Suppliers and machinists hoping Pratt & Whitney’s new generation of engine will create decades more work in Connecticut better start revising their expectations.
From all appearances, while the development of the many variations of the geared turbofan — called PurePower engine by Pratt & Whitney — will take place in Connecticut, large scale production and assembly will take place outside the state. Even for the engine’s component parts, Pratt will look more globally and less inside Connecticut than it has for its other products.
Pratt & Whitney President David Hess said the company is shifting the type of business it does in Connecticut, concentrating more on highly educated, highly skilled people doing research and developing new technology while sending lower skilled jobs to places with lower priced labor and smaller production costs.
The number of Pratt & Whitney employees in Connecticut has dropped from 12,000 to 10,000 over the past two years, and the portion of salaried employees grew to 67 percent while the portion of employees who were highly trained engineers grew to 33 percent.
“Connecticut is a good place to do the right kind of work,” Hess said.
While this shift toward research and development is bad news for the long-term sustainability of labor groups such as the International Association of Machinists that just signed a new contract with Pratt & Whitney, it’s also trouble for the more than 600 Connecticut companies in the Pratt & Whitney supply chain.
Having the company in Connecticut in any form over the long-term is a positive for the state. And Hess did say of the geared turbofan: “Certainly, parts of that will be made in Connecticut.”
But the shift toward the globalization of workers, assembly, resources and supplies is a loss for companies in the state.
“Assembling outside of Connecticut is a profound disappointment and a dangerous development, as it may lead down a path that in the future will result in more and more Pratt activity moving elsewhere,” said Fred Carstensen, director of the Connecticut Center for Economic Analysis. “The governor should be on top of this. (Gov. Dan) Malloy should personally talk with Pratt about its motivation, and how the state might have prevented this and, critically, how the state might persuade Pratt to keep and expand activities in Connecticut.”
The geared turbofan is just one of many Pratt & Whitney products but it has the potential for a new generation of development and production for the company and its suppliers. The engine is much more fuel efficient and will have many buyers needing many variations of the PurePower engine suited for their specific needs.
While all the variations will be developed in Connecticut, the mass assembly of the variations will likely be done closer to the customer, Hess said. The first version of the PurePower will be assembled in Canada, near the buyer — Bombardier, Inc.
Pratt hasn’t decided where subsequent versions will be assembled, but the outlook isn’t great for Connecticut.
In its latest agreement with the International Association of Machinists, Pratt & Whitney didn’t ask for a two-tiered pay scale — where younger incoming workers make one wage and older, experienced workers make another — and instead gave raises to everyone. This signaled to State. Sen. Gary LeBeau, D-East Hartford, co-chair of the Commerce Committee, that the company won’t be hiring new machinists and will eventually move all its assembly work elsewhere.
“They are going to take care of the people they have now, and after that, so long,” LeBeau said. “Or they are going to have so few machinist jobs here that is won’t matter.”
Assembling the geared turbofan and the other Pratt products isn’t a death knell for the Connecticut supply chain, as the company always can order the parts its local companies and ship them to the assembly plants. Also, the company’s commitment to still researching and developing at its Middletown plant means local aerospace companies will still play a key role in Pratt’s future.
Flanagan Industries in Glastonbury supplied parts for the development hardware of the geared turbofan; and the supplier hopes to play a similar role once production goes large scale.
“We merely are a small cog in their machine, and hopefully we can get some business when it goes into production,” said Ken Flanagan, president of Flanagan Industries.
But Pratt has made a shift toward low-cost suppliers, and Connecticut companies just aren’t that, Flanagan said. Plus, Pratt will be developing new versions of the engine with risk and revenue partners who will have a say in where the parts will be made. And companies based outside Connecticut aren’t likely to choose Connecticut suppliers.
“We hope they remember that we had their best interests when manufacturing their development hardware,” Flanagan said. “But even if the assembly somehow ends up in Middletown, not all the parts will come from Connecticut.”
Pratt & Whitney uses 600 Connecticut suppliers and 15 percent of its total suppliers are international companies. Hess said for the geared turbofan, Pratt would seek more than 15 percent of the parts from international sources.
When the International Association of Machinists sat down with the company in 2010 for a new labor agreement, the union officials tried to convince the company to do the bulk of its geared turbofan production in Middletown. Pratt wouldn’t commit to that, said James Parent, IAM assistant directing business representative for District 26.
“It is a brand new engine. It is the first time in a long time that Pratt has developed a new engine,” Parent said. “Having this assembled here would really help us on the commercial side of the business.”
Pratt’s decision over where to assemble the PurePower engines and all its other products is an effort to maximize their profits, and that is a marginal decision, LeBeau said. Connecticut just can’t compete in the margins as the cost of production — line items such as energy and labor — are higher here. Canada has the advantage of cheap hydroelectric power and a national health care system, which reduced labor costs by at least 15 percent, he said.
Pratt’s customers buying the geared turbofan — Bombardier in Canada, Airbus in France — will want at least some of the production done by residents of their country.
“It is about dollars and politics,” said LeBeau.
