Archive For The “Heroux-Devtek” Category
Boeing claimed a victory from the latest round of WTO rulings – Airbus, of course, differed in their interpretation. Irrespective, the WTO rulings have no teeth and are largely a game for government officials, bureaucrats, and attorneys. By the time any decision is taken, appealed, and re-appealed, the original topic is usually moot. But it appears that the 777X wing factory, built with the largesse of the State of Washington, is safe, as everyone knew it would be.
Boeing also just doubled down on its position against Bombardier. “In Canada, we face a situation with a competitor, an emerging competitor, that has, yes, long received government support – but that just went beyond the pale in 2016,” said Marc Allen, president of Boeing’s international division. Boeing apparently sees a potential new Airbus in Bombardier. Apparently, only Boeing does not think this case is as ridiculous as nearly everyone else in the industry since they no longer make any aircraft that competes with the CS100 that Delta purchased.
Boeing has a number of fights to contend with. Their drained financial condition and inability to fund a new narrow-body aircraft to “one-up” Bombardier or Airbus mean that Boeing is likely to continue to go to Washington DC to seek economic protectionism and favors. But in Washington, the threat to Boeing has also turned as American as apple pie. Several US lawmakers are already skeptical of Boeing’s claim against Bombardier, particularly the impacts it will have on local congressional districts. Boeing is no longer just tangling with Bombardier, Canada is joining the fight. Should the US Department of Commerce decide to impose tariffs on Bombardier, there is a very good chance Boeing will lose its fighter deal with Canada. This is not a win-win situation for Boeing but could be very good news for another fighter OEM.
But then came the biggest news, and next potential battlefield – UTC’s deal to buy Rockwell Collins. If Boeing fears Bombardier, the UTC deal should absolutely terrify Boeing. The newer, bigger, UTC will be a manifest threat to Boeing. Boeing issued a statement indicating: “We intend to take a hard look at the proposed combination of United Technologies and Rockwell Collins. Until we receive more details, we are skeptical that it would be in the best interest of—or add value to—our customers and industry.” On an order of magnitude impact, the WTO case just disappeared into a puff of smoke, and Bombardier became irrelevant.
This will undoubtedly turn into a fight that Boeing isn’t used to, a fight between US-based relative equals. Boeing needs a number of parts and pieces from the new UTC. No other aerospace company has the same heft, nor as broad a footprint, as the new UTC, except perhaps the new SAFRAN if Thales joins the group as rumored. From engines to avionics, interiors, landing gear, electrical systems and other offerings, UTC could nearly assemble a full aircraft from the parts it provides. UTC now easily represents more than 60% of the content of the Boeing 787 and is unlikely to be pushed around by the Boeing when the next negotiations occur.
Boeing (and Airbus) are rightly nervous about the new UTC. Both OEMs have been moving into the services business, much to the annoyance of the supply chain. As Jim Cramer points out: “Boeing can play off everybody…. but If you own the landing gear, you own the brains, you own the inside, the seating, you can be a player that can say to Boeing ‘we’re not part of your partners’ plan.’ To be able to make you more money, you’re going to make us more money. So it changes the balance of power.”
UTC builds just about everything that goes on an aircraft, with the exception of the fuselage and wings. But if it seeks to return to its origins in manufacturing commercial aircraft, all it would need is another acquisition – someone like Spirit for example, with a majority of the aircraft being from the combined UTC – to fully compete with Boeing or Airbus.
The question that needs to be analyzed is where the innovations in aviation come from – the airframe OEMs or the supply chain. With increasing technological complexity in both airframes and components, the answer is both. Imagine a Boeing without the combination of products from UTC and its Goodrich and Rockwell Collins acquisitions. We couldn’t pull together a list of alternative suppliers with the same capabilities and technologies, and a transition would be exceptionally difficult for Boeing.
Boeing recently changed the balance of power with the supply chain with its Partnering for Success program, which was an effective 10-15% price cut in favor of Boeing. Their second effort resulted in additional marginal gains, and rumors of a PFS III are rampant in the supplier community, wondering when and how hard the next shoe will drop.
When PFS was introduced, UTC balked, and Boeing awarded the 777X landing gear to Heroux-Devtek, a Montréal-based manufacturer that, while capable, has never built a gear quite that large. UTC heard the message loud and clear.
But instead of playing dead and acquiescing to Boeing’s wishes, it decided that the acquisition of Rockwell Collins, and growing the critical mass represented by UTC to become so large that it is unlikely that any aircraft manufacturer could dare attack their margins again. They know it, and so does Boeing. This is a deal that changes supply chain leverage from the OEMs favor towards the supplier, and equalizes the playing field. Meanwhile, other suppliers are hoping that whatever favors UTC can gain will trickle down to keep the playing field level.
Can Boeing shut off UTC if its demands become too great? Of course, it can, but it would be like cutting off its nose to spite its face – an ugly arrangement. The balance of power has shifted, and there is a new 900-pound gorilla in the zoo pounding its chest. It will be interesting to watch this class over the next few years.
It is not commonly known that Montreal, Quebec is the world’s third largest commercial aerospace hub after Toulouse and Seattle. The names of companies based in the Montreal region are obviously Bombardier, but also CAE, Bell Helicopter, Pratt & Whitney Canada, Liebherr among others.
This week Aero Montreal is hosting an event to showcase the region’s impressive aerospace industry. A look at the group’s leadership is evidence of the deep industry connections within the region. The location of so much of the industry within the Montreal region serves to boost many other aspects of the community – for example the industry creates a strong demand for skilled workers that require cutting edge education. This ranges from exotic materials and additive manufacturing to exploring new innovations.
Today we attended a session titled “The Future of Flying: Electric Aircraft and Aerostructures”. The panelists included people Liebherr, Airbus Group and LTA Aerostructures. Airbus’s spokesman described their work on E-Fan. For those who have attended the big airshows, you will have seen (but not hear) the littlest Airbus. The technologies Airbus is developing by undertaking this project are not a marketing gimmick.
As we have seen, Airbus is collaborating with Siemens on a hybrid drive propulsion system for aircraft up to 100 seats. By learning what is possible, given the current state of art in terms of batteries, for example, Airbus is creating valuable IP. The speaker from Liebherr was equally interesting – focusing on how future aircraft will be requiring fewer hydraulics, with zero hydraulics being the goal. We also heard from LTA Aerostructures. This company has a vision of how it will be able to deliver cargo across the vast Canadian hinterland all year, regardless of seasons because it will be developing airships.
Although Airbus is not located in the Montreal region, its work serves to underscore and indeed validate the work being done at Liebherr and LTA. And none of this would have been so apparent were it not for the event being hosted by Aero Montreal. Canada has an impressive history in aviation, driven by its huge size and relatively small population. Canadian ingenuity in commercial aviation is pretty amazing as this short history through 2000 lists.
On Tuesday and Wednesday, Aero Montreal has organized visits to some of these impressive Canadian firms. One is Heroux-Devtek. A name that few associate with big aerospace news perhaps. But the firm developed and built the NASA Apollo Lunar Module’s landing gear in 1969. The aerospace industry has deep roots in Montreal, and they are flourishing.