Royce's North American operation produces more than half the engines it delivers, accounts for 30% of annual sales and employs 20% of its workforce. And when it comes to growth, the US defence market is at the top of R-R's list.
With several key opportunities to power not only military aircraft, but also warships, and a massive installed base of engines to support, R-R sees prospects for increased business with the US Department of Defense (DoD), already its largest military customer.
When it acquired Allison Engine from General Motors in 1995, R-R was required to keep its new US subsidiary at arm's length because of US government concerns over technology transfer. Under a special security agreement (SSA), Allison Advanced Development (AADC) was set up as a US-controlled company working on DoD contracts and firewalled off from the rest of the Indianapolis, Indiana-based operation.
Three years ago, based on R-R's strong security record, says Mike Ryan, senior vice-president government relations, the SSA was elevated to cover all of the company's US facilities. Jim Guyette, president and chief executive of R-R North America, is now allowed to sit on the main board and AADC has become the "Skunk Works" of the North American operation.
R-RNA's annual sales have grown from $1.4 billion, 19% of R-R's revenues, in 1998 to $3.2 billion, 29%, last year. At the same time, as part of R-R's global slimming down, the workforce has reduced from 8,500 to 7,800 - 6,200 in the USA and 1,600 in Canada. Over the same period, US ownership of R-R shares has grown from 25% to 30%, and has peaked as high as 38%, says Ryan.
With US defence spending growing strongly relative to the UK's, and Europe's, R-RNA is pursuing several key programmes. Potentially the largest is R-R's 40% stake in the F136 afterburning turbofan being developed by the General Electric/Rolls-Royce Fighter Engine Team as the alternative powerplant for the Lockheed Martin F-35 Joint Strike Fighter. "The current phase is contracted with GE as the prime. The next phase will be contracted directly with the Fighter Engine Team," says Ryan. R-R already provides the entire lift system for the short take-off and vertical landing F-35, regardless of engine choice.
There are also new opportunities for existing engines originating on both sides of the Atlantic. R-RNA is proposing the Indianapolis-built AE1107 turboshaft, which already powers US Marine Corps Bell Boeing MV-22 tiltrotors, to re-engine the service's Sikorsky CH-53E heavylift helicopter under the CH-53X modernisation programme. The European-sourced RTM322 turboshaft, meanwhile, has been proposed to re-engine US special forces' Sikorsky MH-60Ms, and will be assembled in the USA if selected.
The AE2100 turboprop powering the Lockheed Martin C-130J is a candidate to re-engine the Northrop Grumman E-2E Advanced Hawkeye, currently planned to be powered by R-RNA's venerable T56-427. R-RNA is also looking into the possibility of upgrading the European-sourced Adour turbofan powering the US Navy's Boeing T-45 trainer under its existing "power by the hour" support contract.
With a huge installed base of engines in the late, middle and early phases of their service lives, R-RNA foresees strong growth in aftermarket sales, which accounted for 56% of R-R's defence revenues last year. Much of this work is set to come under the banner of R-R's "Mission Ready Management Solutions" (MRMS) business. The defence aftermarket is already a $1 billion business, says Scott Crispin, head of the transatlantic MRMS business.
Crispin also has been acting as interim president, defense North America, since the elevation of Steve Dwyer to R-R chief operating officer and until Dennis Jarvi, formerly Bell's V-22 general manager, takes over as president this month.
Lead MRMS programmes include support of Adours, AE1107s and AE2100s in the USA and Speys, EJ200s and RB199s in the UK, with numerous additional performance-based logistics programmes being worked on both sides of the Atlantic. "Aftermarket growth of 10% a year would not be too shabby," says Crispin.
Despite being the 15th largest defence contractor worldwide, with the DoD as its largest customer, R-R still faces frustrating restrictions on using technology developed in the USA in programmes that originate elsewhere. "Technology transfer is an issue for us," says Colin Green, president of R-R's defence aerospace sector. "It adds to our costs and slows us down. Very seldom do we get an outright refusal, but in only a few areas can we get a licence to move technology in either direction."
R-R wants the DoD to introduce broader programme-specific, rather than technology-specific, licences to allow work to be distributed more efficiently between its sites. This is already happening on the civil side, with R-RNA and R-R Deutschland jointly designing a new family of two-shaft engines to follow their respective AE and BR series.
GRAHAM WARWICK / WASHINGTON DC
Source: Flight International
