When Collins Aerospace was the independent company Rockwell Collins, it had a balanced business portfolio split almost half and half between commercial aerospace and defense.
It was point of pride at Rockwell Collins that if one side of the business was down, the other side was often up, helping it navigate the shifting currents of military appropriations and economic cycles.
When Rockwell Collins was sold to United Technologies Corp. (UTC) in 2018, it set off myriad organizational, structural and corporate changes. Rockwell Collins was rolled in with the acquiring company’s UTC Aerospace Systems business to create Collins Aerospace. Then Collins Aerospace and United Technologies Corp. merged with Raytheon to create a new and truly massive corporate parent, Raytheon Technologies.
We initially thought that being part of UTC, a larger and more diversified company producing everything from elevators to air conditioners to aircraft engines would help improve the ability of Collins to weather market downturns. That might have been the case until UTC’s Otis elevator business and Carrier heating and cooling business were spun off as independent companies in the Raytheon merger, and Collins Aerospace had to sell off its military GPS division to satisfy antitrust concerns in the Raytheon-United Technologies merger.
The Collins Aerospace business portfolio is now 75% commercial and 25% military. This became problematic when commercial air travel nearly collapsed due to the COVID-19 pandemic. Raytheon Technologies CEO Gregory Hayes recently told an investor conference the company will eliminate 15,000 jobs at its Pratt & Whitney jet engine business, at Collins Aerospace and in its administrative ranks. That was an increase of 6,500 jobs over cuts Raytheon Technologies announced earlier this summer, reflecting expectations of a prolonged slump in commercial aerospace demand – and for Collins Aerospace, a less balanced business portfolio.
The CEO’s comments that Raytheon Technologies will cut at least $2 billion in expenses and “we’re not done yet looking for further ways to reduce structural costs in all our businesses” creates anxiety for employees and business leaders in the Corridor, even though Collins Aerospace spokeswoman Pam Tvrdy-Cleary noted that many cuts “have already been implemented or are underway.”
Eliminating higher-cost plant locations and reducing office space are two areas of longer-term cutbacks the company is pursuing, although Mr. Hayes emphasized that may take years.
It’s worth noting that Mr. Hayes was appealing to an investment-focused audience in highlighting the cuts and Collins‘ progress toward achieving a $600 million cost synergy target announced after the acquisition of Rockwell Collins by UTC.
Still, this news is disconcerting to employees, suppliers and other stakeholders of the Corridor’s largest private employer. The pandemic has no end in sight and commercial aviation could be bleeding for years.
When commercial aviation comes back, Collins should be positioned to take advantage of its many strengths, assuming it doesn’t slash and burn now for a relatively short-term benefit to its stock price. CBJ