GRAHAM WARWICK / WASHINGTON DC
Johnson wants to create "better, leaner and faster" business following GE merger failure
Aerospace is central to Honeywell's plans to survive and thrive as an independent company following its aborted merger with General Electric. The sector's performance improved during the merger planning period, and "now we have our company back we can create an even stronger aerospace business", Honeywell Aerospace chief executive Bob Johnson tells Flight International.
Aerospace accounts for $10 billion of Honeywell's $25 billion annual revenue and the goal is to grow this to $12-13 billion, says Johnson. This will be achieved through "bolt-on" acquisitions to fill in gaps in the company's capabilities, as well as new products and services. "And not just products and services, but solutions that will turn airlines into information and communication centres," he says.
Johnson says Honeywell will benefit from lessons learned during the eight to nine months spent working with GE on integrating the two companies, a period he now describes as "our consultancy project". The company will expand its use of six sigma, a strategy to reduce costs and improve quality by eliminating waste and reducing defects. "Honeywell started six sigma; GE took it to another plane," he says. "We learned how to apply it to design and not just supply."
The 100 teams formed during the merger period with GE are carrying on their work in areas such as six sigma and supply chain management. "GE has a world-class supply chain, which I'd like us to have," Johnson says. Another area of continuing effort is digitisation, which he describes as "connecting live to the customer" using e-business tools. "We want to connect the aircraft to the system, make the supply chain leaner and get inventory out."
Honeywell Aerospace will strengthen its service and support network, expanding "globally and virtually" as well as increasing the rate of technology and repair development, Johnson says. The emphasis is set to be in providing information technology solutions that help customers reduce costs. "The value is in helping the customer to be integrated," he says.
Other actions planned under the merger are no longer required, such as divestiture of the AS900 turbofan under development for business and regional jets. "We were talking about integrating two big engine businesses. The divestitures contemplated were a big hill to climb," he says. Selling off the AS900 "was not something our customers wanted. Now we get to put it back together."
The divestitures were proposed in a bid to win US and European approval for the merger, finally blocked in July by the European Commission competition authority. The process gave customers concern, Johnson admits, while competitors saw it as an opportunity. "Our competitors were excited about the beachfront properties on the divestiture list. We're glad to have all the parts still there," he says.
Johnson says the merger process validated that the former AlliedSignal and Honeywell aerospace businesses have been successfully integrated and projected benefits have been achieved. Translation of best practices and disciplines into the rest of Honeywell is still under way and will be accelerated, he says. The 1999 merger of AlliedSignal and Honeywell created a "wonderful company", he says, "but there was not enough time to realise all the benefits".
Honeywell became a target for takeover when its financial performance faltered following the AlliedSignal merger. Its stock price fell in the middle of last year as its automotive, chemical and industrial businesses were first to enter the latest economic downturn. United Technologies made the first merger offer, but was outbid by GE. "Selling the company wasn't the goal, but the stock price...allowed us to be bought," Johnson says. Post-GE, there is no intention to sell the company, but divestitures planned before the merger bid and aimed at shaping Honeywell's overall business portfolio are likely to go ahead.
Aerospace will play a key role in keeping Honeywell independent. Johnson's goal is to apply lessons learned from the merger process in time to catch the economic cycle improvement anticipated next year. "What we learned in the GE process will help us be better, faster and leaner," he says. The aerospace business slimmed down during merger period, as recruitment was put on hold. "We would like to stay leaner as we enter tighter market economic conditions," Johnson says.
Source: Flight International
