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Aviation History
1993
1993 - 1652.PDF
NEWSMAKERS BUSINESS BUILDER Bill Lowe clearly enjoys being chairman and chief executive of Gulfstream Aerospace. Previously a Xerox executive president, he was a business-aircraft user. Now he runs the firm which builds arguably the best of business aircraft. Under Bill Lowe's guidance, first as president, now as chairman, Gulfstream has be come a very different company. Previously confident, possibly complacent, in its position at the top of the business-aircraft tree, Gulfstream is now fight ing back against tough compe tition. Lowe has presided over the biggest culture change in Gulfstream's history. With the launch ofr~^~ the improved GIV-SP and long-range GV in September 1992, Gulfstream was no longer a one-product company. Traditionally, each new generation of Gulfstream replaced the old, typically at around the 250-aircraft mark. Jt Moving to a two-product range was "risky", Lowe admits. Gulfstream had to overcome the belief that "...when we intro duce a new aircraft, we're no longer serious about the old one". This was critical be- | cause "...from now to 1996, we are dependent on the GIV. We held our ^~"^ breath to see if we could sell both aircraft — and we are," Lowe says. In the nine months before the launch of the GIV-SP and the GV, Gulfstream delivered ten GIVs. In the nine months following the announcement, the company has delivered 25 GIVs and sold the first batch of 26 GVs. "We have built up a $1 billion backlog," he says. New York investment firm Forstmann Little has controlled Gulfstream since 1990, when it helped founder Allen Paulson buy the company back from Chrysler. The seven Forstmann Little partners manage retire ment funds, Lowe explains, using the money to invest in businesses which they build up and then resell. In some cases, they have retained ownership longer and made the compa nies partially public. Such was the intention with Gulfstream and an initial pub lic offering was attempted in early 1992, but was withdrawn when "...market conditions eroded", Lowe says. Forstmann Little's intention was to use the money raised to pay off debts i resulting from the Chrysler buy-out. Instead, in September 1992, the investment firm an nounced that it would invest an additional $250 million in Gulfstream and purchase Paul son's 31% stake. The move was crucial, Lowe says, because it created "...the stable financial base Gulfstream needed to encourage BMW Rolls-Royce to invest in the GV programme". BMW R-R is a risk-sharing partner in the GV and is supplying the complete propulsion system, including the BR710 engine and its na celle and thrust-reverser. Having paid off its debts, thus reducing its interest pay ments, Gulfstream is able to fund continued improvements to the GIV and development of the GV "...from ongoing opera tions; expenses are met as they are incurred", Lowe says. This explains why continued sales of the GIV-SP are so crucial to the company. For the GIV to continue to be sold, it was essential to differentiate the new GV from the existing product, Lowe says, and in that task Gulfstream has been helped, ironically, by competition from Canadair for the ultra-long- range market. Gulfstream launched the GV with a guar anteed 11,600km (6,300nm) range. Canadair is offering 12,000km with its Global Ex press, but has yet to launch the programme formally, or guarantee performance. "Whatever they do, we can do more," promises Lowe. "We will be there first and we will go further. That is our fran chise." The GV will enter serv ice a year ahead of the Global Express and, he says, the range of the aircraft can be extended, because Gulfstream "...is not using the full thrust potential of the engines", which are the same as those used on Cana- dair's design. When Lowe joined Gulfstream in June 1991, the company was struggling with a growing inventory of second hand Gils and GUIs taken in part-exchange for new GIVs. The problem was tackled with a new trade-in policy, introduc tion of a manufacturer's war ranty on used aircraft and the launch of the Quiet Spey programme to guarantee availability of a Stage 3 hushkit for the Rolls- Royce Spey-powered Gil and GUI. Gulfstream sold 23 used aircraft in 1992. "Inven tory is down and [second hand] prices are increas ing," says Lowe. "If a cus tomer knows he can up grade his aircraft, then he can feel confident [in buy ing a used Gulfstream]." Surprisingly, Lowe does not expect to ship a lot of Quiet Spey packages, the programme having served its purpose by stimulating secondhand sales. "The product has sold ~~^ itself in past years," Lowe admits, but that is changing and, as chairman, he is taking the marketing helm, entrusting day-to-day operation of the company to new president Fred Breidenbach, recruited from General Electric. Traditionally, Gulfstream owners have been the biggest customers for new Gulfstreams, but close to 50% of recent sales have been to new customers. "The current prospect list for the GIV and GV includes a lot of non-Gulfstream operators — we are expanding the customer base," Lowe says. This is quite an achievement for a company selling business aircraft costing $20-30 million apiece. BY GRAHAM WARWICK • "Inventory is down and secondhand prices are increasing. If a customer knows he can upgrade his aircraft, then he can feel confident in buying a used Gulfstream.." Bill Lowe FLIGHT INTERNATIONAL 30 June - 6 July, 1993 19
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