By Scott Malone

BOSTON (Reuters) - Diversified U.S. manufacturerTextron Inc said it is cutting back production at itsCessna unit, citing soft demand for business jets, but held itsfull-year profit target steady.

It will lay off about 700 workers at Cessna, whichcurrently employs 8,400 people, as well as cutting operatinghours, a spokesman said.

The company, which also makes Bell helicopters and EZ-Gogolf carts, said that the liquidation of much of its financearm is going better than it had expected and should offsetlower aircraft profit.

"While we are seeing solid performance in most of our otherbusinesses, we have not yet seen a discernible improvement inbusiness jet order activity," said Chief Executive ScottDonnelly.

Demand for corporate aircraft plunged during the longestrecession since the Great Depression, as corporate Americalooked for ways to trim costs and shied away from symbols ofexcess as companies from banks to automakers turned to the U.S.government for financial backing.

Textron shares were down 1.3 percent at $19.92 in earlytrading on the New York Stock Exchange.

The Providence, Rhode Island-based company held itsfull-year profit forecast, which it had raised in July, to arange of 55 to 65 cents per share excluding items.

Analysts, on average, look for full-year profit of 43 centsper share, according to Thomson Reuters I/B/E/S.

Textron, which employs 32,000 people overall, looks forfree cash flow from continuing operations at its manufacturingbusinesses to come to $400 million for the year, down from aprior forecast of $500 million to $550 million.

Offsetting that, the company expects to reduce outstandingreceivables at its finance arm by about $2.4 billion this year,ahead of its initial target of $1.6 billion.

Donnelly, a former General Electric Co executive whojoined Textron in 2008 and was named CEO in December, has ledthe company at a rough time.

During his tenure, the company has laid off aboutone-quarter of its staff and scaled back the finance arm --which had gotten into businesses like loaning money togolf-course developers -- to focus back on helping Textroncustomers pay for company-made equipment. (Reporting by Scott Malone, editing by Gerald E. McCormick andDerek Caney)