Thread regarding Esterline Technologies Corp. layoffs

Transdigm to lay off 15% of Korry Electronics Workforce Wed, June 26, 2019

Inside Sources claim a headcount reduction of 15% of workforce at the Korry Electronics, formerly under Esterline ESL, is going to occur Wed, June 26th, 2019.

Per SEC, Q2 Shareholders Report, Transdigm has aggressive plans to immediately sell off and liquidate entire business units until they recoup 1B dollars off the 4B purchase price of ESL during the buyout.

Post 55 days of ownership, Transdigm announced the sale and liquidation of assets plan that will net them 1B dollars in return for the sale of business units that are of no interest.

Also announced, is the mention of a five-year plan. A 5-year plan is typically employed by investment and holdings firms to flip a business for profit and, in this particular case involving ESL, TD announced they calculate a 20% Return on Equity in five years. In short, they plan on selling it all for profit.

They also announced the capital allocation plan will be delayed until late 3rd quarter to sometime in the 4th quarter with an announcement on that plan along with their plan of the future involving integration into their portfolio and restructure of manufacturing going forward.

It is unknown what they plan on parsing out but, Korry was a direct competitor to Transdigm thus one could say it is safe to speculate that, based on the fact that they're cutting heads by 15% at Korry Electronics alone - compounded with the fact that Korry was a direct competitor, compounded with a statement made by TD regarding the acquisition of intellectual property from the purchase is to be used to their advantage to pursue military contracts in their fastest growing market with regards to return, it is highly likely that they will bury Korry and put them out of business after they've integrated product lines and technology into their divisions nearby in Everett and eastern Washington that build the same type of products.

This would reduce their burden by ridding the long-term lease on the building that Korry resides in Everett - that building is not paid for and is a 75-year lease agreement if memory serves me correct. They do not own that property thus, it almost comes as a no-brainer with regards to closing down the Korry Electronics plant.

They can then sell off the long-term contracts and then issue Last-Time Buy letters to customers per diem. This will absolve them of all accountability and liability going forward thus, reducing burden with regards to contracts.

They'll cut their losses on labor and engineering costs and the long-term lease costs and utility costs associated with the property and any outstanding loans for the "Transformation" of the plant that occurred starting in 2015 that cost them double digit millions.

The switches and knobs lines were rumored to be parsed out to Mexico plants while parsing out some of the electronics lines to India to cut costs. ESL built a large facility under the radar in India that could be sold off to interested buyers in the liquidation phase.

The display line is being shipped back to Belgium as the burden rate is high and they've not been successful in first-pass yield ratio thus, their profit margin on those is marginal. It remains unknown as to if Transdigm will sell off that business until later this year with years end announcement.

They could easily transfer all of the avionics panel lines over to TDs manufacturing plants as they're making the same products already thus, integration and restructure of this is also feasible.

Expect more news towards the end of the year from Transdigm (TD) on integration and restructure of manufacturing in late Q3 - Q4.

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Post ID: @OP+ZIlQQYk

27 replies (most recent on top)

Update on Korry Electronics Layoffs: 20 more people were walked out as of yesterday. This makes two for two in a little over a half year ago. Per TDGs report out, they've completed their 1B recovery plan with regards to Phase I of their divestiture plan by selling ESL's Souriau-Sunbank Connection Technologies business for 920M along with the EIT segment for 190M thus netting them an instant 1.1B dollars on return right out of the gate as originally planned. These guys are good at doing what they do.

TDG knows exactly what they're doing and have made good on those plans to the letter and then some. Per 4th quarter announcement however, they did not disclose future looking plans with regards to allocation of capital spending and / or future plans for other divisions, consolidations and to how they plan on integrating ELS into their portfolio.

What they did mention however was being at risk post acquisition of ESL due to incurring substantial level of indebtedness. This was merely an announcement under risk of integration of Esterline and the complexity involved with integration of ESL as compared with other acquisitions made in the past. Post evaluation and measurement period that began on September 30th, 2019, if things do not perform as expected, they will update and adjust valuation.

It also should be mentioned TD completed a purchase offer involving a private offering of 2.65B aggregate principal amount and 5.50% Senior subordinated notes. Those notes were issued at 100% of their principal amount. If the revolving loan facility should exceed 35% of the total revolving commitments, the company will be required to maintain a maximum consolidated net leverage ratio of net debt. This increases the chance that they may be unable to generate enough cash necessary to pay the principle of interest with respect to indebtedness including indentures.

