The post-September 11th economy has confronted Rockwell Collins in Cedar Rapids, Iowa with hard choices. Faced with the need to cut costs, including laying off significant portions of the work force, the company and its unions still maintain a commitment to knowledge retention and knowledge building. This case study chronicles the efforts of this leading producer of advanced communication and aviation electronics for the commercial market and the defense industry to balance the costs of maintaining productive effectiveness while responding to market pressures. The company is faced with increased technical requirements and depressed demand for its products, which include: in-flight entertainment systems, aircraft communication systems, global positioning systems (GPS), flight deck displays (including collision alert systems and virtual landing aids), communications systems, and automatic flight controls. Survival depends on walking a strategic knife edge to sustain the bottom line and still maintain the innovation and flexibility needed to build products to market demand.Case study