boeing globalization program industry... · 2012-07-24 · globalization thru local content: mhi...
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Growth & Productivity:Leveraging Business
Internationally
Dennis EncarnationHarvard University
BOEINGGLOBALIZATION PROGRAM
PART IV:Aerospace Industry
BOEINGGLOBALIZATION PROGRAM
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AEROSPACE: TRANS-ATLANTIC CONCENTRATION
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*Revenues for defense & space, government information services &
commercial aircraft (including financing), components & subsystems.
2007
Sales, $B*
Source: Annual Reports; Dennis J. Encarnation & Associates, 2008.
STILL, SOME INDUSTRIES WILL LIKELY REMAIN CONCENTRATED GEOGRAPHICALLY FOR A LONG TIME …
TOP 20 AEROSPACE COMPANIES, 2007
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AEROSPACE: TRANS-ATLANTIC CONCENTRATION
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*Revenues for defense & space, government information services &
commercial aircraft (including financing), components & subsystems.
2006
Sales, $B*
TOP 20 AEROSPACE COMPANIES, 2006
STILL, SOME INDUSTRIES WILL LIKELY REMAIN CONCENTRATED GEOGRAPHICALLY FOR A LONG TIME …
CONTINUED CONCENTRATIONMILITARY SPENDING
(US$ billion & % of US$1,367 billion, 2006)
1.622.3INDIA10.
1.723.7SOUTH KOREA9.
2.635.7GERMANY7.
22.6307US Alliances*
9.0122CHINA2.
4.459.1RUSSIA3.
4.155.1UK4.
3.345.3FRANCE5.
3.041.1JAPAN6.
1.925.4SAUDI ARABIA8.
47.5%
% GLOBAL
MILITARY
SPENDING
644
MILITARY
BUDGET(US$ billion)
USA1.
COUNTRYRANK
Note: *Multilateral (NATO) and bilateral (Australia, Japan, S. Korea) alliances.
Sources: International Institute for Strategic Studies, 2006; US Department of Defense, 2007.
… IN PART BECAUSE OF BIASES IN DEMAND, CAPITAL OUTLAYS, AND TECHNOLOGICAL ADVANTAGE
GLOBALIZATION THRU LOCAL CONTENT: MHI
Aerospace
Systems
FY2006 Financial Results (FY Ending 3/31/06)
Sales - $26.0B
Operating Profit - $627M
Executive Management
Kazuo Tsukuda, President
Hideaki Omiya, President
Machinery &
Steel
Structures
Ship-Building
& Ocean
Development
Power
Systems
• Defense Aircraft & Aeroengines
• Tactical Fighters
• Helicopters
• Commercial Aircraft Components
• Aircraft Engines
• Guided Weapon Systems
• Space Systems
• Launch Vehicles
• International Space StationOther
2006 Sales – $3.9B
Mass &
Medium-lot
Machinery
2006 Sales – $6.3B 2006 Sales – $2.0B
2006 Sales – $4.8B
2006 Sales – $608M
2006 Sales – $7.1B
Mitsubishi Heavy Industries
Japan’s largest defense contractor for a half century
2006 Preliminary Financial Results
Sales = $15.7B
Op. Profit = $1.1B
Executive Management
Pier F. Guarguaglini, Chairman and CEO
Giorgio Zappa, COO
Chairman & CEO, AleniaCOO, Finmeccanica
2005 Sales = $2.5B
2005 Sales = $1.5B2005 Sales = $961M
2005 Sales = $4.1B
• Agusta Westland (50%)
• Bell Agusta Aerospace Co. (50%)
• GIE ATR (50%)
• Civil Aerostructures
• Modifications
• Military Transport,Training & Combat A/C
• Telecommunications
• Components &subsystems
• Satellites & Services
• Space Mission Mgmt
Aeronautics
TransportationEnergy
• Avionics
• UAVs
• Land & Naval C2
• Radar Systems
Defence
Electronics
GLOBALIZATION THRU LOCAL CONTENT: ALENIA
2005 Sales = $917M
Space
2005 Sales = $3.1B
Helicopters
• Missiles
• Land, Air & NavalWeapons Systems
• Underwater weapons& sonar
2005 Sales = $1.5B
Defence
Systems
Protecting the Home Market
Finmeccanica
GLOBALIZATION THRU LOCAL CONTENT: NORTHROP
Electronic
Systems
2006 Sales=$6.6B2006 Margin=11.3%
2006 Financial Results
Sales - $30.1B
Operating Profit - $2.5B
Executive Management
Ronald Sugar - Chairman,
CEO & President
Aerospace
2006 Sales=$5.6B2006 Margin=9.1%
2006 Sales=$11.3B2006 Margin=8.7%
• Aerospace Sys.
