AIRSHOW-Drone maker General Atomics may face layoffs - executive

Reuters

By Andrea Shalal-Esa

DUBAI, Nov 22 (Reuters) - Privately-held drone maker GeneralAtomics Aeronautical Systems Inc may have to lay off about onequarter of its production staff if it does not receive furtherU.S. or foreign orders, a senior company executive said thisweek.

Frank Pace, president of the company's aircraft systemsgroup, said the Pentagon's current plan to halve its purchasesof Predator B drones to around 24 a year, coupled with continuedrestrictions on foreign sales, were putting pressure on the SanDiego-based company, a unit of General Atomics.

Unless additional orders come in, the company may have tolay off about 25 percent of its current production staff ofabout 1,400 people, Pace told Reuters at the Dubai Airshow.

"It's significant. We're still working off the fiscal 2012buy, but eventually if we can't make some more overseas sales orsell to the Marines or something like that, we'll have to cutback staff," Pace said.

Company officials said the U.S. Marine Corps is looking atbuying Predator B drones in fiscal 2018, but funding is beingcut across the military given $500 billion in mandatory budget reductions that took effect earlier this year and are due tocontinue for a decade.

"When the budgets are going down in the U.S., you would liketo be able to export more," Pace told Reuters, adding that U.S.restrictions on foreign sales slowed the company's ability torespond to strong foreign demand which could offset the slump inU.S. military spending.

Foreign sales of larger unmanned aerial vehicles (UAVs) thatcan carry 500 kilograms or more of sensors and payloads arebanned under the Missile Technology Control Regime, and requirespecial waivers from the U.S. government, in addition to thealready lengthy regular process for approving weapons sales.

Pace said there was widespread frustration about therestrictions in the unmanned systems industry, but it wasunclear if any changes in the statute were forthcoming.

Some efforts are under way in the U.S. government, but theprocess has been moving very slowly. Wes Bush, the chiefexecutive of Northrop Grumman Corp has warned thatfailure to adjust the rules could result in a competitiveadvantage for manufacturers outside the United States.

General Atomics' new larger Predator C drone - which can gothree times as fast as the Predator B and carries 10 times asmany sensors - would be subject to the restrictions, Pace said.

"It's one of those things where all of industry isfrustrated with the government, so there's a chance that theymight do something," he said when asked if the U.S. governmentwas making any moves to loosen the current rules.

Pace said unmanned plane sales had probably peaked in theUnited States, but there was still strong demand from Europe.

General Atomics has built nearly 200 Predator B drones, andhas sold the airplanes to Italy and France. Germany, theNetherlands, Canada and Australia have also expressed interest,but that may not translate into firm orders until 2015 or 2016,Pace said.

In the Gulf region, General Atomics has sold five of the XPor export version of the unmanned plane to the United ArabEmirates, which is looking at additional purchases, Pace said.

Other Gulf countries including Saudi Arabia, Kuwait, Qatarand Oman had also expressed interest, he added.

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