BOEING GLOBALIZATION PROGRAM

Transcription

1 BOEING GLOBALIZATION PROGRAM Growth & Productivity: Leveraging Business Internationally Dennis Encarnation Harvard University

2 BOEING GLOBALIZATION PROGRAM PART IV: Aerospace Industry

3 AEROSPACE: TRANS-ATLANTIC CONCENTRATION 2007 Sales, $B* TOP 20 AEROSPACE COMPANIES, 2007 *Revenues for defense & space, government information services & commercial aircraft (including financing), components & subsystems. Boeing EADS Lockheed Martin BAE Northrop Grumman General Dynamics Raytheon United Technologies General Electric Finmeccanica Thales L-3 Communications Honeywell Rolls Royce Bombardier Goodrich Alcatel Dassault Mitsubishi Embraer Source: Annual Reports; Dennis J. Encarnation & Associates, STILL, SOME INDUSTRIES WILL LIKELY REMAIN CONCENTRATED GEOGRAPHICALLY FOR A LONG TIME

4 2006 Sales, $B* AEROSPACE: TRANS-ATLANTIC CONCENTRATION TOP 20 AEROSPACE COMPANIES, 2006 *Revenues for defense & space, government information services & commercial aircraft (including financing), components & subsystems. Boeing EADS Lockheed Martin Northrop Grumman BAE General Dynamics Raytheon United Technologies General Electric Finmeccanica STILL, SOME INDUSTRIES WILL LIKELY REMAIN CONCENTRATED GEOGRAPHICALLY FOR A LONG TIME Thales L-3 Communications Honeywell Rolls Royce Bombardier Goodrich Alcatel Dassault Mitsubishi Embraer

5 CONTINUED CONCENTRATION MILITARY SPENDING (US$ billion & % of US$1,367 billion, 2006) RANK COUNTRY MILITARY BUDGET (US$ billion) % GLOBAL MILITARY SPENDING 1. USA % US Alliances* CHINA RUSSIA UK FRANCE JAPAN GERMANY SAUDI ARABIA SOUTH KOREA INDIA Note: *Multilateral (NATO) and bilateral (Australia, Japan, S. Korea) alliances. Sources: International Institute for Strategic Studies, 2006; US Department of Defense, IN PART BECAUSE OF BIASES IN DEMAND, CAPITAL OUTLAYS, AND TECHNOLOGICAL ADVANTAGE

6 GLOBALIZATION THRU LOCAL CONTENT: MHI Mitsubishi Heavy Industries FY2006 Financial Results (FY Ending 3/31/06) Sales - $26.0B Operating Profit - $627M Aerospace Power Executive Management Kazuo Tsukuda, President Hideaki Omiya, President Ship-Building & Ocean Development 2006 Sales $3.9B Defense Aircraft & Aeroengines Tactical Fighters Helicopters Commercial Aircraft Components Aircraft Engines Guided Weapon Space Launch Vehicles International Space Station 2006 Sales $6.3B 2006 Sales $2.0B Machinery & Steel Structures 2006 Sales $4.8B Mass & Medium-lot Machinery 2006 Sales $7.1B Other 2006 Sales $608M Japan s largest defense contractor for a half century

7 GLOBALIZATION THRU LOCAL CONTENT: ALENIA 2006 Preliminary Financial Results Sales = $15.7B Op. Profit = $1.1B Aeronautics Space Finmeccanica Defence Electronics Executive Management Pier F. Guarguaglini, Chairman and CEO Giorgio Zappa, COO Chairman & CEO, Alenia COO, Finmeccanica Defence 2005 Sales = $2.5B 2005 Sales = $917M 2005 Sales = $4.1B 2005 Sales = $1.5B GIE ATR (50%) Civil Aerostructures Modifications Military Transport, Training & Combat A/C Telecommunications Components & subsystems Satellites & Services Space Mission Mgmt Avionics UAVs Land & Naval C2 Radar Missiles Land, Air & Naval Weapons Underwater weapons & sonar Energy Helicopters Transportation 2005 Sales = $961M 2005 Sales = $3.1B 2005 Sales = $1.5B Agusta Westland (50%) Bell Agusta Aerospace Co. (50%) Protecting the Home Market

8 GLOBALIZATION THRU LOCAL CONTENT: NORTHROP 2006 Financial Results Sales - $30.1B Operating Profit - $2.5B Northrop Grumman Executive Management Ronald Sugar - Chairman, CEO & President Electronic Aerospace Information Technology & Services Ships 2006 Sales=$6.6B 2006 Margin=11.3% Aerospace Sys. C4ISR & Naval Sys. Defensive Sys. Navigation Sys. Gov t Space Sys Sales=$5.6B 2006 Margin=9.1% Air Combat Airborne Early Warning/Electronic Warfare Airborne Ground Surveillance/Battle Management Civil Space Missile & Space Defense Satellite Comm. ISR Radio Technology 2006 Sales=$11.3B 2006 Margin=8.7% Government IT Enterprise IT Technical Services Commercial IT C2 & Intelligence Missile Technical & Mgmt Svcs 2006 Sales=$5.3B 2006 Margin=7.4% Aircraft Carriers Surface Combatants Amphibious & Auxiliary Submarines Commercial & Int l Services

