Running head: HAWKER BEECHCRAFT MOVES TO MEXICO
Hawker Beechcraft Moves to Mexico
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Abstract
The fall of 2008 began an unprecedented period of economic turmoil with the United States and around the world. Seemingly overnight, the aircraft manufacturing boom experienced by many U.S. companies was gone. With losses totally into the hundreds of millions, aircraft manufacturers were forced to change business strategies or face financial collapse. Common to most changes in business strategy has been the increased use of offshore manufacturing. This paper will analyze the recent decision by Hawker Beechcraft to move sub-assembly manufacturing to Mexico, and how that decision has affected their shareholders and stakeholders. It will cover corporate social responsibility (CSR), ethical decision making, and the ethical implications associated with that decision. Hawker Beechcraft Moves to Mexico
In order to understand the decisions made by Hawker Beechcraft, it is necessary to define and have a clear understanding of corporate social responsibility, the process of ethical decision making, and have an understanding and knowledge of the conditions faced by Hawker Beechcraft and their Senior Leadership Team (SLT).
Corporate Social Responsibility
Corporate Social Responsibility (CSR) is the responsibility organizations accept for their decisions and ultimately their impact on society, people, and the environment. (MPI: Committed to Improving Our World, 2012)
By developing a sound business strategy which reflects the organization's culture, values, and objectives, the business will help strengthen the community, and ensure a sustainable and profitable future for its shareholders and stakeholders.
Process of Ethical Decision Making
Ethical decision-making refers to the process that an individual or organization uses to assess a situation and select a course of action (ETHICAL DECISION-MAKING, 2007)
In order for a decision to be considered ethical or right and just, management must seek to achieve a balance between their economic, legal, and ethical responsibilities. If each of these is afforded equal weight during the decision process, a balanced, well though-out, and ethical decision will prevail.
Economic Conditions
Up until the fall of 2008, general aviation manufacturing in the United States (U.S.) was experiencing a manufacturing boom. Legacy Company’s such as Cessna, Hawker Beechcraft, and Bombardier were growing and producing some of the world’s most advanced business aircraft. Deliveries of business jet aircraft exceeded 1000 airplanes, but by September of 2009, production was off by almost 46.8%. (Platzer, 2009)
By the end of 2009, the aviation manufacturing downturn experience by the U.S. had become part of a global economic downturn. Now part of the global financial crisis, U.S. aviation manufacturing was coming to the realization that the U.S. market could no longer support their business strategies and that the fastest growing markets were outside North America. (GAMA, 2009)
In order to survive, manufacturing would have to adapt and overcome previous market conceptions, or cease production. U.S. aircraft manufacturers began moving subassembly manufacturing to offshore locations in an attempt to reduce operating costs, capitalize on overseas market sales, and to help improve their financial position.
Like many other manufacturers, Hawker Beechcraft was beginning to feel the effects of an embattled economy, continued order cancellations for their product, and by the end of 2009, Hawker Beechcraft Acquisition Company, LLC estimated their losses to be between $725 and $740 million. (Hawker Beechcraft Acquisition Company, LLC Provides Financial Update, 2009)
Hawker Beechcraft Corporation
History: In 1932, Water and Olive Beech founded Beech Aircraft Corporation. From their humble beginnings, Walter and Olive would grow Beech Aircraft into a company synonymous with quality. During World War II, Beech produced some 7,400 airplanes for the United States and Allied armed forces.
In the 1960’s Beech would introduce the Model 90 Beech King Air, and from that day forward, established itself as the standard in corporate turboprops. Today, various models of the King Air maintain a market share of more than 90 percent in their class. On February 8, 1980, a historic even would take place in Wichita, Kansas. Beech Aircraft Corporation would become Raytheon Aircraft, a subsidiary of Raytheon Company.
This new relationship would develop the first certified composite fuselage business jet in U.S. history, and on March 23, 2001, the Premier 1 business jet was born. Continuing to build upon the legacy Beechcraft, Raytheon Aircraft would continue to manufacture and develop industry standards of quality and performance, and on March 26, 2007, GS Capital Partners, and Onex Partners purchased Raytheon Aircraft, renamed the company Hawker Beechcraft Corporation, and began the next exciting chapter of two of aviation’s most enduring brands. (About Us: History, 2012)
Now the longest running general aviation aircraft manufacturer, Hawker Beechcraft continues the vision and values first established by Walter and Olive Beech.
Vision: To be recognized as the World’s Best General Aviation Company; relentlessly pursuing superior product quality and delivering the best experience to our customers.
Values:
• Strive for excellence and perfection.
• Maintain an environment that fosters integrity, the highest level of ethical conduct, and motivates employees to do the right thing.
• Treat each other with respect, welcome diverse opinions and encourage teamwork and collaboration.
• Provide the customer with the safest and highest quality service in the industry.
• Make a commitment to each other and the customers. Accept personal accountability for your actions.
Based on the values established by Walter and Olive Beech in 1932, Hawker Beechcraft’s Code of Conduct represents a culture built on integrity and values. Chief Executive Officer Bill Boisture was quoted as saying “Our reputation as an ethical company is essential to our customers and stakeholders, and it is as critical to our future success as the aircraft we build and the services we provide”. (Business Ethics and Compliance. (n.d.).
Corporate Social Responsibility
Partnering with Wichita State University and local manufacturers, Hawker Beechcraft Corporation (HBC) would establish the Wichita Sustainability Coalition. Through increased recycling efforts, Hawker Beechcraft’s goal was to reduce landfill waste by 61 percent, and improve the community and environment. (News Release: Hawker Beechcraft Sets Industry Standard for Sustainability, 2009)
After two years, and more than $725 million in losses, Hawker Beechcraft Corporation’s SLT, headed by Chief Executive Officer Bill Boisture, announced their Project Challenge initiative. The decision made by the Senior Leadership Team would downsize the company through a reduction if facilities usage, outsourcing of noncore activity, supply chain rationalization, and the implementation of lean manufacturing initiatives. (Harrison, 2011) As part of their Project Challenge, Hawker Beechcraft Corporation evaluated, identified, and closed the non-essential property space totaling nearly one million square feet. The closure of this space provided significant utilities cost savings.
Bill Boisture and the Senior Leadership Team made the decision to offshore plants 1, 2, and 3 to Chihuahua, Mexico, or to third party suppliers. The decision made by the SLT came after months of negotiations with the International Association of Machinists Union (IAM), Capps Manufacturing, the state of Kansas, and the Wichita City Council.
The decision was made in order to realign the manufacturing organization, reduce operating costs, and position the company to operate more efficiently during times of lean production. In addition to the layoffs and relocation, Bill Boisture cut compensation at all levels, including his own. (Marsh, 2010)
In partnership with the International Aerospace Machinists Union, Hawker Beechcraft and the union were able to agree to a five year agreement which would secure jobs and help share the financial burden faced by all. The agreement would allow the union to benefit from any upturn in the manufacturing market as well as share in the performance bonuses normally allotted to non-union workers.
Working with the Wichita City Council and Hawker Beechcraft, Capps Manufacturing agreed to a five year deal which would keep 31 fabrication jobs in Wichita. Capps will purchase the equipment from Hawker Beechcraft, fabricate the necessary assemblies, and then sell those assemblies to Hawker Beechcraft. (Wichita company saves jobs from moving to Mexico, 2012) On December 21, 2010, HBC reached a formal agreement with the State of Kansas and the city of Wichita to keep Hawker Beechcraft in Wichita for 10 more years. As part of the deal, HBC would receive $40 million in incentives in exchange for keeping at least 4000 jobs in Wichita during their 10 year presence, and provide workforce training assistance.
Recognized as a victory for both sides, HBC’s decision to accept the states offer is seen as a commitment to the success of Wichita and the struggling aerospace manufacturing industry. The commitment will save thousands of jobs and strengthen the partnership between the community and the Hawker Beechcraft family. (Hawker Beechcraft Reaches Agreement with State of Kansas, 2010)
Throughout the decision making process, Hawker Beechcraft continued to remember their historic past, the work to get where they were, and where they were going. By the end of 2011, Project Challenge was already delivering results. The plants in Mexico were manufacturing subassemblies; Wichita was assembling and delivering aircraft, and stability had begun to return to those whose lives were intertwined with Hawker Beechcraft.
Never more evident was the return to a more stable environment than the announcement, from United Way of the Plains, that they had surpassed their fundraising goal of $15 million. As part of this effort, the men and women of Hawker Beechcraft would contribute more than $1.1 million. (Leiker, 2011)

