150 to 225 workers to lose jobs at AAI Parent company will also attempt to sell subsidiary

March 30, 1993|By Ted Shelsby | Ted Shelsby,Staff Writer

The parent of the AAI Corp. announced yesterday that it would lay off between 150 and 225 workers at its Cockeysville complex as the company restructures to lessen its dependence on military sales.

At the same time, United Industrial Corp. also said it would try to sell a unit that it bought less than two years ago in a bid to broaden its non-Defense Department business. Despite its push increase that side of its business, the company said its AAI/Microflite subsidiary had not lived up to expectations.

In all, the company said it expected to eliminate 300 jobs at locations around the country by midsummer. To pay for the restructuring, the company said it would take a one-time charge of $23 million against first-quarter earnings.

The layoffs at Cockeysville would begin in the next two to three weeks and be concluded by early summer, said William F. Herrfeldt, a spokesman for AAI. He said the cuts would come "across the board" and include technical, clerical, engineering and management positions.

At one time, AAI was among Maryland's fastest-growing companies. The work force at its York Road complex grew to a high of about3,500 in late 1987 from about 1,500 in 1979. It now has about 1,400 employees.

Its last significant work-force reduction came in 1991, when it eliminated about 200 jobs through a combination of layoffs and an early retirement program.

United Industrial shares, traded on the New York Stock Exchange, closed at $8.75, down 50 cents.

Bernard Fein, president and chief executive of United Industrial, said AAI was "predominantly a defense contractor" and the restructuring was designed to realign its business "to become ,, more competitive in the marketplace with its current customers and to enter new non-Department of Defense markets."

AAI is by far the largest unit of United Industrial, accounting for about 85 percent of the New York company's annual revenues.

AAI's plan is to cut its dependence on military contracts to 50 percent of sales by 1995. Defense sales currently account for about 70 percent of AAI's business, down from about 98 percent as recently as 1989.

The company produces a wide variety of items for the military. They include a small, pilotless drone used to spy on enemy troop movements, a trailer that lifts cruise missiles into place on B-52 bombers and simulators to train ship and aircraft crews.

One of its biggest contracts in the commercial market is for the production of electronic airport weather equipment that provides updated reports every 60 seconds to airline pilots during their landing approach.

Yesterday's announcement came after AAI hired the consulting and accounting firm of Coopers & Lybrand in January to help with a corporate reorganization.

"Their role was to assess virtually every process and function of the company to help make the corporation more efficient," said Mr. Herr-feldt.

One of Coopers & Lybrand's suggestions was to seek a buyer for AAI/Microflite, the Binghamton, N.Y., maker of flight simulators used to train commercial pilots.

AAI acquired what was then-called the Microflite Simulation International Corp. in June 1991 for "about $14 million," said Howard M. Bloch, secretary and treasurer of United Industrial.

At that time, the transaction was hailed as a major move to reduce AAI dependence on the defense budget. Company executives predicted that it could boost AAI's commercial sales to 40 percent of its business over a few years.

But, Mr. Fein said in a statement yesterday: "Regrettably, we could not anticipate all of the issues that we would face, including legal action brought against Microflite" by a competitor.

Mr. Fein said the company was "actively exploring the sale of the business with other parties."

Mr. Herrfeldt said a lawsuit filed by CAE-Link challenged AAI's right to software data used in building flight simulators.

He said CAE-Link, a Binghamton, N.Y.-based unit of CAE Industries in Toronto, was one of the world's largest makers of flight simulators and its legal action against Microflite had discouraged potential AAI customers.

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