United Tech focused on one buyer for Rocketdyne
EAST HARTFORD, Connecticut
EAST HARTFORD, Connecticut (Reuters) - United Technologies Corp's (UTX.N) talks to sell its Rocketdyne space unit are now focused on one possible buyer, the head of the company's Pratt & Whitney engine unit said.
The diversified U.S. manufacturer in March put Rocketdyne, which makes engines used in satellite launches, up for sale as part of an effort to avoid selling new common shares to fund its largest-ever acquisition, the $16.5 billion pending takeover of aerospace components maker Goodrich Corp GR.N.
"We've had a number of interested bidders and right now we're focusing our discussions on one of them," Pratt & Whitney Chief Executive David Hess said in an interview on Wednesday.
United Tech is also seeking to sell its Clipper Windpower unit and some industrial businesses at its Hamilton Sundstrand aircraft components operation to fund the Goodrich deal.
Pratt & Whitney on Monday conducted the first test flight of its long-in-development geared turbofan engine, on a specially modified Boeing Co (BA.N) 747 aircraft, with the test engine mounted towards the front of the aircraft, off the right side of the cockpit.
The geared turbofan marks United Tech's return to selling engines for large commercial jets, a market it had largely ceded to rivals General Electric Co (GE.N) and Rolls-Royce Plc (RR.L), and could help Pratt to roughly double its revenue to $24 billion by 2020, Hess said.
"EXTREME" R&D YEAR
Pratt is forecast to record a decline in operating profit of roughly 1 to 2.5 percent this year despite a high single-digit-percentage rise in sales, in part due to heavy research and development costs, which are budgeted to reach $1 billion in 2012. That is roughly double what the company spent on development in 2009, Hess said.
"It's really a very extreme year of spending," said Hess, whose unit is currently testing versions of the turbofan engine for forthcoming Bombardier (BBDb.TO), Mitsubishi (7011.T) and Airbus EAD.PA aircraft. "We're going to start ramping down to more moderate historic levels of spending."
Testing for future engines based on the geared turbofan model will be less costly, Hess said.
"We're kind of in the hardware phase across all of these programs and that tends to be the most expensive phase," Hess said.
The new design differs from the variety of jet engines currently in common use by using a gear system between the fan at the front of the engine and the interior turbine that generates the engine's power. This allows both the turbine and fan to rotate at their optimal speeds and also makes it possible to use a lighter-weight turbine and could reduce the amount of fuel an aircraft uses by 16 percent, United Tech said.
The geared turbofan engine will power some of Airbus' forthcoming A320neo single-aisle aircraft, due to enter service in 2016. Airlines ranging from JetBlue Airways (JBLU.O) to Qatar Airways have already placed orders for A320s powered by the new Pratt engine.
NOT WORRIED ABOUT BOEING WINGLETS
Hess dismissed concerns that a Boeing move to add fuel-saving winglets to its forthcoming GE-powered 737 MAX aircraft, would threaten the A320neo.
"I don't think we feel that it's a threat," Hess said. "Once there are real airplanes flying with real engines, I think the market will rationalize as to who has the more competitive engine and airplane."
Operating profit at Pratt fell 9 percent to $389 million in the first quarter, despite a 6 percent rise in sales to $3.05 billion.
Hess also said that demand for corporate jets, which fell dramatically in the recession, is showing "modest recovery." Pratt also makes engines for that size of aircraft. "It's kind of tracking with the economic recovery, which I think is generally slow," Hess said.
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