Analysis
Economic Responsibility: Faced with mounting losses, Hawker Beechcraft Senior Leadership moved quickly to mitigate the continued financial loss, and reduce operating cost associated with manufacturing.
Legal Responsibility: Hawker Beechcraft continued to meet their legal responsibility to their community, stakeholders, shareholders, and all those affected by the economic downturn.
Ethical Responsibility: Bill Boisture and the Senior Leadership Team were true ambassadors for Hawker Beechcraft. Through economic uncertainty, they continued to maintain concern for their community, employees, stakeholders, and the environment.
Philanthropic Responsibility: Even through the tough economic times, Hawker Beechcraft Corporation met a record United Way donation when they managed to raise an impressive $1.1 million.
Conclusion
As an employee of Hawker Beechcraft and a citizen of the United States, I’m naturally concerned with the strength of our nation and economy. Like many other concerned citizens, I was disappointed with the decision made by Hawker Beechcraft. The economy was struggling, and we needed jobs now. Basing my opinion on information provided in the media, I naturally came to the wrong conclusion.
After completing the research concerning Hawker Beechcraft’s move to Mexico, I was impressed with the values and ethics displayed by Bill Boisture and the Senior Leadership Team. Their decisions and the difficulties they faced enabled many of the Hawker Beechcraft family to keep their jobs and their security. I consider their decisions to have been made in accordance with the finest traditions established by Walter and Olive Beech and our company Code of Conduct. Their decisions were a balance between their ethical, legal, and economic obligations and I believe they have secured our future for many generations to come.
Faced with the challenges of a global economic downturn, I feel the senior leadership team performed their duties and responsibilities admirably.

