Providence-based Textron Inc. said yesterday it will shrink its finance unit, suspend buybacks and make other cost-cutting moves after the credit crisis contributed to the company’s first profit decline in more than four years.

Textron notified about 20 employees in Rhode Island that they will lose their jobs as part of the company’s plan to restructure its Textron Financial Corp. subsidiary.

The company will reduce that unit’s 1,200-person work force by about 9 percent, said Karen Gordon Quintal, a spokeswoman for Textron. About 210 Textron Financial employees work in Rhode Island, including about 180 at the parent company’s world headquarters in Providence, and about 30 at a customer-care center in Warwick.

There is no set time frame by which all the layoffs will occur, Quintal said.

“It will vary, depending on their specific job function,” she said. Textron will allow the affected employees “an appropriate amount of time to transition out of their position.”

Textron employs 565 people in Rhode Island and about 1,000 in Massachusetts, largely at the Textron Defense Systems unit in Wilmington.

As part of its third-quarter earnings report, Textron, the maker of Cessna aircraft and Bell helicopters, said it plans to sell its asset-based lending, structured-capital and other financing programs and limit new loans in its distribution-finance, golf and resort portfolios. The measures will include more than 100 job cuts and result in a $169-million charge this quarter.

“These are unprecedented times in the U.S. financial markets and around the world,” Chief Executive Officer Lewis Campbell, 62, said on a conference call. “As a result, we’re taking immediate action.”

Stock in Textron (TXT:NYSE) closed yesterday at $20.19 per share, up $1.12. Previously, Textron shares had lost 73 percent this year.

Textron reported that profits from continuing operations dropped to $210 million, or 85 cents a share, from $225 million, or 88 cents a share from the year-earlier period. Sales rose 14 percent to $3.53 billion.

Textron was projected to earn 87 cents, the average of 11 analysts’ estimates compiled by Bloomberg News.

The company’s earnings report missed analysts’ estimates for the first time in more than three years as higher borrowing costs amid the worst financial crisis since the Great Depression trimmed profits at Textron’s lending unit by two- thirds. The company also is halting its share repurchase program and reducing its outstanding commercial-paper funding. Textron plans to spend $25 million on cost cutting that will save $40 million a year.

“Investors may be relieved to see some action being taken to downsize, especially as the fundamentals have continued to deteriorate,” Harry Nourse, a Bank of America analyst, wrote in a note. The new finance-unit strategy is “a step in the right direction.”

Textron Financial’s five-year credit-default swaps have more than doubled since Sept. 23 to 539 basis points as of yesterday, according to CMA Datavision in London. An increase in the contracts, used to hedge against losses or to speculate on creditworthiness, represents a decline in investor confidence.

“We have plenty of credit-line backup for our commercial paper,” Campbell said. An untapped, $3-billion revolver gives Textron “sufficient capacity under the bank lines to cover all term maturities over the next 12 months.”

The company is trying to reduce its use of commercial paper, or short-term loans, with funding from free cash flow or term-related debt, Campbell said. In the meantime “paper is rolling fine — fine but expensive.” Textron had a commercial-paper balance of about $2 billion at the end of September.

Campbell said he plans to reduce finance assets by $1.5 billion by the end of next year, for a 10-percent reduction in managed receivables. There will be no “fire sale,” he said.

The airplane maker in July accelerated its buyback and said it would repurchase as much as $500 million in stock in the second half of the year. Yesterday, the company said it has suspended the program “to maximize funding predictability in the current environment.”

Textron forecast fourth-quarter profit from continuing operations of 80 cents to 90 cents a share, less than the $1.03 average estimate of 11 analysts surveyed by Bloomberg. Sales this quarter will be about $3.87 billion.

“This is hardly the best time to be missing expectations, slashing guidance and trying to sell an unwanted business,” Rob Stallard, an analyst with Macquarie Capital Ltd. in New York, wrote in a report.

“However, given the stock price performance of late, we think that investors are already mentally prepared for such a result, and may actually welcome the scaling back of Textron Financial, which will mean further concentration on the core aerospace and defense businesses,” Stallard wrote.

Textron missed analysts’ profit estimates for the first time in at least 14 quarters, according to data compiled by Bloomberg.

The last time profit from continuing operations fell was in the fourth quarter of 2003, according to Bloomberg data.

Finance earnings fell to $18 million, from $54 million, and revenue dropped 14 percent to $184 million, Textron said. The company increased provisions for loan losses as delinquencies nearly doubled to 1.06 percent, from 0.61 percent at the end of the second quarter.

Textron’s lending unit has been helping the business-jet unit arrange credit for customers who need to find alternative financing, Cessna president Jack Pelton said earlier this month.

Cessna, which sells 10 business-jet models, posted a 12-percent revenue gain last quarter, to $1.42 billion, on deliveries of 124 planes, compared with 103 it shipped a year earlier.

Cessna had a $15.6-billion order backlog, adding a less-than-expected 47 jet commitments during the quarter, Campbell said. About 68 percent of the orders are from customers outside the United States, with about half of those in Europe, he said.

“We are seeing some impacts of this weakening economy on Cessna,” particularly with slower growth in the aftermarket business and in used-aircraft sales, he said. Still, the number of order cancellations so far is “not even noteworthy” and global demand is “well in excess” of production capacity.

The Bell and Defense and Intelligence units had a combined backlog of $7.9 billion. Sales of Bell helicopters rose 8 percent, to $702 million. Increased orders and higher prices for commercial aircraft tempered a decline in revenue from the U.S. government on fewer sales of the V-22 tilt-rotor aircraft.

With reports from Journal Staff Writer Timothy C. Barmann