July 09, 2012
Credit: Credit: Embraer
“I’m very bullish on the future,” says Clay Jones, chairman, president and CEO of avionics manufacturer Rockwell Collins. “Late 2014-early 2015 and beyond – those are going to be good days indeed.”
And that’s from the head of a $4.8 billion company whose business is 55% defense-related. The threat of sequestration of the U.S. defense budget fails to shake his positive view. “If I read everything in the newspapers, I could get very depressed,” he says.
The key to Jones’ confidence has been his insistence that Rockwell Collins become versatile and nimble in the face of adversity, such as the years following the terrorist attacks on New York City in September 2001 that devastated the commercial aviation industry.
“I lost 25% of my commercial business over two years, when the business was 60% commercial,” says Jones. But increased defense spending after 9/11 helped Rockwell weather the storm.
Jones realized that the company must be able to react quickly to upturns and downturns in the civil aviation and defense cycles by making its products as common as possible between the two. There is no reason, he says, that C-130 cockpit upgrades cannot incorporate technology from the latest Pro Line Fusion commercial avionics, or that the military could not use the same weather radar that Rockwell supplies to Airbus instead of specifying their own that ends up with the same functionality.
“The secret has been shifting commercial technology to the military,” says Jones. His military business generates a 20% margin while saving the military money, giving the warfighters more bang for the buck as they pay commercial rather than military prices.
While maneuvering between the usually out-of-sync commercial and military cycles, Jones is careful that his business mix does not shift to more than 60/40 either way. “You must have 40% business in a segment to have critical mass,” he explains.
Two years ago Rockwell’s business was 50/50 commercial/military. During the recessions of the last decade it stretched to 60% military, but by 2014 it will be 50/50 again.
And then, says Jones, times will be good for the company, with strong revenue growth from civil aviation.