References
About Us: History. (2012, March 2). Retrieved from http://www.hawkerbeechcraft.com/about_us/history/

Business Ethics and Compliance. (n.d.). Retrieved from https://www.hawkerbeechcraft.com/investor_relations/Code%20of%20Conduct.pdf

ETHICAL DECISION-MAKING. (2007). In The A to Z of Corporate Social Responsibility Retrieved from http://www.credoreference.com/entry/wileyazcsr/ethical_decision_making

GAMA (2009). 2009 General Aviation Statistical Databook & Industry Outlook. Retrieved from http://www.gama.aero/files/GAMA_Databook_2009.pdf

Harrison, K. J. (2011, October 10). Hawker Beechcraft Adapting To Meet The Times. Retrieved from ainonline.com: http://www.ainonline.com/aviation-news/nbaa-convention-news/2011-10-10/hawker-beechcraft-adapting-meet-times

Hawker Beechcraft Acquisition Company, LLC Provides Financial Update. (2009, December 14). Retrieved from Hawker Beechcraft: http://newsroom.hawkerbeechcraft.com/news/hawker-beechcraft-acquisition-company-llc-provides-financial-update/

Hawker Beechcraft Reaches Agreement with State of Kansas. (2010, December 21). Retrieved from Hawker Beechcraft: http://newsroom.hawkerbeechcraft.com/news/hawker-beechcraft-reaches-agreement-with-state-of-kansas/

Leiker, A. R. (2011, November 17). United Way of the Plains exceeds this year's fundraising goal. Retrieved from Kansas.com: http://www.kansas.com/2011/11/17/2106487/united-way-of-the-plains-exceeds.html

Marsh, A. K. (2010). Hawker Beechcraft Moving 820 jobs. Retrieved from AOPA: http://www.aopa.org/aircraft/articles/2010/101025hbc.html

MPI: Committed to Improving Our World. (2012). Retrieved from Meeting Professionals International: http://www.mpiweb.org/About/CSR

News Release: Hawker Beechcraft Sets Industry Standard for Sustainability. (2009, May 12). Retrieved from Hawker Beechcraft: http://newsroom.hawkerbeechcraft.com/news/hawker-beechcraft-sets-industry-standard-for-sustainability/

Platzer, M. D. (2009). U.S. Aerospace Manufacturing: Industry Overview and Prospects. Washington D.C.: Congressional Research Service. Retrieved from http://www.fas.org/sgp/crs/misc/R40967.pdf

Wichita company saves jobs from moving to Mexico. (2012, February 3). Retrieved from Capps Manufacturing: http://www.cappsmfg.com/wichita-company-saves-jobs-from-moving-to-mexico-2/