Q1 report may shed more light on where they plan on consolidating and integrating ELS companies into their portfolio over the 5-year plan that they announced Q1. This 5-year plan goes back to the very beginning and is a contingency plan. TDG figured, even if ELS doesn't measure up, they can still flip the entire thing, Lock-Stock & Barrel and still turn a profit thus, it's a Win-Win scenario for TD Group regardless of how ESL performs.

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Post ID: @3Nqji+ZIlQQYk

Shame those that will lose their jobs won't get as big a pay out upon leaving as the architect of The Esterline Way. It wasn't a case of being On or Off the bus. It was a promise of being "Given the keys to the van". Such b—s— from platform directors. No hooks to hang their heads in shame where they're going.

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Post ID: @1Vhqq+ZIlQQYk

I am ex-ESL now and part of the cull that we all knew would happen. More will follow. And don't think our friends across the channel wont get hit either - its inevitable. Just makes it harder for the minions who remain until its their turn - there is a word for them from the past - Sonderkommando.

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Post ID: @1Uzfc+ZIlQQYk

Giad I left Korry years ago....all the talk of how the employees are their most valued component ... BS all of it. Upper Management all the way through ESL reaping fat fat bonuses and the grunts lucky to get 3% raises.

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Post ID: @1Pegs+ZIlQQYk

Where there's smoke there is fire. They will never be up front and tell you what is going on, they do not want a mass exodus. They want people to leave on their terms not on the people's terms.

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Post ID: @8key+ZIlQQYk

Typically companies lay off numbers are kept as low over frequent intervals to avoid triggering Warn Act policy. Per Law, anything over 50 employees falls under the Warn Act. My guess is it's a total of 15% divided by frequency. A 15% cut would have equated to ~ 100 employees thus, the Warn Act would have been mandated. Time will tell if they're going to run in 3% blocks * 5 blocks thus, total amount would be 15%. I've seen this done at a number of plants in the past including Micron which is occurring now and they're being investigated for non-disclosure of the numbers. Companies typically trickle people out the door - again, under 50 at a time.

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Post ID: @3wdb+ZIlQQYk

"Transdigm to lay off 15% of Korry Electronics Workforce Wed, June 26, 2019"

Pretty much blew the credibility of that source!

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Post ID: @3irf+ZIlQQYk

What is "job security" without an employment contract? What protections does anyone have in place to expect to be able to retire from a job after 20+ years at the same company? I feel sorry for the people that are in that boat who will feel the degradation of their benefits most while trying to stay retired.

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Post ID: @2seu+ZIlQQYk

3% head-count reduction was executed this morning at Korry.

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Post ID: @2onp+ZIlQQYk

It's not called Transdigm Aero-anything and that's because Trans Group is a massive holding firm. If a business unit isn't turning a profit and is weighing them down - there's a good chance it will be unloaded and sold to the highest bidder.

This how they've been able to keep churning huge returns. Trans Group is highly aggressive. They plan way ahead of time - during pre-sale periods by placing analysts into business units to gather data and understanding of business models used.

Headquarters mapped out a plan going forward during the pre-sale period as stated per disclosure letter from TD (filed on the dot.gov/archive portal) prior to closing of sale. In the case of ESL, it was stated that ESL would continue operating under its own power until closing was final which was about two months ago. Once closing was final, they'd execute changes that were planned ahead of time. I believe this is what may be occurring.

TD doesn't appear to have the highest ethics standards in place either as they were recently caught up in a price-gouging swindle - to the tune of 16.1M dollars via massive markups (>4500%). Big Government caught it and asked them to repay the money back via what is known as a Voluntary Refund without being charged or fined. So, as reported at the SEC level on financial matters, 16M is going back to Uncle Sam. In exchange, TD won't be charged with any wrongdoing.

They're exceedingly good at what they do. TD excels in all facets of not only turning a profit but also generating large returns. Hands-down, this holding firm reports serious returns and net gains. Whether that's at the expense of everything else - one would have to research that and see if that's the case.

They have very deep pockets and were labeled by Bloomberg as The Barbarian at the Gate. They're in the game of making money not only for themselves but for stakeholders and investors. This appears to be their primary driver vs. being a world-class aerospace company.

