Raytheon's Burnham Bullish on Turnaround

Embattled U.S. aerospace giant Raytheon plans to "focus on fundamentals"-and seek more international partnerships in its bid to restore investor confidence.

Speaking in London Sunday, Raytheon chairman and CEO Daniel P. Burnham said a turnaround for the Lexington, Massachusetts-based company is well underway, though much work remains to be done.

"We're doing a much better job of it," he said. "Our backlog is up, and year to date, our cash outflow is doing much better than planned. The U.S. defense budget is up 10% year over year, and soon we'll start to see the benefits of that."

But the key to Raytheon's revival, Burnham said, is reinforcing the company's role as a provider of the electronics and systems integration, and greater involvement in joint ventures with other risk-sharing partners.

"We recognize that this is a global market, and we bring defense electronics upgrades to the party," he said. "What we're starting to see is a transition from being hardware or platform-driven to being mission and information systems driven.

"That's our strength, whether it's with our involvement in the UK's ASTOR program, our work in air traffic management, or unmanned aerial vehicles. We have world-class technology."

Burnham said a key element of Raytheon's turnaround, is Six Sigma-a quality management initiative the company is enforcing at all levels of its research and development and manufacturing operations.

On the AMRAAM missile program, for example, Burnham credits Six Sigma with reducing "work in process" by 50%. On the Hawker Horizon business jet program, adherence to Six Sigma has reduced the "cycle time" for engineering drawings by 76%.

"Six Sigma is starting to pay off," Burnham said. "We're now in our second year of Six Sigma, and the program has floated $25 million to the bottom line, while increasing cash flow by $30 million."

This week Raytheon plans to brief the industry on its air-to-air and strike weapons systems; its Global Hawk UAV; its new B2B exchange venture with Boeing, BAE Systems, Lockheed Martin and Commerce One; and Raytheon avionics for the "One Team" Joint Strike Fighter.

"Farnborough is an opportunity to demonstrate our breadth and depth," Burnham said. "We want to reinforce the idea that Raytheon is driven by a culture of performance and accountability, while demonstrating our commitment to our UK partners."

By Paul Richfield