July 11, 2012
Credit: Credit: Rockwell Collins
Rockwell Collins , stung by U.S. program cuts, said on Tuesday it expected most of its defense portfolio would remain intact as it considers trimming its government business.
While there could be changes that result in the exploration of strategic alternatives for some parts of the defense business, Chief Executive Clay Jones said he expected most of the defense portfolio to be deemed core to the company.
“I don’t think the company needs open heart surgery,” Jones said in an interview at the Farnborough Airshow. “What’s happening to us are market driven forces that we’re managing through. There are not systemic reasons we can’t win, we can’t invest or we can’t make money.”
Rockwell Collins, which supplies avionics and other electronic systems for commercial and military planes, has been pinched as several of its defense programs were canceled in the face of U.S. budget cuts. Sales to government agencies have fallen for four straight quarters.
Sentiment on the company has turned negative recently. Late last month, Goldman Sachs cut its rating on Rockwell Collins to “sell” and other research firms downgraded their price targets, citing limited near-term prospects for growth and a difficult defense market.
Jones said Rockwell Collins had suspended its investment in soldier systems, ground vehicle systems and public safety markets, businesses that once were better performing.
Jones didn’t discuss specific moves that Rockwell Collins might make, but said, “I think you’d expect to see changes.” He added that he expected “the vast majority of our defense business to continue to be core.”
Rockwell Collins stands to benefit as production of airplanes such as the Boeing 787 increases and it sells more products for them. Jones said the company’s commercial exposure would compensate for the long-term downturn in defense as the U.S. government scales back spending in an effort to get its fiscal situation in order.