The following example is one of many of what they've been doing. They targeted not only a company of interest but also its direct and sole competition and bought them out as well in order to control the market and manipulate financial outcome to their advantage.

https://www.federalregister.gov/documents/2018/01/16/2018-00544/proposed-final-judgment-and-competitive-impact-statement-united-states-v-transdigm-group

I'll state one thing, for a massive company they are extremely agile. It's this agility that allows them to plan ahead and execute extremely fast and make changes almost ad-hoc in nature. This gives TD a lot of flexibility and advantage to downsize or expand per diem to accommodate shifting market demands. It's a very robust business model - if one wants to look at it from that perspective. Not to be confused with promoting this type of model.

Where other companies (BAC & UTC) move at the speed of dinosaurs - not these guys, these guys are like pack hunters like Velociraptors.

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Post ID: @2led+ZIlQQYk

ESL was a train wreck of a company who seemed hell bent on shoving things down the business units throats. ESL liked to talk about numbers of business units, number of employees, and spent millions of dollars putting the Esterline name on every building they “controlled”. They were driven by ego. On the other hand, TD is driven by profit. I have not heard about or seen any power hungry messages or ego driven personalities. I wish I still worked there to have had a chance to make thinks work under a management team that has a proven track record of maximizing a companies potential. Anybody who worked under ESL during Curt’s reign of failure, should be thrilled for this new opportunity. The “transformation” project was the t–d on top of the Curtis sh-- sundae. Wake up chronic complainers you have a golden opportunity.

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Post ID: @2gwo+ZIlQQYk

Super sad! At how when I joined this company several years ago, I though this would be my last Job...so sad to see the sell off of stock purchase with Transdigm then to this., the “LayOff” Guess Glass Door was right all along!

How Transdigm purchases and destroys company’s

For profit what about the 700+ people and family’s

Employed here? Just makes me feel so uneasy! What’s bout all the people that have 20+ years

And they are to old to seek new employment because their age it undesirable ! Shame on you Transdigm ;(

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Post ID: @2pme+ZIlQQYk

What I think is super messed up is that all supervisors and managers know why and who is getting fired and our so called leaders just won’t tell us what’s going on biting into the corporate bull. That just shows us employees what kind of 2 faced people we are dealing with here.

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Post ID: @2ejj+ZIlQQYk

The writing is on the wall time to plan your departure. Korry employees you are all smart, hardworking and a great team of individuals to work with and any employer will be lucky to have any one of you work for them. Keep your heads up and take care of # 1YOU!

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Post ID: @2awr+ZIlQQYk

To the long winded, very informative comment made a couple of hours ago, it's interesting you referred to Curtis as Curt. I can only imagine who you are ;)

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Post ID: @1bhz+ZIlQQYk

Based on Glassdoor reviews of employees working under TD, it's a dog eat dog world compounded with layoffs to spin the numbers. Comments such as every man for himself, vampire company to constant buyouts followed by mass layoffs at a rate of 1X or more per year - FWIW to anyone interested: https://www.glassdoor.com/Reviews/TransDigm-Reviews-E22279.htm.

I don't see anything listed for 2019 however, the reviews do go back years stating more of the same issue encountered post buyout involved with Transdigm. It doesn't look promising that's for sure.

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Post ID: @1cdo+ZIlQQYk

Great! My anxiety is through the roof! Can’t wait to not sleep tonight and come in to work tomorrow hoping, praying it’s not me.

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Post ID: @1ewz+ZIlQQYk

Boeing we are only 2 miles down the street from your Everett plant.....please come buy us!

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Post ID: @1daz+ZIlQQYk

There's some long running history associated with the sale of ESL dating back to year 2008 followed by a hard push in 2012 to rid it all lock-stock & barrel. The whole premise of moving it from a terribly located facility in downtown Seattle near the RR tracks and put into that nice shiny golden building from day one was nothing more than polishing a t–d in attempt to make it more attractive to buyers.

ESL owners and certain investors wanted out of the game prior to softening markets and disclosed their intentions of getting out of the market before economic implosion struck.

There was one primary Big Money chappie who sat on the board who was calling the play to sell it all and get out as seen in The Wall Street Journal: https://blogs.wsj.com/deals/2012/05/24/relational-will-push-esterline-technologies-to-sell-itself/

During the process of trying to rid of it in 2012, I recall someone in the investor world stating they couldn't sell it - it was a hard sell and they couldn't sell ESL for love or money. BAE and Honeywell stated they didn't have a clear understanding of what ESL was along with stating they didn't want anything other than aerospace related business units. At the time, the investor stated there was this security firm in Texas to a division that made arcade games thus, muddying the waters and, to some degree, was seen as excessive baggage.

