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Non-military work targeted by CPI Aero in face of cuts

Keywords: Tags  CPI Aerostructures, aerospace, Spirit AeroSystems, non-military business, sequestration, Edward Fred, Vincent Palazzolo, aircraft programs Gulfstream

LOS ANGELES — CPI Aerostructures Inc. has extended a business jet manufacturing deal as it looks to build non-military business in the midst of federal budget sequestration.

Edgewood, N.J.-based CPI has reached an agreement with first-tier aerospace contractor Spirit AeroSystems Inc., Wichita, Kan., that will extend its contract for manufacturing wing leading edge assemblies for a business jet aircraft through 2019. The contract, originally signed in 2008, had been due to expire at the end of this year.

CPI, citing confidentiality restraints, declined to specify the aircraft program, the dollar amount of the contract or the number of units involved.

However, both CPI and Spirit separately list the Gulfstream 650 built by the Gulfstream Aerospace Corp. unit of General Dynamics Corp., Savannah, Ga., as among the programs in which they participate.

The Gulfstream jet’s wing is believed to be built primarily of aluminum with a skin of formed aluminum sheet, while the ribs and internal parts are machined. The wing also has a composite framing piece that attaches to the plane’s fuselage.

Despite posting record net income of $11 million and revenue of $89.3 million for 2012, CPI president and chief executive officer Edward J. Fred said the company’s results last year had already been affected by the "looming threat of forced, across-the-board government spending cuts," or sequestration.

Fred cited "delayed contract decisions by many prime contractors in the aerospace and defense sector, including our customers" with the possibility that "releases on previously awarded contracts could be delayed."

CPI has "noticed a slowing of the process of new military awards and even releases on long-term programs that we’ve already won," chief financial officer Vincent Palazzolo said this week.

While so far there has been no reduction in the "throughput in our shop," and none is expected through the first half, there "could be an effect in the back end of the year," depending on how long the slowdown persists, Palazzolo said.

"We don’t know where it’s going to go," he said about the impact of sequestration, noting that throughput isn’t expected to be affected in part due to more non-defense work.

However, the company’s business, which had been growing at a "double-digit" pace for a number of years through 2012, won’t reach that rate this year, Palazzolo said.

Last year, CPI’s business was about 70-percent defense, and 30-percent non-defense and commercial, Palazzolo said, noting that this ratio will shift to 65-35 in favor of military programs this year.

In addition to the Gulfstream 650, CPI’s largest non-military program, the programs at its largest customers include the Northrop-Grumman E-2 Hawkeye surveillance aircraft and the Boeing A-10 attack aircraft, he said.

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