The new chief executive officer of United Technologies Corp., Gregory Hayes, threw cold water on hopes and dreams of Pratt & Whitney, a subsidiary, that the successful small- and medium-sized Geared Turbo Fan will grow into the wide-body market.
Aviation Week just published an article in which all three engine OEMs were reported to be looking at a 40,000 lb engine that would be needed to power a replacement in the category of the Boeing 757 and small 767. Hayes did not specifically rule out a 40,000 lb engine, leaving PW’s potential to compete for this business unclear.
Hayes has been CEO for two weeks. He was previously CFO. He made his remarks in a UTC investors event last night. The Hartford Courant has this report.
Hayes’ remarks were in response to a question from an analyst about research and development expenses. Here is his reply, from a transcript of the event:
That is exactly the challenge that we have. We have to take E&D down. We have been in this investment cycle since 2007 on the GTF. The CSeries is going to go into production next year. You’re going to have the NEO in production next year.
You still got some additional follow-on development obviously on the Embraer and the Mitsubishi and the Irkut. You’re also going to see another year or so the G500, 600 will go into production. The fact is [R]&D should come down.
Like all organizations, however, there’s an insatiable appetite to do more, right? What we need to do is figure out a way to do more with less because we cannot continue to afford to invest at these levels. We had $1.1 billion of [R]&D at Pratt, $800 million at the Aerospace Systems.
That’s not sustainable for us at that level. It’s got to come down closer to 4% or 5% of sales than what it is today. So we’re working on this. Not a surprise, this is one of Alain’s biggest challenges out there. But we’re not going to make some investments. I think, again, we’re not in the wide-body space, right? We’re not going to build a new engine in the wide-body space. Customers would love to take the GTF and scale it up. We’re not going to do that, right?
“Alain” is Alain M. Bellemare, Chief Executive Officer and President of UTC Propulsion & Aerospace Systems, who agreed that there will be no new large engine.
The GTF is on five platforms: the Airbus A320neo, E-Jet E2, Irkut MC-21, Mitsubishi MRJ and CSeries. Still, rival CFM has a lopsided domination of the engine market share due to its exclusivity on the Boeing 737 MAX and 50% share (so far) of the A320neo. It’s also the exclusive engine on the COMAC C919.
If Hayes is essentially ruling out growth of the GTF into the 40,000 lb sector that would be served by a 757/767 replacement, this leaves Rolls-Royce and CFM (GE) for this sector and above.
One aerospace analyst in attendance told us that before landing at UTC, Hayes worked for Harry Stonecipher, former CEO of McDonnell Douglas and Boeing, where shareholder value was the priority and research and development funding suffered.