GE Engine Services head Brad Mottier thinks the idea of an engine manufacturer making parts for a rival's product is a non-starter. So he is not too worried about Pratt &Whitney targeting the market for CFM56 spares
No-one would be surprised that Brad Mottier, president of GE Engine Services, doubts the wisdom of Pratt & Whitney's jump into the parts manufactured approval (PMA) business. After all, P&W is targeting one of GE's most reliable cash-cows - the CFM CFM56-3 -for the aftermarket equivalent of a hostile takeover bid.
And since the aftermarket is the foundation for the aircraft engine industry's formula of selling new hardware below cost and reaping any dividends on long-term service agreements, P&W's new "MROEM" business tactic poses perhaps the single biggest threat to GE Aviation's future viability as a business.
The United Technologies company's new venture involves reverse engineering aftermarket parts for the engines installed on Boeing 737 Classic-series aircraft, and certificating them for sale at prices deeply discounted from the prices charged by the original manufacturer for the same components. Since, in theory, P&W has no sunken development costs in a rival OEM's engine, it has no need to charge more to amortise an investment for entire engine development programme.
At first, Mottier answers equivocally on the significance of the threat of P&W's new PMA business: "It's remaining to be seen what impact that they'll have at this point." However, as Mottier elaborates, it becomes clear he not only disbelieves P&W's optimism about the outlook for PMA services, he rejects the notion that any engine manufacturer, including GE, can successfully operate a successful business based on providing services for another manufacturer's engine.
"We think that that's a very difficult business case and we don't want to go there," Mottier says.
He is confident in his statement because his business unit has "gone there". Although GE Aviation does not and has never certificated PMA components for its or any other manufacturer's engines, the company during the 1990s acquired several businesses that provided maintenance, repair and overhaul services for rival manufacturers' engines.
That experience proved to be unsuccessful. Even as GE Aviation Services' annual revenue has grown more than five-fold since 1995, the unit has at the same time closed nearly its entire portfolio of maintenance service facilities for rivals' engines. In 2001 to 2002, the company closed about 93,000 m2 (1 million ft2) of facilities, with those providing MRO services for rival engine designs especially targeted.
"What we found is it's very difficult tocompete and really bring competitive value if you're not the original designer of that engine," says Mottier, who before he joined GE spent 20 years at component and systems manufacturer Unison Industries, latterly in the position of chief executive, moving when the company was acquired by GE in 2002.
So GE has decided to vacate the market. The company continues to perform MRO services on Rolls-Royce RB211s and P&W PW4000s as carrying out those services is required under long-term contracts signed several years ago with the operators of those engines. But, when those deals expire, GE plans not to renew them, even if it allows the operators to move their business to competing MRO services providers - perhaps even P&W and R-R themselves.
That means that in a few years GE's aftermarket portfolio will be based solely on the installed base of GE and CFM engines. GE and French-based Snecma are equal partners in the CFM joint venture that produces a series of engines for Airbus A320-family and Boeing 737 aircraft.
Mottier believes that the same difficulties his business experienced in the MRO field would carry over into the PMA model, if it is not the OEM's own products.
P&W is "going to try to rely on the fact that they are an engine designer and manufacturer, but there is a systems effect associated with these engines", he says.
Mottier's point is that it is not possible to reverse engineer engine parts in isolation. It requires comprehensive knowledge of the engine as a propulsion system to understand the finer points in the design, performance and reliability of any particular part, he says. An aircraft engine is a delicate balance of airflow, spinning turbines and combustion, and if any one is even minutely out of synch the margin in reduced performance can be unacceptable.
Thus, GE, says Mottier, would lack the systems knowledge needed to engineer a part for a competitor's engine that could deliver the same reliable performance as the original manufacturer's part it is replacing.
So is the attack on PMA simply sour grapes or scare tactics at being potentially upstaged by a competitor? No so, insists Mottier: "This is an aviation [industry] view."
Source: Flight International