New CEO retools Honeywell Aero

Farnborough Air Show » 2006
November 27, 2006, 6:22 AM

When Rob Gillette arrived at Honeywell Aerospace in January 2005 as its new CEO and president he quickly set out to reorganize the complex engines/avionics/systems giant so that it would make better sense to its customers.

The central plank of this restructuring has been to look at customers in terms of meeting the needs of the business they are in rather than just as a set of products. So all of Honeywell’s engineering capabilities (employing some 12,000 engineers) have been categorized into centers of excellence with staff acting as what Gillette calls “brokers of our capabilities.”

According to Gillette, the process of change was concluded by the end of 2005. Customer and product support has been elevated in importance to the extent that the buck literally stops with him now. “We have integrated the supply chain for manufacturing and sourcing,” he explained to Aviation International News. “It is now quicker to resolve issues and we have single warranties and simpler contracts.” Honeywell has also invested in extensive staff training in understanding and responding to customer expectations.

In essence, the reshaping of Honeywell (Hall 1 Stand A9) has been about reducing the distance from the top to the bottom of the organization. In the process, it has cut out management layers, rather than simply slashing payroll numbers. “It’s been about being better at what we do and being more focused on what needs doing,” said Gillette.

As a major systems integrator Honeywell is making a concerted effort to make its approach to design more holistic. The group is actively involved in Boeing and Airbus studies for new generation narrowbodied airliners and, according to Gillette, this entails, “looking at the whole process of building an airplane and not just selling parts.”

To this end, Honeywell has opened a new systems simulation laboratory in Mexicali on the border between Mexico and the U.S. This is being used to advance the more electric aircraft concept, reducing parts numbers and weight to make the aircraft more efficient.

“Materials only represent about 20 percent of the cost (of Honeywell’s systems),” explained Gillette. “So cost reduction starts with design and reducing the complexity of parts. The challenge is making everyone involved understand what we are doing and why. Some suppliers are responding and some are not.” Those who are not may be well advised to do so soon because Honeywell is actively consolidating its supply base.

As part of the effort to reduce product cost, Honeywell recently announced plans for a new machining center in Chihuahua, Mexico. The U.S. group also has some presence in low-cost China, although this is more to do with increasing customer service in a fast-growing marketplace. “We are looking at this by customer segment and market to determine which aircraft are where and what logistics and supply chain strategy we should have,” said Gillette.

In his view, service agreements are a key facet of the cost pressure on the entire aerospace sector. “Customers don’t just want (support) infrastructure they want predictable costs,” he stated.

Gillette believes that Honeywell’s prospects now look rosier in the air transport sector than in defense and space. Production of airliner engines, avionics and systems is now “flat out” with airline flight hours growing at four to five percent annually and commercial shipsets expected to peak in 2008. Beyond that future growth hinges on the as yet unclear pace of fleet renewal and the timescale for new generation narrowbody programs.

By contrast, Honeywell faces uncertainty in military markets, partly driven by the seemingly open-ended commitment of the U.S. and its remaining allies to conflicts in the Middle East–and how much these may drain dollars away from major new defense platforms. “There is now more emphasis on logistics and war fighter deployment than on big ticket programs,” said Gillette.

A decade on from its high profile and somewhat controversial absorption of the AlliedSignal group, Honeywell has not ruled out further growth through acquisition. Gillette didn’t take the bait in responding to rumors that it has eyed UK-based Smiths as a possible takeover target, saying only that, “we have a good idea of what we would like to have.”

New partnerships are another option and Honeywell has continued to grow its capabilities in-house, not cutting its research and development budget once since the cataclysmic events of the 9/11 terrorist attacks. “We are looking at what we can do to combine what we have today and what we need in the future,” Gillette concluded.

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