• C4ISR & Naval
Sys.
• Defensive Sys.
• Navigation Sys.
• Gov’t Systems
• Space Sys.
• Air Combat Systems
• Airborne Early
Warning/Electronic
Warfare
• Airborne Ground
Surveillance/Battle
Management
• Civil Space
• Missile & Space
Defense
• Satellite Comm.
• ISR
• Radio Systems
• Technology
Information
Technology
& Services
• Government IT
• Enterprise IT
• Technical Services
• Commercial IT
• C2 & Intelligence
• Missile Systems
• Technical & Mgmt
Svcs
2006 Sales=$5.3B2006 Margin=7.4%
Ships
• Aircraft Carriers
• Surface Combatants
• Amphibious &
Auxiliary
• Submarines
• Commercial & Int’l
• Services
Northrop Grumman
GLOBALIZATION THRU LOCAL CONTENT: NORTHROP
Electronic
Systems
2006 Sales=$6.6B2006 Margin=11.3%
2006 Financial Results
Sales - $30.1B
Operating Profit - $2.5B
Executive Management
Ronald Sugar - Chairman & CEO
Aerospace
2006 Sales=$5.6B2006 Margin=9.1%
2006 Sales=$11.3B2006 Margin=8.7%
• Aerospace Sys.
• C4ISR & Naval
Sys.
• Defensive Sys.
• Navigation Sys.
• Gov’t Systems
• Space Sys.
• Air Combat Systems
• Airborne Early
Warning/Electronic
Warfare
• Airborne Ground
Surveillance/Battle
Management
• Civil Space
• Missile & Space
Defense
• Satellite Comm.
• ISR
• Radio Systems
• Technology
Information
Technology
& Services
• Government IT
• Enterprise IT
• Technical Services
• Commercial IT
• C2 & Intelligence
• Missile Systems
• Technical & Mgmt
Svcs
2006 Sales=$5.3B2006 Margin=7.4%
Ships
• Aircraft Carriers
• Surface Combatants
• Amphibious &
Auxiliary
• Submarines
• Commercial & Int’l
• Services
Northrop Grumman
Joint Bid with EADS forUS Tankers,
Trading Market Accessfor Product Offering
2006 Financial Results
Sales = $26.8B
Operating Profit = $2.1B
Executive Management
Dick Olver, Chairman
Mike Turner, CEO
Ian King, CEO
2006 Sales = $5.7B
2006 Sales = $6.2B
Airbus (20%)
• A380 development
• Wing design andtransport
• Wingtips, leadingedges, ailerons,airbrakes production
2006 Sales = $3.4B
2006 Sales = $532
2005 Sales = $5.9B 2006 Sales = $7.8B
• InformationSystems
• Controls
• TechnologyServices
• Information andElectronicSystemsIntegration
• C41SR
Air Systems
• Eurofighter
• JSF
• Nimrod
• Hawk
Sea Systems
• Type 45
• Astute
• UnderwaterWeapons
• Future Carrier
ProgrammesCommercial
Aerospace
Electronics,
Intelligence
& Support
International
Systems &
Partnerships
Customer
Support &
Solutions
HQ & Other
Business
GLOBALIZATION THRU INVESTMENT & JOINT PROGRAMS: BAE
Structure is the servant of strategy
BAE Systems
Land &
Armaments
2006 Sales = $4.1B
• InformationSystems
• Armoredcombatvehicles
• Naval gyros
• Missilelaunchers
• Artillerysystems
• Intelligentmunitions
SOLD
2004 Financial Results
Sales = $24.7B
Operating Profit = $1.9B
Executive Management
Dick Olver, Chairman
Mike Turner, CEO
Chris Geoghegan, COO
Steve Mogford, COO
Mark Ronald, COO
2004 Sales = $5.3B
2004 Sales = $4.1B
Airbus (20%)
• A380 development
• Wing design andtransport
• Wingtips, leadingedges, ailerons,airbrakes production
2004 Sales = $3.5B
2004 Sales = $2.0B
2004 Sales = $5.3B 2004 Sales = $5.0B
• InformationSystems
• Controls
• TechnologyServices
• Information andElectronicSystemsIntegration
Air Systems
• Eurofighter
• JSF
• Nimrod
• Hawk
Sea Systems
• Type 45
• Astute
• UnderwaterWeapons
C4ISR
ProgrammesCommercial
Aerospace
North
America International
Partnerships
