It's great to be here this morning to talk a little about Hamilton Sundstrand and UTC.
Basically, Hamilton Sundstrand is like a mini-UTC. Like UTC we are balanced and diverse, in terms of our products, markets and customers.
You may not be aware of the rather amazing variety of the products that HS makes, but let's see how you did on this morning's quiz. (Attendees were able to view four HS products prior to Dave's remarks, and they had quiz cards on which they could guess what the product did.)
The choices were:
- Biological and chemical agent detector
- Satellite guidance system
- Anti-tank land mine
- Fire extinguisher for Boeing 777
The answer is d. Although this may look like a satellite guidance system, it's actually a titanium fire extinguisher for the Boeing 777. As you might imagine, aircraft manufacturers work hard to design their planes to avoid the possibility of a fire onboard. If one does occur, though, you want to have this system here.
Our Kidde Aerospace unit in North Carolina, the newest part of HS that we acquired earlier this year, designs and builds systems that will detect and suppress a fire on board a plane, and on military vehicles as well.
Kidde Aerospace is the world's leading supplier of fire protection and safety system products for civilian and military aircraft and is currently developing its newest system for Boeing's 787 Dreamliner.
The choices were:
- industrial-strength mixer for molasses plant
- wind-energy system turbine
- emergency power system for Boeing 767
- mini-watercraft propeller for the U.S. Army Special Forces
The answer is c. This is a ram air turbine emergency power system for a Boeing 767 -- affectionately referred to in the industry as a RAT. It is built at our plant in Rockford, Illinois, and provides emergency power if the engines shut down on an aircraft in flight. If you look out the window and see one of these while you are flying in an airplane -- it's not a good thing.
Obviously, it doesn't happen very often, but if it does when you are flying, you definitely want our RAT on board. The system drops down and the air moving past the aircraft turns this little propeller, which generates enough power to safely land the plane.
Over the years, our RAT systems have saved more than 1,400 lives. Hamilton Sundstrand is the world's leading supplier of RATs and provides them for all Airbus aircraft and most Boeing aircraft.
Now, we chose the fire extinguisher and the RAT, both emergency systems, because given aircraft safety levels, they are used so rarely that we figured you wouldn't be familiar with them.
The choices were:
- oil well metering system
- afterburner control for F-16 jet engine
- F/A-18 jet fighter air conditioning system
- atmospheric ozone level monitor
The answer is c. This is an air management or air conditioning system for the F/A-18F Super Hornet fighter jet, the Navy's premier fighter-attack aircraft. It's built in Windsor Locks, Connecticut. It controls the temperature in the cockpit and avionics bay and supplies conditioned air for other subsystems, such as the anti-ice and rain removal systems.
HS has supplied these systems to the military for more than 50 years going back to the Environmental Control System for the North American F-86 fighter jet. This one is designed and qualified for the very hard landings that are typical when jet fighters land on aircraft carriers. So this is built to be a little tougher than the commercial aircraft that all of you have flown in.
By the way, you may have noted a bend in one of this system's ducts. No, it's not a "factory second." The installation of the F/A-18E/F air conditioning pack is extremely tight with little room for error. Upon initial installation there was a piece of aircraft structure that was left off the customer model to HS. HS accommodated the customer by redesigning the duct instead of requiring the aircraft structure to be changed. All packs have this bend.
HS also is a leading manufacturer of air conditioning systems for commercial aircraft. We design air conditioning systems for everything from little Cessna business jets to the new Airbus A380 behemoth that will hold 550-plus people. The system for the A380 that was also developed here in Connecticut will produce 67 tons of cooling for the passengers and cargo, enough to cool 42 typical New England homes.
The choices were:
- Army's Future Combat Warrior body armor
- Space toilet tank section
- Hub for regional jet propeller
- Hard upper torso of spacesuit
The answer is d, the hard upper torso of the spacesuit we produce for NASA that permits astronauts to go spacewalking. This fiberglass piece forms the central structure for the spacesuit, which NASA refers to officially as the extravehicular mobility unit. This hard upper torso is crafted by hand at Hamilton Sundstrand and is the piece within the suit that the arms, pants/legs, life support subsystem and controls module attach to. It is made in three sizes --medium, large and X-large -- and has accommodated male and female astronauts from 5 feet 2 inches tall weighing 115 pounds up to 6 feet 3 inches weighing 220 pounds.
