Drone maker General Atomics may face layoffs: executive

DUBAI (Reuters) - Privately-held drone maker General Atomics Aeronautical Systems Inc may have to lay off about one quarter of its production staff if it does not receive further U.S. or foreign orders, a senior company executive said this week.

Frank Pace, president of the company’s aircraft systems group, said the Pentagon’s current plan to halve its purchases of Predator B drones to around 24 a year, coupled with continued restrictions on foreign sales, were putting pressure on the San Diego-based company, a unit of General Atomics.

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

“It’s significant. We’re still working off the fiscal 2012 buy, but eventually if we can’t make some more overseas sales or sell to the Marines or something like that, we’ll have to cut back staff,” Pace said.

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

“When the budgets are going down in the U.S., you would like to be able to export more,” Pace told Reuters, adding that U.S. restrictions on foreign sales slowed the company’s ability to respond to strong foreign demand which could offset the slump in U.S. military spending.

Foreign sales of larger unmanned aerial vehicles (UAVs) that can carry 500 kilograms or more of sensors and payloads are banned under the Missile Technology Control Regime, and require special waivers from the U.S. government, in addition to the already lengthy regular process for approving weapons sales.

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

Some efforts are under way in the U.S. government, but the process has been moving very slowly. Wes Bush, the chief executive of Northrop Grumman Corp NOC.N has warned that failure to adjust the rules could result in a competitive advantage for manufacturers outside the United States.

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

“It’s one of those things where all of industry is frustrated with the government, so there’s a chance that they might do something,” he said when asked if the U.S. government was making any moves to loosen the current rules.

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

General Atomics has built nearly 200 Predator B drones, and has sold the airplanes to Italy and France. Germany, the Netherlands, 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 XP or export version of the unmanned plane to the United Arab Emirates, which is looking at additional purchases, Pace said.

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

Editing by Mark Potter