Surviving the recession, by Frank Robinson

Surviving the recession, by Frank Robinson

14-Oct-2010 Source: HeliHub.com

Robinson Helicopter Company “RHC” has no doubt been the number one success story of the light helicopter market in the last three decades, but it is this sector that demonstrates the greatest volatility when the going gets tough. In our interview with Frank last Friday, he described how the company went from the high of its best year ever in 2008 to the worst year ever in 2009.

RHC was hit by a combination of three main factors.

* The global recession meant that customers became much more cautious, particularly of big item spending. These customers then put off purchases until a later time or bought pre-owned aircraft instead

* The customers who did want to buy were severely hampered by the banking industry. Frank was quite outspoken, using words I cannot quote here, about the bankers over-exuberance in past years and continued taking of huge bonus payments. The sudden cautious approach from the banks meant that getting finance on asset purchases was significantly more difficult. This aspect did not appear to affect RHC themselves, and we understand that the successes of previous years has led to sufficiently strong cash-flow to see them through the recessions without any reliance on loans from banks.

* The failure of Silver State Helicopters hit hard in spring 2008. With a fleet of 140 Robinson R22s, 75 R44s and 25 other helicopters, RHC not only lost their biggest customer, but also had a number of further aircraft in production for them. Furthermore, the pre-owned market was then hit with a glut of low-age R22s and R44s, the effect of which was felt later in 2008 and through 2009.

Seeking his current views on how the recession was panning out for RHC, Frank said they were cautiously optimistic. With steady increases in sales, RHC was pulling out of the recession at an rate that is both realistic and sustainable. This contrasts with the depths of the downturn when RHC reduced their headcount by 300. Although Frank was unhappy at the need to carry out such a reduction, he felt it was a positive move for the company as it allowed them to refine the workforce by making the lowest performers redundant. At the appropriate time, they will recruit again, and California laws do not require them to re-employ the same people they had previously laid off. So the recession had a vicarious benefit in allowing RHC to become leaner.

HeliHub.com had also heard that during this difficult period, RHC had a stockpile of new helicopters at Torrance all complete and in crates ready to go. With figures ranging anything up to the 50-75 range, we put this to Frank and he flatly denied this happened, citing the fact that they only produce helicopters to orders with banked deposits. Away from the Torrance factory, HeliHub.com is aware that some dealers had pre-ordered helicopters and were forced to complete the purchases and take delivery of them, or risk losing their deposits. One unidentified organisation had upwards of 15 uncrated aircraft in stock in their hangar at one point, although they have gradually worked through these now and most, if not all, are now registered. Only the eagle-eyed would spot that newly registered helicopters were carrying serial numbers issued 12-18 months prior, but that is the level to which HeliHub.com monitors the industry.

Finally we explored other options open to RHC to reduce costs, principally the potential to move production to somewhere with a cheaper cost base – particularly given the high cost of living in California. RHC have looked at moving work to Mexico, and rejected it on the basis of being both a less predictable economy and not providing sufficient safety for their employees. Given RHC’s investment in their facility at Torrance, and the fact that it is a family-controlled company, we are confident to say that the future of RHC remains in its current location.

The final installment in our five-part series from our interview with Frank will be published tomorrow.

This is one of a series of five articles from HeliHub.com’s interview with Frank Robinson – here are links to all five
* Frank Robinson completes UK tour
* Frank Robinson talks to HeliHub.com about the market for the R66
* Frank Robinson promises he will make it to 100
* Surviving the recession, by Frank Robinson
* Frank Robinson prefers R44 to R66 (and other anecdotes)

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