GE Aerospace Clarifies CPP Deal Is Not a Model for Broad Integration
GE Aerospace's Strategic Approach to Supply Chain and Vertical Integration
CHICAGO, Sept 17 (Reuters) - GE Aerospace does not see broad vertical integration as the answer to aerospace supply-chain constraints, Chief Financial Officer Rahul Ghai said on Thursday, after the engine maker agreed to buy castings supplier Consolidated Precision Products for $11.75 billion.
The company unveiled the CPP deal last week as it seeks to expand supplies of precision-cast metal parts used in jet engines, including turbine blades and vanes.
Details of the CPP Acquisition
Unique Nature of the CPP Deal
• Ghai called the CPP deal a "unique situation"
Expected Benefits from the Acquisition
• GE believes it can improve CPP's delivery performance, expand production and speed up the introduction of new airfoil technology
GE's Broader Integration Strategy
Vertical Integration Not a Universal Solution
• "That's not to say that we're going to go vertically integrate every single part of our value stream," Ghai told a Morgan Stanley conference
Industry-Wide Capacity Challenges
• Industry still needs to add manufacturing capacity in several areas, Ghai said, adding that the capacity squeeze was not going away quickly
Market and Production Outlook
Engine Deliveries and Growth Expectations
• GEnx engine deliveries rose 50% from a year earlier in the second quarter, with GE expecting stronger year-on-year and sequential growth in the third quarter, Ghai said
Airline Fleet Planning and Retirement Rates
Long-Term Fleet Plans
• Airlines not altering their long-term fleet plans, Ghai said
Deliberate Fleet Decisions Post-Pandemic
• He said airlines were being more deliberate about fleet decisions after their experience during the pandemic, when quickly cutting capacity created challenges in maintaining market share
Retirement Rate for Older Engines
• GE expects the retirement rate for aircraft powered by older-generation CFM56 engines to be between 1.5% and 2% this year, down from a previous estimate of 2% to 3%
(Reporting by Rajesh Kumar Singh, Editing by Rosalba O'Brien)