9 GLOBALIZATION THRU LOCAL CONTENT: NORTHROP 2006 Financial Results Sales - $30.1B Operating Profit - $2.5B Northrop Grumman Executive Management Ronald Sugar - Chairman & CEO Electronic Aerospace Information Technology & Services Ships 2006 Sales=$6.6B 2006 Margin=11.3% Aerospace Sys. C4ISR & Naval Sys. Defensive Sys. Navigation Sys. Gov t Space Sys Sales=$5.6B 2006 Margin=9.1% Air Combat Airborne Early Warning/Electronic Warfare Airborne Ground Surveillance/Battle Management Civil Space Missile & Space Defense Satellite Comm. ISR Radio Technology 2006 Sales=$11.3B 2006 Margin=8.7% Government IT Enterprise IT Technical Services Commercial IT C2 & Intelligence Missile Technical & Mgmt Svcs 2006 Sales=$5.3B 2006 Margin=7.4% Aircraft Carriers Surface Combatants Amphibious & Auxiliary Submarines Commercial & Int l Services Joint Bid with EADS for US Tankers, Trading Market Access for Product Offering

10 GLOBALIZATION THRU INVESTMENT & JOINT PROGRAMS: BAE 2006 Financial Results Sales = $26.8B Operating Profit = $2.1B BAE Executive Management Dick Olver, Chairman Mike Turner, CEO Ian King, CEO Programmes Commercial Aerospace Electronics, Intelligence & Support Land & Armaments International & Partnerships 2006 Sales = $5.7B Air Eurofighter JSF Nimrod Hawk Sea Type 45 Astute Underwater Weapons Future Carrier 2005 Sales = $5.9B 2006 Sales = $7.8B Airbus (20%) A380 development Wing design and transport Wingtips, leading edges, ailerons, airbrakes production SOLD Information Controls Technology Services Information and Electronic Integration C41SR 2006 Sales = $4.1B Information Armored combat vehicles Naval gyros Missile launchers Artillery systems Intelligent munitions Structure is the servant of strategy 2006 Sales = $3.4B Customer Support & Solutions 2006 Sales = $6.2B HQ & Other Business 2006 Sales = $532

11 GLOBALIZATION AT BAE: US ACQUISITIONS 2004 Financial Results Sales = $24.7B Operating Profit = $1.9B Programmes 2004 Sales = $5.3B Air Eurofighter JSF Nimrod Hawk Sea Type 45 Astute Underwater Weapons C4ISR Commercial Aerospace 2004 Sales = $5.3B 2004 Sales = $5.0B Airbus (20%) A380 development Wing design and transport BAe Wingtips, leading edges, ailerons, airbrakes production North America Information Controls Technology Services Information and Electronic Integration Structure is the servant of strategy Executive Management Dick Olver, Chairman Mike Turner, CEO Chris Geoghegan, COO Steve Mogford, COO Mark Ronald, COO International Partnerships 2004 Sales = $3.5B Customer Support & Solutions 2004 Sales = $4.1B Avionics 2004 Sales = $2.0B

12 REVERSE TREND, GLOBAL TO LOCAL: LOCKHEED 2006 Financial Results Sales = $39.6B Operating Profit = $4.0B Lockheed Martin Executive Management Robert J. Stevens, Chairman, President & CEO Aeronautics 2006 Sales = $11.4B 2006 Margin = 10.3% Combat Aircraft Air Mobility Aeronautical R&D Electronic Missiles & Fire Control Maritime & Sensors Simulation, Training & Support Integration - Owego Transportation & Security Solutions LM Canada & IT 2006 Sales = $20.3B 2006 Margin = 10.5% Prior Divisions disbanded February Integrated Solutions Management & Data Mission Information & Technology Services Federal Technology Svcs Department of Energy Gov t & Commercial IT Aerospace Svcs Space 2006 Sales = $7.9B 2006 Margin = 9.4% Launch Services Commercial Satellites Government Satellites Strategic Missiles Ground

13 REVERSE TREND, GLOBAL TO LOCAL: LOCKHEED 2005 Financial Results Sales = $37.2B Operating Profit = $3.0B Lockheed Martin Executive Management Robert J. Stevens, Chairman, President & CEO Aeronautics Electronic Integrated Solutions Space Information & Technology Services 2005 Sales = $11.7B 2005 Margin = 8.5% Combat Aircraft Air Mobility Aeronautical R&D 2005 Sales = $10.6B 2005 Margin = 10.5% Missiles & Fire Control Maritime & Sensors Simulation, Training & Support Integration - Owego Transportation & Security Solutions LM Canada 2005 Sales = $4.1B 2005 Margin = 8.8% Management & Data Mission Geographic Sales, 2005 (%) US Government, 51% US Classified, 20% Foreign Governments, 19% US Commercial, 7% Foreign Commercial, 3% 2005 Sales = $6.8B 2005 Margin = 8.9% Launch Services Commercial Satellites Government Satellites Strategic Missiles Ground 2005 Sales = $4.0B 2005 Margin = 8.8% Federal Technology Svcs Department of Energy Gov t & Commercial IT Aerospace Svcs Not seeking to become a global enterprise for aerospace leadership

