On the Record with
Dr. KLAUS STEFFENS, PRESIDENT & CEO, MTU

You Gotta Go Global Consolidation of the European aero engine business in a way that emphasizes European partnerships "is unthinkable," according to Dr. Klaus Steffens, chairman of the world's fifth-ranking MTU of Germany. He was commenting on reports that Snecma of France had said it would be interested in MTU, which could conceivably be put on the block if DaimlerChrysler decided to convert the MTU cash cow into pure cash. "Stronghold Europe does not make sense," Steffens told Show News. "The engine business is historically transatlantic, and we can only succeed if we are on both Boeing and Airbus as well as global." Joining with Snecma could jeopardize many of MTU's strong ties-which include alliances with Rolls-Royce on military programs such as the Eurofighter's EJ200 engine, Pratt & Whitney on commercial programs including the V2500 which competes with the GE-Snecma CFM56, and GE itself on numerous commercial and some military programs. "If Snecma were to buy us, it would immediately sink (the link with) some of our other partners," says Steffens. "Personally I do not see the value in Snecma taking the whole company over." MTU already has excellent relationships with FiatAvio and Volvo Aero and that could be a far more realistic consolidation, he said. Steffens stresses that apart from its most natural alliance being with Rolls-Royce on military programs, MTU's strategy is to spread its skills, financial resources and relationships across as broad a spectrum as possible. Thus it can boast skills in compressors, turbines, combustors and engine controls over the whole of the military and commercial thrust range. So would it build its own engine? Definitely not, says Steffens. MTU must preserve its relationships with the three major and Snecma OEMs; to become an OEM itself would be "an absolute disaster" that would put it in direct competition with all or most of its best customers and destroy its strategy of being an indispensable partner to the global industry. "We already play a very important role in the global engine business," he says. -- J.M.

DaimlerChrysler's goldmine in MTU could be the linchpin of the European aero engine industry. The German-based engineering company that ranks fifth among the world's aero engine companies -- yet doesn't make a single engine itself -- is both the key to European consolidation and the puzzle that no one can solve.

So interwoven are its relationships with GE Aircraft Engines, Pratt & Whitney, Rolls-Royce and Snecma that ownership by one could jeopardize business with the other OEMs.

So while everyone else thinks about the chessboard possibilities, MTU chairman Dr. Klaus Steffens concerns himself with how to be a more indispensable world player, growing his business and becoming an even bigger profit center within DaimlerChrysler.

"Compared with a German machine builder or an industrial merchandise manufacturer we are extremely profitable," he told Show News. Growth in revenues topped 20% last year thanks both to MTU's strategy of globalization and a sound economy. Power shortages in California were an unexpected bonus-MTU could not make enough stationary gas turbine generators to meet demand.

Yet MTU's four-legged growth strategy is rooted firmly in aero engines.

• First, it plans to proliferate worldwide its engine overhaul services, depending neither on airline shops nor OEMs for joint ventures but setting up its own independent shops. In parallel it will become a full service supplier with a full range of products such as engine leasing, on-wing emergency support and power-by-the-hour maintenance contracts.
• Second, MTU is emphasizing consistent technical and managerial excellence across its global empire to ensure a customer anywhere finds the same standards. This, says Steffens, is a major challenge.
• Third, MTU plans a bigger share in its OEM activities. It is negotiating for a stake in excess of 22% in the GE-Pratt & Whitney Alliance GP7000 engine that has just won its first customer, Air France, on the giant Airbus A380. It also wants a large share in the six-company-consortium TP400 turboprop engine for the A400M European military transport. It currently holds more than one-fifth of the PW2000, and is a partner in the V2500. "This will all be a very big financial challenge, but we have enough financial power to do it," Steffens says.
• Fourth-the goal to expand technological expertise to building a commercial compressor. "We're very good at turbines in the civil market," says Steffens. "And we build the world's most advanced military compressor in the EJ200. We can use those skills to design and build a civil compressor."