This is a very long running issue with this company going back more than a decade. I believe this was why they put former CEO of UTC in place back in mid 2014. Curt was a well known expert on poising to sell. He'd been through the sale of GD to Hughes, then Hughes to Raytheon. Raytheon to Goodrich and lastly, Goodrich to UTC for 22.6B dollars per emails to our desktops from HR at the time.

Even the Goodrich handbook - the infamous blue and orange booklet with the courthouse looking building on the cover sporting: "How to Break Down Culture and Tearing Down the Walls" was issued to managers inside Korry with the Goodrich Logo still in tact. Same booklet seen during the UTC Corporate Takeover period of Goodrich.

This was before he was advised to have a publishing company reprint the booklet with ESL branding. I remember Curt's speeches at Goodrich / UTC . Anyone remember these infamous words: "You're either ON the bus or OFF the bus". Insiders know what that meant whenever that line was dropped during all-hands meetings and Top Brass meetings at the executive level. Some were immediately dismissed during an all-hands meeting for raising their hands as OFF the bus.

They were poising the company to sell since 2014 and, based on factual evidence of who bidders were, (UTC was a prior bidding candidate years earlier along with four other potential bidders), it was speculated in the industry that UTC may be the buyer. The whole makeover along with media reports hitting the airwaves employing buzz words such as cost reduction, streamlining, increasing throughput and on-time-delivery and expected larger returns etc, it was all smoke & mirrors throughout the transition period. Typically, models like these are employed quite often via Big Money guys along with, on certain occasions, models that devalue companies indirectly via transformation projects.

Instead of hiring professionals like Price, Waterhouse & Cooper to do the planning like they did when transferring from Seattle to Paine Field, they allowed floor people and employees not experience to take the monumental task on while Top Brass provides "guidance" to assure things go according to plan.

We call this methodology Rearranging of the Furniture. This method is typically employed to impede output thus, shipments are delayed, sales numbers decline, supplier ratings drop, fines are imposed - basically, everything goes against being profitable. This all leads to indirectly having a negative impact on the bottom line. Over time, this can devalue share stocks along with the value of the company. This model is typically employed to reduce the value of a company down to meet a potential buyers bid / offer. I'm not saying this was the case with ESL but rather - it's a tactic employed.

On paper, all checks out - money spent for improvements and shows tremendous effort was put forth. Can't hold anyone accountable for that thus, the chain of events leading to devaluation appear to be natural and indirect as part of Cause & Effect. In the olden days - they used to simply shelve products and hold up shipments in warehouses until that became the 101 investigating parties caught on to that scam.

Moving onto 2018 or so, on the net, made public knowledge, a rumor was in circulation that BAC was the buyer around late 2017-2018.

When the news hit that Transdigm was the buyer, some in the know weren't surprised. This was a long time coming based on factual and historical evidence in not only the investor channels but also Seattle Times. It comes to no surprise that it's actually manifested and become reality at this point.

Time will tell. I think we will know more come Q3 and Q4 of this year after TD announces what their game plan is going forward.

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Post ID: @1zzu+ZIlQQYk

The Corporate American business model was built on GREED and DECEPTION. Of course Transdigm is going to do whatever they have to do to make BIG PROFITS. If Transdigm makes Korry cut staff when the existing work force is already a skeleton crew, they are designing Korry for failure...

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Post ID: @1kmk+ZIlQQYk

Looks like we won’t be getting any work done today. Thank you anonymous internet person.

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Post ID: @1cdq+ZIlQQYk

Even if I don't get laid off, do I really want to stay at a company where there's no job security anymore? Korry is being driven straight into the dirt!

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Post ID: @1pcf+ZIlQQYk

"Business as usual". Cant say we didn't see this coming.

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Post ID: @1ztr+ZIlQQYk

It's time to form a union and save our jobs before it's too late. IAM 751!

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Post ID: @1ngr+ZIlQQYk

Told they would not do this and now they are doing exactly what they said they would do. LIARS EVERY LAST ONE OF THEM!!!!

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Post ID: @1fyb+ZIlQQYk

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