Marshall Larsen may soon find himself running an aerospace empire. Larsen is the chairman, president and CEO of Goodrich, which has agreed to be acquired by United Technologies Corp. (UTC ) in an $18.4 billion deal. When the transaction was unveiled on Sept. 22, UTC said Larsen would run a new operation that was widely assumed to include Goodrich and UTC’s Hamilton Sundstrand, a leading supplier of aircraft control systems.
But another shoe dropped six days later, when UTC moved to consolidate Hamilton Sundstrand with its aircraft engine unit, Pratt & Whitney. The two will fall under a new UTC Propulsion and Aerospace Systems Div. That operation is expected to add Goodrich as a third leg and be headed by Larsen after the scheduled closing of the acquisition in mid-2012. Although Pratt and Hamilton Sundstrand will continue to report their operating results separately, the move signals a grand plan to better integrate units that have long been run as standalone operations. “It’s a different approach altogether,” says a UTC insider.
With annual sales of $26.5 billion, the new division will offer avast product line of dozens of aircraft systems—from engines, landing gear, wheels and brakes to aerostructures, electronics and interiors. It also would surpass Honeywell International as the largest aerospace supplier. “UTC has upgraded itself from a major supplier to a ‘super supplier,’ and the full appeal of this acquisition likely manifests over years and decades,” says Morgan Stanley analyst Heidi Wood, who upgraded UTC’s stock to theequivalent of a “buy” and has made it her top pick in aerospace.
Larsen would certainly be up to his new job. Shrewd, low-key and sometimes prickly, he has spent his entire career at Goodrich, joining the company in 1977 as an operations analyst and financial manager. Goodrich is a major supplier on many Boeing and Airbus jets, and derives 43% of its sales from the high-margin aftermarket. And Larsen’s focus on newer aircraft left the company less exposed to a downturn in aftermarket sales when a spike in oil prices caused airlines to park older jets en masse three years ago.
It’s not clear how long the 63-year-old Larsen will stay on the job. UTC appears to be grooming a successor in Alain Bellemare,who is being promoted from president of Hamilton Sundstrand to president and chief operating officer of the new propulsion and aerospace systems organization. He will run the operation while the acquisition of Goodrich awaits shareholder and regulatory approvals.
Another question is whether Honeywell and General Electric will seek to counter this new super-supplier by making acquisitionsof their own. Both certainly have the financial resources to make a major move. Rockwell Collins is often mentioned as an attractive target. The well-run avionics supplier is not up for sale. But then again, neither was Goodrich.