Hamilton Sundstrand's spacesuit life support system for the Gemini and Apollo programs allowed man to walk on the moon. Because of our spacesuits, astronauts have been able to repair the Hubble Space Telescope, fix satellites and build the space station.
Hamilton Sundstrand spacesuits have been worn successfully by NASA astronauts during 191 space walks.
OK, enough for the quiz. Let me tell you a little bit more about Hamilton Sundstrand.
This year we estimate Hamilton Sundstrand will generate close to $4.5 billion of UTC's estimated $43 billion in total revenues. We have more than 16,000 employees worldwide with about 4,000 of them right here in Connecticut, where we are headquartered. And you now know that HS has a broad range of products and capabilities.
We are largely an aerospace company serving both aviation and space.
HS systems can be found on almost anything that flies. Like the RAT and Fire suppression systems, you may not see them, but they are there. Our aircraft systems generate and distribute electrical and pneumatic power, maintain a comfortable temperature and pressure in the passenger cabin, provide flight control functionality and control the engines that make the airplane fly.
In addition to our aerospace business, we also have three industrial companies that generate about 20 percent of our revenues. Our pumps and compressors are used in many industries, ranging from mining and construction to water purification and food processing.
And, as we spoke about earlier, we make systems for space applications and homeland security.
Aerospace is one of the toughest industries in which to compete, especially over the last few years. The aviation industry suffered huge challenges in the first half of this decade. 9/11, SARS, skyrocketing fuel cost and other factors conspired to created financial havoc in the airline industry. Four of the seven major U.S. carriers have filed for Chapter 11. And the U.S. airlines will collectively lose more than $8 billion this year.
So this business is not for the faint of heart.
How has HS survived in this industry? Two of the keys are technological innovation and Operations Transformation.
HS has been a pioneering company throughout our history going back to our beginnings in the early 1900s when Hamilton Standard started out as a propeller manufacturer. One of our claims to fame is our propeller powered the "Spirit of St. Louis" across the Atlantic.
HS pioneered the technology to make human space flight possible.
Our engineers played an important role in saving Apollo 13's crew. When Apollo 13 radioed "Houston, we have a problem," we had engineers in a mission support room here in Windsor Locks working around the clock to support the prime contractor Grumman and NASA to save the crew. The lunar module that served as a lifeboat after an explosion crippled the command module and our life support system did things that it was never designed to do and helped get Jim Lovell and his crewmates home alive.
We are continuing to pioneer today with the development of aircraft level systems integration capability.
In 1999, UTC bought a $2 billion company called Sundstrand Corporation and combined it with Hamilton Standard to form Hamilton Sundstrand. This combination enabled the transformation of two aerospace companies that were largely component suppliers to a single aerospace powerhouse that has the combined capability to provide entire system solutions to airplane makers like Boeing and Airbus. The breadth or our capability now extends from literally the nose to the tail of today's aircraft.
The culmination of all this was the unprecedented success we had last year winning eight out of nine systems we competed for on the new Boeing 787 Dreamliner. In doing this we won seven and lost none against our toughest competitor, Honeywell.
Every Dreamliner that gets built in Seattle will have more than $2 million worth of HS equipment on it. This is more than twice the content we have on the Boeing and Airbus aircraft that it will be replacing in the 250-passenger airplane market.
The Dreamliner is a revolutionary new airplane. It will be super-efficient, using 20 percent less fuel than airplanes today and the systems and technologies we are developing today will represent the heart of this new airplane. The 787 Dreamliner does not enter revenue service until 2008 and it already has booked over 300 airplane orders and essentially sold out the first three years of aircraft production. This is kind of the Xbox of the airplane industry. We expect this program to generate in excess of $8 billion in revenue for Hamilton Sundstrand over the next 20 years.
These wins wouldn't have been possible without UTC’s acquisition of Sundstrand in 1999, and the subsequent integration of the two companies and productivity improvements. Sundstrand is just one of a series of great acquisitions that have expanded our global presence.
Now, continual engineering innovation and pioneering technology have clearly been key ingredients in Hamilton Sundstrand's success and has set us apart from our competitors. However, equally important to our success over the last five years has been the UTC Operations Transformation agenda.
