savings accounts.
Cessna and its parent company, Textron Inc., bought the Bend plant from Columbia Aircraft Manufacturing Co. in December 2007.
It builds the high-performance, single-engine Cessna 350 and 400 Corvalis TT models priced from $500,000 to $600,000 and meant for entrepreneurs, small-business owners and some high-end flight schools.
In June 2008, the Bend plant was still hiring workers and had increased its production goal to 150 planes by the end of the year. But on Wednesday, the company said the effects of recession had taken an increasing toll on the company, resulting in a decision to close the Bend plant.
It once employed more than 400 workers, but after two rounds of layoffs, it is down to about 150.
“As production continues to fall, these requirements come to us,” said Cessna spokesman Doug Oliver at Cessna headquarters in Wichita, Kan.
The company said production of the Bend models will shift to Cessna’s plant in Independence, Kan.
“Some of those people will be offered jobs in Independence. Most will not,” Oliver said.
He said that workers to be laid off will get 60-day notices, and the transition of the production facilities to Kansas would take place over the summer.
In all, Cessna announced Wednesday that it is laying off 2,300 workers, including 1,600 hourly employees and 700 salaried workers.
The latest job losses come on top of 4,600 jobs already cut. Most of the jobs were in Wichita.
The cuts reflect a rapidly diminishing market for business jets. Cessna says it will now deliver 290 to 300 corporate jets this year – a decline from its previous forecast of about 375 aircraft.