On the Record with
Louis Chenevert, President & Ceo, Pratt & Whitney

Pratt and Whitney today is certainly very different from the 1990s when it faced erosion of its markets and poor financial performance.

Major restructuring and investment in new programs over the last few years is beginning to pay off. "Our results and diversified portfolio show Pratt is well positioned to withstand the tough times we have in front of us in the next few months. It's a good position to be in," P&W president and CEO Louis Chenevert told Show News. "We're committed to this business, we're committed to all our segments, including large commercial engines, where we have strategically invested in what I believe are the right opportunities.

"Pratt & Whitney is going to be a game-changer over the next 5-10 years because of some of our key wins in military and small engines, and also some of the new technology emerging in large commercial engines," he said.

While September 11 hit Pratt as it did the rest of the aerospace industry, the engine manufacturer turned in a 14% increase in profits for the year of $1.3 billion on revenues that rose four percent to $7.7 billion-evidence, according to Chenevert, that the restructuring is paying off. Pratt reported aftermarket revenues (not including materials and parts) of $1.02 billion in 2001, and a backlog of long term care contracts of $5.3 billion.

"Despite September 11, P&W delivered both top line growth and earnings growth, which is a change for Pratt," Chenevert said. "Revenues had been slowly declining for the last two to three years. Now you can see there's a turn; now we have the opportunity to continue on a growth track."

The downturn in aerospace means Chenevert will probably miss his goal of making Pratt a $15 billion company by 2005, but he is certain it will still get there.

Key to that growth will be strategic acquisitions in the aftermarket arena that will help drive that segment to $4 billion a year, and some key strategic acquisitions as the space industry consolidates, bringing that sector to $1 billion. Power systems (for pumping and power generation) will also grow to $1 billion. "We are still going to pursue these targets and will get to $15 billion when the right acquisitions are there," Chenevert said.

Pratt & Whitney's key engine milestones in 2001 included:

• Full funding of the Joint Strike Fighter and F-22 and their Pratt & Whitney powerplants, with over $5 billion in contracts for the JSF engine alone.
• Funding for the next 60 C-17s (with four engines apiece);
• Pratt's entry into the large business jet class with first-ever wins at Dassault on the 2000EX and 7X Falcon Jets; the business on the 7X alone is estimated at more than $3 billion over the life of the program.
• An 80% capture of the A320 family by the IAE V2500 engine. Over 1,800 engines have been delivered, and there will be 3,000 in service by 2005.
• PW4000 wins at Hainan and Northwest Airlines. "We have sometimes not been as aggressive as some large players in the market as we have to look to shareholder value," Chenevert said. Meanwhile a final fix for the surge problem on the smaller PW4000s will be ready next year, he said.
• Launch of the GP7200 to power Airbus A380s for Air France.
• Selection of P&W to develop the motor for the second-generation reusable launch vehicle shuttle replacement. "We're developing the liquid-hydrogen-fueled 60,000 pounds-thrust-class RL60 as a new generation upper stage to replace our RL10. We also have our SSME main engine turbopumps on every Space Shuttle; and our RD-180 Russian engine."

By John Morris