At Hamilton Sundstrand, we've gotten through these tough times by using the UTC Operations Transformation agenda to reengineer our processes in order to lean out our operations and improve productivity.
Productivity is the most powerful force in our economy today. At UTC, it's jumping at 5 to 7 percent a year, and there is no end in sight. Like all of the UTC companies, we are continually striving to improve productivity, which is essentially figuring out how to do more with less.
At HS, we are proud of our productivity improvements, especially when we see how they have helped the bottom line. Since 2003, revenue per employee at HS has increased 7 to 10 percent per year, which is especially remarkable given the economic situation in the aerospace industry.
Improving productivity takes a lot of old-fashioned hard work. For example, at HS we brought together engineers, product designers, factory operators and procurement specialists using a process called 3P, which stands for production preparation process. These one-week collaborations bring phenomenal results that we're applying to the 787 and all new development programs. By year-end we will have run 20 of these events. The result is we have reduced build time by 70 percent in some cases and cut manufacturing space in half -- all before the production process even begins.
We are continuing to restructure our company to better compete in the global marketplace. This includes actions we have taken to eliminate excess capacity, consolidate core work in lower-cost HS plants and to obtain non-core products and services from low-cost suppliers.
The fact remains that when economies change and shift, so do jobs at HS. This results in what economists call "churn" -- job creation and job elimination -- and it happens naturally as economies change.
One of the toughest things we have to do is restructuring, especially when it involves job loss; but we do not believe companies can guarantee a job, either.
What we can guarantee is opportunity, and HS does that through UTC's generous Employee Scholar Program.
This program pays all costs up front and even gives employees paid time off to study. It sets no course or degree limitations, and rewards employees with $10,000 worth of UTC stock upon graduation.
We also extend this program for four years to employees whose jobs are relocated more than 50 miles away. These employees can go back to school, get a degree, and then hopefully find an even better opportunity than the one they left.
To date, we've had more than 16,000 graduates from around the world and nearly 15 percent of our U.S. employees are currently enrolled. At Hamilton Sundstrand, 16 percent of our domestic workforce participates in the program.
Since 1996, UTC has invested half a billion dollars in the program and it's one of our proudest achievements.
The Employee Scholar Program has been important to the state of Connecticut as well. Since the program's inception in 1996, more than 2,600 Hamilton Sundstrand employees have earned degrees and about 1,500 are currently enrolled.
Connecticut schools have received a total of nearly $24 million in tuition and fees from UTC with $16 million of that total coming from HS.
With respect to Connecticut, HS has a long history in Connecticut; we have been here since 1931, and we moved to Windsor Locks, our headquarters site, in 1952. This is our largest facility.
We employ about 4,000 people in Connecticut; that's a quarter of our total workforce. And this figure has been relatively stable since 2002.
I won't say a lot about this today, but I think most of us here know that Connecticut is a high-cost state to do business.
It is the most expensive for manufacturing and the sixth most expensive for doing business overall. And it's among the highest in energy costs as well.
What is further frustrating and puzzling is that the legislature continues to propose bills each year that make it even more expensive to do business here. Last year's "pay or play" bill is just one example. Our state government cannot rely on businesses to remedy its budget problems and needs to remain sensitive to the fact that we are a global company and Global companies are not tied to one state or one region. We can choose where we are located. So as we start to think about the upcoming legislative session, I encourage all involved to keep these issues in mind.
From a quality of life standpoint, our employees love Connecticut, but it is important that the state works hard to create a business environment that enables HS to continue the long history we have had here.
We are optimistic about the future. This is true at UTC as well as at Hamilton Sundstrand.
The industries we are in are recovering. Revenues increased 8 percent in 2004 and will increase almost double that this year.
In addition to the Boeing 787, Hamilton Sundstrand has won major content on every new major aircraft program, and our content per airplane for new aircraft is generally greater than it is on the aircraft that it is replacing in the market.
No other aerospace company offers the breadth of aircraft products and systems that we do. And we believe that we have a competitive advantage that is unmatched in the industry.
And our experience over the past years has demonstrated that the key to performance in a tough market is a constant focus on technical innovation, combined with a relentless pursuit of more and better efficiency gains. We keep raising the bar. That's really the UTC recipe for how to transform your operations.
Thank you for listening.
