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Size doesn’t always equate with wise in aerospace. Just ask the owners of Triumph Group, who have seen the company double in size in the past six years, but also the value of their shares more than half from a 2013 peak of over $80, as the conglomerate has struggled to knock into shape a sprawling portfolio of some 47 businesses. The US conglomerate – ranked 30th in FlightGlobal’s latest Top 100 aerospace companies by turnover – may have achieved scale, but has not been matching that with profitability.
This is something new chief executive Dan Crowley is determined to rectify with his “One Triumph” transformation strategy. After launching a bottom-up review of the 24-year-old company after joining last year, Crowley has begun a painful process of consolidation, reducing the number of operating units from 47 to 22 and organising them into four product groups – structures, integrated systems, precision components and aftermarket. “It’s about bringing a decentralised set of companies into one company structure,” says the former Lockheed Martin executive.
Triumph’s rise to become of the biggest tier ones in the USA began under founder Richard Ill, who returned briefly to head the company as interim chief executive following the departure of Jeffry Frisby last year. Formed in 1993 as a buyout of 13 companies from Alco Standard, Triumph began an acquisition spree of aerospace businesses, taking aerospace revenues from $60 million in the mid-1990s to almost $4 billion. Its boldest move came in 2010 when it purchased troubled aerostructures firm Vought Aircraft Industries, propelling Triumph firmly into the ranks of top-tier suppliers.
In 2014, Triumph increased its aerostructures presence further with the takeover of Spirit AeroSystems’ wing assembly work for Gulfstream G650s and G280s in Tulsa, Oklahoma. However, while Crowley says the business will “get back to an M&A [mergers and acquisitions] posture” in 2017, his focus this year is very much on driving efficiencies. “With over 40 acquisitions, we had grown in size to $4 billion [turnover], but we didn’t have economies of scale,” he says. “We had overcapacity, people bumping into each other.”
With the internal structure announced, Crowley is now focusing on selecting presidents of the new 22 companies. At the same time, 10 factories will be closed – not all have been announced – and a “handful of non-core companies” will be divested, something that Crowley says “will help us generate cash”. Other savings are perhaps more straightforward. “We found a lot of overlap,” he says. “We had 130 suppliers of raw materials, so we were not getting economies of purchasing. So we’ve created commodity groups to support all four of our product lines.”
Another initiative has been to ensure that the Triumph brand is at the fore, with businesses that do not carry it being renamed. “We are going to the market as one company, focusing on delivering our commitments,” says Crowley. Those commitments include becoming “a predictable supplier for our investors” and “to grow our business in line with our customers”, he adds. As original equipment manufacturers (OEMs) look to deal with few suppliers, Crowley wants Triumph to be seen as “one company with many capabilities”.
Triumph’s strategy is not all about consolidation and closing businesses. Despite an ongoing push to reduce its industrial footprint by almost a quarter, Crowley is keen to emphasise that the company has also been investing in infrastructure and sizing up in other ways. It has opened a factory in Kansas City for machining components for the Airbus A350. A new plant near Dallas has been set up to produce wings for the Bombardier Global 7000, the Canadian manufacturer’s new longer-range business jet. Production rates have also been increased at its Gulfstream G650 wing facility in Tulsa.
In fact, meeting a series of ramp ups is just as big a challenge as streamlining the organisation of the company. Crowley says that seven of Triumph’s 13 biggest programmes are increasing in rate with only one in decline – the Boeing 747-8. “Customers including Airbus, Bombardier, Boeing and Lockheed Martin are all very demanding at the moment,” he notes. “We are having a lot of conversations about hitting the rate on the G650 and the A350. Boeing is looking to go from [a monthly output of] 42 to 57 on the 737.”
Crowley, who has been in the job for just over six months and has previously managed the F-35 programme for Lockheed Martin, sees an upside to the fact that Triumph’s largest single programme – the 747-8 – is declining, even though that, along with restructuring costs, helped contribute to a net fourth quarter fiscal year loss for Triumph of $80 million. The latest Jumbo Jet has in recent years accounted for about 10% of Triumph’s revenues, but that has been dropping. “We have [no individual programme] in double figures and that’s the way I like it,” he says.
For Triumph the painful transition to profitability is far from over, but Crowley is confident it can be delivered. “We are now implementing our transformation as we take decisive action to improve execution, reduce costs and operate as an integrated enterprise as part of an overall effort to drive value,” he told shareholders as part of the company’s latest results statement in May. “We remain confident in our strategic plan and the path we are taking to position Triumph for long-term success.”
Source: Flight Daily News
