Honeywell Aero CEO calls planned GE Aerospace-CPP deal positive for industry

Honeywell CEO Says GE Aerospace's CPP Acquisition Will Benefit Industry

Industry Impact and Honeywell's Strategic Response

By Allison Lampert and Nandan Mandayam

Sept 15 (Reuters) - Honeywell Aerospace’s CEO called GE Aerospace’s planned $12 billion acquisition of a castings maker “positive for the industry overall” and said on Tuesday he sees more opportunities to bring outsourced capabilities back in-house. 

Industry Consolidation and Supply Chain Strategies

Aerospace companies are acquiring smaller manufacturers of high-demand parts, or trying to move such production capabilities in-house, as the supply chain struggles to meet strong demand by planemakers to increase commercial jet output.

Earlier this month, GE Aerospace announced a deal to acquire Consolidated Precision Products to address jet-engine supply bottlenecks.

Honeywell’s Position on the CPP Acquisition

CEO Jim Currier told the Morgan Stanley Laguna Conference in Dana Point, California, that Honeywell Aerospace, which spun off as a separate entity in June, does not compete with CPP and has no overlap within the portfolio.

“Actually, I view that as being a positive for the industry overall. The type of parts that we receive from CPP are very different than the type of parts that GE receives from them,” Currier said.

Bringing Capabilities Back In-House

Currier added that Honeywell Aerospace has taken steps over the last two years to bring back some of the core technologies and capabilities that the company had outsourced between 2010 and 2019.

"But is there more to be done relative to that? Absolutely," Currier said. "And I think there's an ability for us to be able to do that, you know, short term and longer term as well."

Future Growth and Vertical Integration

While Currier did not reveal any specific targets, he said the company would consider vertical integration through "bolt-on M&As" — usually acquisitions of smaller companies with similar or complementary products — as one of its priorities.

Supply Chain Challenges and Solutions

Supply Delays Caused by Labor Shortage

SUPPLY DELAYS CAUSED BY LABOR SHORTAGE

Castings — parts made from liquid metal that are difficult to mass-produce — and forgings, which are made from solid metal and just as hard to make, have been one of the industry's most intractable chokepoints since the pandemic.

Addressing Labor Shortages

Some suppliers have also wrestled with labor shortages following widespread departures of experienced aerospace workers during the pandemic. To tackle that issue, Honeywell Aerospace has sent dozens of its own skilled workers to two of its suppliers' factories, Currier said.

That, in turn, has helped suppliers start additional shift operations at their factories. "And the output transition that we've seen over the last 30 to 45 days has been about (a) 30% increase year on year," Currier said.

Ongoing Supplier Quality Issues

Still, the company continues to wrestle with about 70 companies that are not producing quality products on time, Currier said, although that is down from the 2022 count of hundreds of suppliers.

(Reporting By Allison Lampert and Nandan Mandayam, Editing by Nick Zieminski and Rod Nickel)