Customer
Support &
Solutions
Avionics
GLOBALIZATION AT BAE: US ACQUISITIONS
Structure is the servant of strategy
BAe Systems
REVERSE TREND, GLOBAL TO LOCAL: LOCKHEED
Aeronautics
2006 Sales = $11.4B2006 Margin = 10.3%
2006 Financial Results
Sales = $39.6B
Operating Profit = $4.0B
Executive Management
Robert J. Stevens, Chairman,President & CEO
Space
Systems
2006 Sales = $7.9B2006 Margin = 9.4%
Information&
TechnologyServices
• Combat Aircraft
• Air Mobility
• Aeronautical R&D
• Launch Services
• Commercial
Satellites
• Government
Satellites
• Strategic Missiles
• Ground Systems
• Missiles & Fire Control
• Maritime Systems &
Sensors
• Simulation, Training &
Support
• Systems Integration -
Owego
• Transportation &
Security Solutions
• LM Canada
• Federal
Technology Svcs
• Department of
Energy
• Gov’t &
Commercial IT
• Aerospace Svcs
Integrated
Systems
Solutions
• Management &
Data Systems
• Mission Systems
Electronic
Systems
LockheedMartin
Systems & IT
2006 Sales = $20.3B2006 Margin = 10.5%
--------------3 Prior Divisions disbanded February 2006---------------
REVERSE TREND, GLOBAL TO LOCAL: LOCKHEED
Aeronautics
2005 Sales = $11.7B2005 Margin = 8.5%
2005 Financial Results
Sales = $37.2B
Operating Profit = $3.0B
Executive Management
Robert J. Stevens, Chairman,President & CEO
Space
Systems
2005 Sales = $6.8B2005 Margin = 8.9%
2005 Sales = $10.6B2005 Margin = 10.5%
Information&
TechnologyServices
2005 Sales = $4.0B2005 Margin = 8.8%
• Combat Aircraft
• Air Mobility
• Aeronautical R&D
• Launch Services
• Commercial
Satellites
• Government
Satellites
• Strategic Missiles
• Ground Systems
• Missiles & Fire Control
• Maritime Systems &
Sensors
• Simulation, Training &
Support
• Systems Integration -
Owego
• Transportation &
Security Solutions
• LM Canada
• Federal
Technology Svcs
• Department of
Energy
• Gov’t &
Commercial IT
• Aerospace Svcs
Integrated
Systems
Solutions
2005 Sales = $4.1B2005 Margin = 8.8%
• Management &
Data Systems
• Mission Systems
Electronic
Systems
LockheedMartin
•US Government, 51%
•US Classified, 20%
•Foreign Governments, 19%
•US Commercial, 7%•Foreign Commercial, 3%
Geographic Sales, 2005 (%)Not seeking to become a “global enterprise for aerospace leadership”
• Astrium
• Arianespace (22.9%)
• Satellite Systems
• Ground Stations
• Space Transportation
• Eurofighter (43%)
• Dassault (45.7%)
• Defense Electronics
• MBDA (50%)
• Support, Services,Training
• SecureCommunications
Executive Management
Louis Gallois, Co-CEO
Thomas Enders, Co-CEO To Airbus CEO
• ATR (50%)
• EFW
• SOCATA
• SOGERMA
2006 Sales = $1.6B
2006 Sales = $4.0B2006 Sales = $7.4B
• Military Helicopters
• Civil Helicopters
2006 Sales = $4.8B
2006 Sales = $2.8B
GLOBALIZATION AS REGIONALIZATION: EADS
2006 Financial Results
Sales = $49.6B
Earnings = US$501M (vs. US$3.6B in 2005)
• CASA MilitaryTransports
• Airbus MilitaryCompany (A400M)
Other
Astrium
Defense &
Security
Systems
Military
Transport
Aircraft
Eurocopter
A microcosm of the macro dynamics of EU integration
EADS
Airbus
2006 Sales = $31.6B
Airbus Integrated
Company (80%)
• Commercial Aircraft
THE MANY FACES OF GLOBALIZATION: GE
R & D Sourcing Production After SalesService
Appliances
Lighting
Medical Systems
Plastics
Aircraft Engines
Note: The wider the bar, the greater the share of value created outside the U.S.
