Wednesday, February 27, 2013

Diamond Aircraft: Sales slump makes investors scarce, CEO says

By Norman DeBono, The London Free Press

Wednesday, February 27, 2013 8:40:16 EST PM

Diamond Aircraft needs $77 million to fund its D-Jet program and is trying to raise the money as aircraft sales slump, the company’s chief executive said Wednesday.

Until Diamond can raise the cash, the maker of small piston-powered planes at London International Airport will scale back operations and its ambitious new D-Jet program will be idled, Peter Maurer said.

“It’s very difficult to certify any aircraft and bring it to market, but that is something we are capable of. It’s frustrating.

“We started this (D-Jet program) when the economy was strong and sales were up, but since 2008 it has been difficult. Our timing is not good.”

On Monday, Diamond laid off 160 workers — Maurer corrected earlier reports of 200 cuts — while more than 50 remain on the job at the company’s plant on Crumlin Sideroad, he said.

Maurer also said the announced sale of Diamond to Medrar Financial Group out of Dubai in 2011 was not finalized even though an agreement in principle was reached, leaving Diamond without a major financial backer other than its shareholders and the Dries family in Austria who own Diamond.

Though Diamond sold 150 aircraft last year, only about 70 were from the London plant, with the balance sold from its Austrian head office and a plant in China, Maurer said.

As for sales this year, “to be honest the order board is weak. Overall sales are down,” leading to the layoff.

But the slump is global, with only 880 piston-powered planes sold last year compared with 2,700 in 2006.

“The market is about a third of what it was five years ago, and we have held our market share,” Maurer said.

Diamond needs new backers as the Dries family has invested $150 million in the D-Jet project alone, and more in Diamond Aircraft in total, and other sources of money are needed, he said.

“I’m told they are not in a position to send money over here. By now they were hoping to find new investors.”

As for whether Diamond can raise the cash needed, “it won’t be easy, but I am not giving up, so there is hope,” Maurer said.

His greatest concern is losing skilled workers who are tough to find in the aerospace sector, especially those who can work in composite materials used in Diamond aircraft.

“We will be trying to build up that intellectual capital again. We brought a lot of them here, that was good for our community.”

Maurer remains upbeat, saying the company has 200 orders for the D-Jet, a personal single engine jet that seats five and would cost about $1.5 million.

“There is long-term potential, but there’s no question sales from the piston planes cannot support it.”

Maurer sent a letter Wednesday to Diamond owners and operators, saying the plant is still operating and that though its D-Jet is suspended, it will still produce three styles of piston aircraft, supply parts for all models, and offer customer support, maintenance and sales.

“These developments will not impact our ability to meet our ongoing commitments,” stated the letter.

“We have retained the personnel required to continue our operations.”

As for whether the maker of two- and four-seat propeller aircraft that have been sold as trainers for the U.S. Air Force will survive, it’s too early to say, Maurer said.

“There has been lot of speculation about that for 10 years. We went through it in 2000 and then in 2011.”


The financial woes of London’s aircraft manufacturer were raised in the Ontario legislature Wednesday as NDP Leader Andrea Horwath grilled the Liberal government over funding to Diamond Aircraft.

Diamond received $10 million from the Ontario government in 2009, and long-term job guarantees should have come with the cash, Horwath said.

“We have seen time and again companies get investment, and we see them leave town.”

In 2009 Diamond also received $19.6 million from Ottawa.

Diamond met and exceeded all the job requirements that money came with, bringing workers here, including engineers from Europe, said Peter Maurer, Diamond chief executive.

“The government got more than their money’s worth.”

But to lay off workers four years later is not good enough, Horwath said.

In 2011, Diamond needed $90 million to keep its D-Jet program alive. The company asked the federal and provincial governments for $35 million each. Ottawa said no, and the Ontario government would not go it alone.

Diamond did raise $20 million from shareholders, but needs $77 million to keep the D-Jet program alive, Maurer said.


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