14 GLOBALIZATION AS REGIONALIZATION: EADS 2006 Financial Results Sales = $49.6B Earnings = US$501M (vs. US$3.6B in 2005) EADS Executive Management Louis Gallois, Co-CEO Thomas Enders, Co-CEO To Airbus CEO Airbus Defense & Security Astrium Military Transport Aircraft 2006 Sales = $31.6B Airbus Integrated Company (80%) Commercial Aircraft Other 2006 Sales = $1.6B ATR (50%) EFW SOCATA SOGERMA 2006 Sales = $7.4B Eurofighter (43%) Dassault (45.7%) Defense Electronics MBDA (50%) Support, Services, Training Secure Communications 2006 Sales = $4.0B Astrium Arianespace (22.9%) Satellite Ground Stations Space Transportation 2006 Sales = $2.8B CASA Military Transports Airbus Military Company (A400M) Eurocopter 2006 Sales = $4.8B Military Helicopters Civil Helicopters A microcosm of the macro dynamics of EU integration

15 THE MANY FACES OF GLOBALIZATION: GE Companies do NOT globalize, businesses do Appliances Lighting Medical Plastics Aircraft Engines Note: The wider the bar, the greater the share of value created outside the U.S. R & D Sourcing Production Sales & Marketing After Sales Service

16 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

17 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--including engines, electronics, and capital--would have come from the merged business.

18 2003 Sales, $B* REDEFINING AN INDUSTRY: GE A GE-Honeywell merger would have further consolidated the aerospace industry, creating a new #4 with aspirations for being #1 or #2 GE + Honeywell *Revenues for defense & space, government information services & commercial aircraft (including financing), components & subsystems. Boeing EADS Lockheed Martin Northrop Grumman BAE Raytheon General Dynamics General Electric United Technologies Thales Rolls Royce Bombardier Finmeccanica L-3 Communications Goodrich Alcatel Dassault Mitsubishi Embraer

19 RESTRUCTURING TODAY: A FEW TRENDS Expansion into Adjacencies Case: Trans-Atlantic Servicing a large installed base Commercial: GE-Ae service shops Military: Boeing s ISS, from Canada to the Netherlands (to Korea) New products in new geographies across regions BAe s acquisition of Sanders in the US defined the future of aerospace M&A Finmeccanica s acquisition of DRS Technologies in the US is the largest to date GE s acquisition of Smith Aerospace in the UK illustrates the reverse trend The New Nationalism Case Study: Global Entry of Adjacent Players Case Study: India

20 RESTRUCTURING TODAY: A FEW TRENDS Expansion into Adjacencies Case: Trans-Atlantic Servicing a large installed base Commercial: GE-Ae service shops Military: Boeing s ISS, from Canada to the Netherlands (to Korea) New products in new geographies across regions BAe s acquisition of Sanders in the US defined the future of aerospace M&A Finmeccanica s acquisition of DRS Technologies in the US is the largest to date GE s acquisition of Smith Aerospace in the UK illustrates the reverse trend The New Nationalism Case Study: Global Sovereign funds & state banks Middle East oil exporters: Mubadala, SAGIA, etc. Russia: Vneshtorgbank s 5% equity stake in EADS State-owned enterprises Russia: Consolidation of several enterprises in United Aviation Corporation (UAC) India: HAL s resurgence thru offsets State Aid, Revisited Exim financing or not to buyers: airlines For R&D: GE-Global Research Centre-Munich Entry of Adjacent Players Case Study: India

21 RESTRUCTURING TODAY: A FEW TRENDS Expansion into Adjacencies Case: Trans-Atlantic Servicing a large installed base Commercial: GE-Ae service shops Military: Boeing s ISS, from Canada to the Netherlands (to Korea) New products in new geographies across regions BAe s acquisition of Sanders in the US defined the future of aerospace M&A Finmeccanica s acquisition of DRS Technologies in the US is the largest to date GE s acquisition of Smith Aerospace in the UK illustrates the reverse trend The New Nationalism Case Study: Global Sovereign funds & state banks Middle East oil exporters: Mubadala, SAGIA, etc. Russia: Vneshtorgbank s 5% equity stake in EADS State-owned enterprises Russia: Consolidation of several enterprises in United Aviation Corporation (UAC) India: HAL s resurgence thru offsets State Aid, Revisited Exim financing or not to buyers: airlines For R&D: GE-Global Research Centre-Munich Entry of Adjacent Players Case Study: India Tata no prior defense or aerospace experience except in IT By 2011: sole supplier of 787 floor beams, & potential JV partner for Boeing Mahindra Indian defense contractor, mainly for combat & supply vehicles to the Army partner of choice for BAe as it expands platforms into India Larsen & Toubro Indian defense contractor, mainly for ships and weapons to the Navy potential supplier to Boeing