East Hartford manufacturer Pratt & Whitney is sending $10 billion worth of work down its supply chain starting in 2015, and Connecticut’s aerospace sector is revving up to grab as much of that windfall as possible.
Pratt will produce as many jet engines in the next three years as it has in the past 25, and will rely on the supply chain to produce about 80 percent of the needed parts, said Jill Albertelli, Pratt’s global supply chain vice president. In comparison, during its last major ramp-up in the early 1980s, Pratt outsourced only 20 percent of its parts.
Just last week, Pratt announced it already has 5,500 orders for its PurePower series engine, a number that is expected to grow, leading to an unprecedented surge in business for the jet engine maker’s Connecticut suppliers, said Kevin Flanagan, vice president and sales director of Flanagan Industries in Glastonbury.
Flanagan said his aerospace components firm will be ready for any resulting orders, but between now and then, much uncertainty remains. The state is working out the details on a potential $25 million assistance package for smaller manufacturers who supply varying components to Pratt & Whitney and other advanced manufacturers.
Although not as rich as the $500 million incentive package that Pratt’s parent United Technologies Corp. is receiving to expand in Connecticut, the $25 million is sorely needed by smaller aerospace firms looking for capital to add new machines and employees to meet anticipated demand.
Pratt has 400 major suppliers worldwide, including 90 in Connecticut, plus the hundreds of companies that support them. Suppliers employ some 6,500 people in Connecticut, according to the Aerospace Components Manufacturers (ACM), a Rocky Hill trade industry group.
In a recent newsletter, Pratt & Whitney warned suppliers they should be ready for an unprecedented ramp-up of activity from five new commercial engines for which it expects to win certification by 2016, as well as the engine planned for the F-35 Joint Strike Fighter jet in development.
Pratt opened an operations command center staffed with seven people including in-house analysts to monitor delivery and quality trends by part, supplier, commodity, and program, Albertelli said.
“We are involved in engine programs for Pratt — as well as GE [Aviation] — and the numbers are just staggering,” Flanagan said. “We expect 2015 [revenues] to be up 15 to 20 percent over 2014, and then up 40 to 50 percent in 2016 — easily.”
A Connecticut supplier’s workload is never guaranteed. To win work, suppliers must demonstrate reliability and value; doing business in a relatively high-cost state, Connecticut aerospace suppliers are routinely faced with the possibility UTC will find a lower-cost competitor elsewhere that can match their reliability record.
Adding to the uncertainty are the aviation industry’s boom-and-bust cycles, compounded by the long lead times needed to bid for inclusion in a jet engine, said Douglas Rose, president of Windsor’s Aero Gear, which employs 130 people and supplies Pratt as well as its rivals GE Aviation and Rolls-Royce.
An example of that uncertainty was reflected in the lower than expected sales last year by ACM members. According to ACM’s annual performance survey, its members’ sales were up only 4.1 percent in 2013, well below the 7.1 percent projected increase. ACM members predict a combined 5 percent revenue increase this year.
“One of the hardest parts of being a contractor in this business is that you have to adjust on the fly,” said Al Samuel, ACM’s executive director. “When you look at the increases for commercial-engine production, it is a two-to-three-fold increase. You need to bring on people.”
The Aerospace Industries Association reported that the industry backlog — expected orders in the pipeline that have yet to start production — reached an all-time high of $613.3 billion last year.
Rose said Pratt & Whitney has done a good job communicating with suppliers about the anticipated ramp-up, “because they want to make sure we’ve capitalized and have added people appropriately to meet their needs.”
“I guarantee you it never works out like the forecast; it never plays out exactly that way,” Rose said. “You can’t be hiring people and buying equipment ahead of the curve, but you can’t be behind the curve or you won’t be performing.”
Still, knowing a workload increase is in the pipeline encourages companies to plan for capital expenditures that can help eliminate production line bottlenecks that might impact factory output, Samuel said.
“We’re trying to figure out the Goldilocks moment — not too soon, not too late — and it’s impossible to do that,” said Colin Cooper, CEO of Eastford-based Whitcraft, a Pratt & Whitney supplier. “If you get behind the curve, it’s going to be such a dramatic curve by all accounts that you’re not going to be able to catch the wave. You’re either riding it, or you’ve missed it — thus our bias is to make sure we’re early rather than late.”
UTC extends its in-house training and benchmarking Achieving Competitive Excellence (ACE) program to suppliers, awarding a “Supplier Gold” designation for top performers. Supplier Gold criteria includes zero quality rejections and a perfect on-time delivery record for a period of one year.
Turbine Technologies CEO Tyler Burke credits UTC’s Supplier Gold program and the Department of Economic and Community Development for helping his Farmington firm shorten its development cycle and reduce costs.
Burke said helping the cause are Connecticut’s efforts to expand a manufacturing machine technology training program that had its roots at Asnuntuck Community College in Enfield.
“There has been measurable improvement in the labor pool as a result of the state’s efforts … at several community colleges,” Burke said. “We’re rapidly adding pieces of [computerized machining] equipment and increasing our options to respond quickly when opportunities take place.”