Sales &Marketing
Companies do NOT globalize, businesses do…
GLOBALIZATION & VALUE-ADDED: GE
Example: The ‘worst quarter’ in the history of GE Aircraft Engines
Q1, 2003, CAGR Total Commercial Military
Revenues -8%
Goods -35% -37% 3.5%
Services 14% 23% 9%
Bottom Line: Operating Profits up 13% (to $474 mil.)Thanks to Top-Line Services & Productivity Gains--These are the Main ‘Drivers’ in this Business Today
REDEFINING GLOBALIZATION: GE
Example: The ‘worst quarter’ in the history of GE Aircraft Engines
Q1, 2003, CAGR Total Commercial Military
Revenues -8%
Goods -35% -37% 3.5%
Services 14% 23% 9%
Bottom Line: Operating Profits up 13% (to $474 mil.)Thanks to Top-Line Services & Productivity Gains--These are the Main ‘Drivers’ in this Business Today
And what if GE had acquired Honeywell?According to the European Commission, upwards
of 2/3 of the value of the aircraft--includingengines, electronics, and capital--would have
come from the merged business.
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*Revenues for defense & space, government
information services & commercial aircraft
(including financing), components & subsystems.
2003
Sales, $B*
REDEFINING AN INDUSTRY: GE
A GE-Honeywell merger would have furtherconsolidated the aerospace industry, creating a
new #4 with aspirations for being #1 or #2
GE + Honeywell
RESTRUCTURING TODAY: A FEW TRENDS
Entry ofAdjacent Players
Case Study: India
The NewNationalism
Case Study: Global
Servicing a largeinstalled base
Commercial: GE-Ae serviceshops
Military: Boeing’s ISS, fromCanada to the Netherlands(to Korea)
New products innew geographiesacross regions
BAe’s acquisition of Sandersin the US defined the futureof aerospace M&A
Finmeccanica’s acquisitionof DRS Technologies in theUS is the largest to date
GE’s acquisition of SmithAerospace in the UKillustrates the reverse trend
Expansion intoAdjacencies
Case: Trans-Atlantic
RESTRUCTURING TODAY: A FEW TRENDS
Entry ofAdjacent Players
Case Study: India
Sovereign funds &state banks
Middle East oil exporters:Mubadala, SAGIA, etc.
Russia: Vneshtorgbank’s5% equity stake in EADS
State-ownedenterprises
Russia: Consolidation ofseveral enterprises in UnitedAviation Corporation (UAC)
India: HAL’s resurgencethru offsets
State Aid, Revisited Exim financing or not to
buyers: airlines
For R&D: GE-GlobalResearch Centre-Munich
The NewNationalism
Case Study: Global
Servicing a largeinstalled base
Commercial: GE-Ae serviceshops
Military: Boeing’s ISS, fromCanada to the Netherlands(to Korea)
New products innew geographiesacross regions
BAe’s acquisition of Sandersin the US defined the futureof aerospace M&A
Finmeccanica’s acquisitionof DRS Technologies in theUS is the largest to date
GE’s acquisition of SmithAerospace in the UKillustrates the reverse trend
Expansion intoAdjacencies
Case: Trans-Atlantic
RESTRUCTURING TODAY: A FEW TRENDS
Tata no prior defense or aero-
space experience except in IT
By 2011: sole supplier of787 floor beams, & potentialJV partner for Boeing
Mahindra Indian defense contractor,
mainly for combat & supplyvehicles to the Army
partner of choice for BAeSystems as it expandsplatforms into India
Larsen & Toubro Indian defense contractor,
mainly for ships and weaponsto the Navy
potential supplier to Boeing
Entry ofAdjacent Players
Case Study: India
Sovereign funds &state banks
Middle East oil exporters:Mubadala, SAGIA, etc.
Russia: Vneshtorgbank’s5% equity stake in EADS
State-ownedenterprises
Russia: Consolidation ofseveral enterprises in UnitedAviation Corporation (UAC)
India: HAL’s resurgencethru offsets
State Aid, Revisited Exim financing or not to
buyers: airlines
For R&D: GE-GlobalResearch Centre-Munich
The NewNationalism
Case Study: Global
Servicing a largeinstalled base
Commercial: GE-Ae serviceshops
Military: Boeing’s ISS, fromCanada to the Netherlands(to Korea)
New products innew geographiesacross regions
BAe’s acquisition of Sandersin the US defined the futureof aerospace M&A
Finmeccanica’s acquisitionof DRS Technologies in theUS is the largest to date
GE’s acquisition of SmithAerospace in the UKillustrates the reverse trend
Expansion intoAdjacencies
Case: Trans-Atlantic