Patriarch Partners, the US capital venture firm that bought MD Helicopters five years ago, is not about to let economic downturn get in the way of its plans for transforming the manufacturer.
Arizona-based MD acknowledges it has struggled over the past year as customers failed to secure financing, leading to last-second cancellations. That left MD holding a massive inventory as it was only able to deliver about 40 helicopters globally in 2009, 30 aircraft short of its target. But Lynn Tilton, Patriarch and MD chief executive, says rumours that the company is about to go bust are unfounded - and were spread last year by a rival manufacturer with malicious intentions.
"I'm starting to get personally offended by the fact that lying, cheating and stealing has become a way of life. Let me clear the air: MD is not going into bankruptcy, MD is not going away and MD never faced that issue," she says.
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© MD Helicopters |
She says MD is "still sitting on a lot of inventory" because the company "stumbled and made some mistakes" last year. But she insists the company is now in solid financial shape, with $11 million in payables and little debt. Tilton personally "lent the company a lot of money", allowing MD to pay down a large portion of its debts.
INTERNATIONAL FOCUS
Tilton has a pessimistic outlook for the overall economy and does not expect any pick-up this year. But to offset continued softness in US civil aircraft sales, MD is focusing more on the international market, especially the military sector. "We see increased need overseas," Tilton says, adding: "Now is a time of war."
Large new contracts with Jordan and Saudi Arabia should ensure a return to profit in 2010 and 2011. "We have a good orderbook for this year. We just have to focus on delivering," she says.
Another "big focus" for Tilton is growing MD's aftermarket business. Tilton acknowledges the company in recent years has largely neglected the installed fleet. MD is now aggressively pursuing overhauls, a lucrative business that Tilton believes should boom as the downturn and tight financing prevent existing operators buying replacements. MD also expects retrofits will help drive up its aftermarket business, which accounts for one-third of total revenues, but is expected to make up half of all revenues within two to three years.
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MD is now offering 500E-to-530F conversions and expects new retrofit products will be added to its portfolio as the manufacturer refreshes its new aircraft product line. MD is close to certificating a new glass cockpit option for the 500 series single-engined turbine and is also looking at possible increases in gross weight for the 500E and 530F.
In 2008 Tilton considered moving the company from its base in the Phoenix suburb of Mesa, but says it will stay put for now and has embarked on an insourcing initiative, including a new joint venture composite facility in Mesa. MD is also taking production of the fuselage for its twin-engine 902 Explorer from Turkish Aerospace Industries back to Mesa, possibly this year.
Fuselages for all single-engined models will continue to be produced at MD's own factory in Monterrey, Mexico. MD is also looking at setting up a factory in China as part of a potential minority-stake deal with a new Chinese investor.
Patriarch has been talking to several Chinese companies interested in an MD stake. Tilton is confident a deal will be concluded this year, stressing that the plan is to not build helicopters for the US market in Asia but helicopters for the Asian market in Asia. And, she adds, a China connection will "enhance the growth prospects for the larger MD", which means more, not fewer, jobs in the USA.
Patriach, says Tilton, is a turnaround specialist that has done just that with MD - which was not operating when the firm bought it in 2005. But, she adds, her job is far from complete and Patriarch will hold on to the company. "I try to build greatness. We're not at greatness yet," she says.
Source: Flight International
