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Boeing Sells Propulsion and Commercial Airplane Operations

  • Monday, 28th February 2005
  • Reading time: about 5 minutes

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Boeing is to sell its Rocketdyne Propulsion Unit to Pratt & Whitney and its commercial airplanes operations in Kansas and Oklahoma to Onex.

The Boeing Company and Onex Corporation have formed an agreement under which Onex will acquire the Wichita/Tulsa Division of Boeing Commercial Airplanes. The transaction includes Commercial Airplanes facilities and assets in Wichita, Kansas, and Tulsa and McAlester, Oklahoma. Transaction consideration to Boeing includes approximately $900 million cash, transfer of certain liabilities and long-term supply agreements that provide Boeing ongoing cost savings.

The single-source supply agreements cover the structures and parts currently produced by the Wichita/Tulsa Division, providing a stable base of revenue for the new business to build upon. In addition, the Wichita/Tulsa operations will continue as a major partner on the 787 Dreamliner.

“”This agreement fully supports our strategy to focus Boeing on large-scale systems integration, which is where we are most competitive and can add the most value to our airplanes and services,”” said Boeing Commercial Airplanes President and Chief Executive Officer Alan Mulally. “”Boeing will benefit from lower procurement costs and the Wichita/Tulsa operations now can grow by winning new business with other customers.””

Onex will form a new company to operate the facilities. The plants will continue to operate under the leadership of Jeff Turner, currently vice president and general manager of the Boeing Commercial Airplanes Wichita Division, who will be the new company’s CEO.

“”Onex has a strategy to build the most efficient and innovative company in the aerostructures industry. We intend to invest over $1 billion in Kansas and Oklahoma in the next few years,”” said Seth Mersky, an Onex managing director.

Boeing announced in April 2004 that it was studying the possible sale of its plants in Wichita , Tulsa and McAlester . Boeing included balancing the interests of employees, customers, shareholders and its plant communities in its criteria for the decision.

“”We firmly believe that this decision provides the best available outcome for the Wichita/Tulsa Division and its plant communities by creating new opportunities for sustained growth as a separate operation. Onex shares this perspective, and we look forward to a long and productive relationship together,”” Mulally said.

Approximately 9,000 Commercial Airplanes employees currently work at the Wichita , Tulsa and McAlester sites. The Division incurred approximately US$2.2 billion in annual costs for 2004. The facilities currently supply Boeing with fuselage and other structural components for the 737, 747, 767 and 777 programs, and the division is a supplier partner on the 787 Dreamliner.

Boeing has reached an agreement to sell its Rocketdyne Propulsion & Power business to Pratt & Whitney, a United Technologies company for approximately $700 million in cash.

Rocketdyne is primarily a rocket engine developer and builder, and provides booster engines for the Space Shuttle and the Delta family of expendable launch vehicles, as well as propulsion systems for missile defense systems. The divestiture includes sites and assets in California, Alabama, Mississippi and Florida. Approximately 3,000 people support the operations at those sites

“”This transaction makes sense for Boeing, for Rocketdyne’s employees and customers, and for Pratt & Whitney,”” said Jim Albaugh, president and chief executive officer of Boeing Integrated Defense Systems. “”The acquisition of Rocketdyne by Pratt & Whitney will benefit our customers, as Pratt & Whitney is a company dedicated to the business of propulsion and is in the best position to build upon Rocketdyne’s proud heritage. I have great confidence that the proud legacy of Rocketdyne from Mercury to Saturn V to the Space Shuttle will be in good hands. The sale also reinforces our strategic business aim to be horizontally — not vertically — integrated.””

Albaugh said that Boeing would continue to build launch systems and that the divestiture would enable Boeing to serve its customers more effectively, while preserving the company’s ability to contract with Rocketdyne for continued use of its capabilities and expertise.

“”UTC companies are at the cutting edge of technology in all business segments and we believe Rocketdyne’s rich heritage of technology excellence and innovation is a great addition to our portfolio,”” said Louis R. Ch√™nevert, president of Pratt & Whitney. “”We look forward to working with Boeing, NASA, the Department of Defense and other customers to continue the high level of service that Rocketdyne has always provided.””

Rocketdyne Propulsion & Power was formerly owned by North American Aviation and Rockwell International, and has been the premiere rocket propulsion provider in the nation for more than a half-century. As part of Boeing Integrated Defense System’s Launch & Orbital Systems segment, the business being divested generated nearly $700 million in revenue during 2004. Sales to Boeing have typically represented about a third of Rocketdyne’s sales.

In the 1950s, Rocketdyne engines put the first U.S. satellites into orbit, and the company continued as an integral part of the Mercury, Gemini and Apollo programs that put humans on the moon. Rocketdyne supplied the main engines for the Space Shuttle in the 1980s and has continued to build booster engines for Atlas and Delta expendable launch vehicles. And recently, Rocketdyne developed and has flown the RS-68, the first large liquid-fueled American booster engine in a generation.

United Technologies, based in Hartford, Conn., is a diversified company that provides high technology products and services to the commercial building industry and the military and commercial aerospace industry. In addition to Chubb, Otis, Carrier and UTC Power, United Technologies’ companies include Pratt & Whitney, Hamilton Sundstrand and Sikorsky Aircraft.

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