Spirit AeroSystems eager to apply expertise to military market
06/25/2014 5:12 PM
08/08/2014 10:24 AM
Inside the gray walls of a high-security research and development laboratory at Spirit AeroSystems, work on a variety of materials and processes is underway.
It’s where early work on Spirit’s part of the Boeing 787, Airbus A350, Sikorsky CH53K and other projects took shape.
“They all got incubated here,” said Phil Anderson, Spirit’s senior vice president of defense and contracts.
The laboratory includes a massive automated fiber placement, or winding, machine. The machine takes composite materials of different widths and weaves them into large, complex composite parts.
“This is the starting point for all great things aerospace if you’re Spirit,” Anderson said. “Large-scale automation is one of the things Spirit does well.”
That kind of capability – and Spirit’s investment in people and equipment – is a big advantage, he said.
Now, Spirit aims to use that expertise to grow its defense business.
It’s searching for opportunities to build large metal or composite structures for the military market.
“We’ve got to do a lot of marketing to make sure the aerospace and defense industry understands Spirit’s capability,” Anderson said.
For example, Spirit is exploring the potential of the unmanned aerial vehicle market and work on the F-35 fighter jet.
“These are the kinds of programs that fit into Spirit’s possibilities,” said Spirit spokesman Jarrod Bartlett. “So we are looking.”
The strategy is to partner with a prime contractor.
“We have a design/build capability that doesn’t exist elsewhere,” Anderson said. “And we have affordability that the prime contractors don’t have.”
Today, only 5 percent of Spirit’s revenue is derived from the defense market. The goal is to grow that to 10 to 15 percent of revenue over the next five to 10 years, Anderson said.
Commercial aerospace will remain Spirit’s primary business.
Anderson, formerly Spirit’s chief financial officer, has been charged with increasing the company’s defense work. He moved into that role in October.
The strategy reflects Spirit CEO Larry Lawson’s long background in the defense business. Lawson joined Spirit a year ago after serving as a senior executive for defense contractor Lockheed Martin.
“Larry’s one of the foremost aerospace leaders in the last 30 years in defense,” Anderson said. “It’s an honor to work with him.”
A useful hedge
Growing the defense business is a good strategy, said Richard Aboulafia, an aerospace analyst with the Teal Group.
“Diversification is always a good strategy,” he said. It will help Spirit hedge against a downturn in the commercial market.
Spirit has a lot of volume on commercial programs, which gives it an advantage in going after defense work, Aboulafia said.
A major win for Spirit was work on the Sikorsky CH-53K heavy lift helicopter.
“They’ve had enough success (in defense) to make this encouraging,” Aboulafia said of Spirit’s strategy.
The downside is, “there just aren’t that many programs to go after,” he said.
So far, Spirit has mainly used commercial aircraft platforms to build structures for defense products.
The fuselage Spirit builds for the Navy’s P-8A Poseidon uses a Boeing 737 airliner as its platform. The nose section it builds for the Air Force’s new tanker is based on a Boeing 767.
Spirit builds major structural cockpit and cabin components for Sikorsky Aircraft Corp.’s CH-53K heavy lift helicopters.
Sikorsky rolled out the first CH-53K helicopter for the Marine Corps earlier this month. The Marines plan to field 200 of the cargo aircraft due to enter service in 2019.
The program is in the design and test phase. Sikorsky expects first flight this year.
The Navy said this week that it’s in talks with other governments that could boost the purchase of the helicopters by 50 percent, the Wall Street Journal reported.
Negotiations to sell as many as 100 of them for the export market are underway, a Navy official said Wednesday.
That bodes well for the program.
“We think it’s going to be a good long-term program,” Anderson said.
Potential for helicopters
In October, Spirit won a contract from Bell Helicopter to design and build the composite fuselage for a V-280 Valor prototype of a tilt-rotor aircraft.
The program has a lot of potential.
The helicopter could be the future replacement for the Army’s Black Hawk helicopter fleet, which could total well over 4,000 aircraft, Anderson said. Bell, with Spirit as a partner, is in competition for the contract.
Spirit ranks high on a short list of companies with capabilities in composite and metal structures and engineering brain power, he said.
For example, Spirit’s team – and Boeing Wichita before that – helped develop some of the first components for Boeing’s 787 Dreamliner back in 2004 and 2005, he said.
Spirit has capability and affordability, he said.
That massive winding machine inside the research and development lab is part of the reason.
“I can supply the prime contractors structure,” Anderson said. “This machine can deliver with a very affordable price probably better than what they can do themselves.”
Spirit plans to heavily market its capabilities.
It’s inviting potential customers to Wichita to show them the expertise in its commercial operations and in its engineering lab.
“It opens up the conversation about what can we do together and what role can Spirit play on prime contracts in the future,” Anderson said. “That’s a big push.”
Spirit is doing some proactive marketing with research labs inside the Air Force and the Navy to make sure they know what Spirit can do, “which, frankly, we have not done at Spirit in an organized deliberate fashion over the last eight years.”
Spirit has continued to invest in research and development, despite some financial setbacks.
“It’s one of the exciting things” about the company, Anderson said.
One of the first things chief financial officers tend to do in difficult financial times is to cut money for research and development.
“We never did that,” he said.
Spirit employs 100 to 150 people in its research and development area. They are working on materials, such as composites, and various applications of composite technology and assembly technology.
Spirit plans to take its capabilities and apply them to the future.
“It’s a good chance to be entrepreneurial in a larger company,” Anderson said.
Spirit is realistic about the pace of growth in the defense market.
Defense budgets tend to grow or decline slowly, he said.
“It’s more of a modest cycle up and down,” Anderson said.
The budget is a “more-for-less budget environment,” Anderson said. The Pentagon and the Department of Defense have been clear about that.
Plus, there are fewer new defense programs.
“What we’re trying to do is make sure we’re on those start-ups when they happen,” Bartlett said. “There are fewer of those than there were a decade ago.”
But there are opportunities to explore.
Another area Spirit will explore is the unmanned aerial vehicle industry, Anderson said.
“Generally, unmanned programs have been well funded, and you build a bunch of them,” he said.
The industry will need aerostructures, Anderson said. “It’s absolutely an area we have to explore.”
Analysts predict unmanned aerial vehicles will continue as the most dynamic growth sector of the aerospace industry this decade.
Aboulafia, with the Teal Group, said that while there has been a lot of experimentation with unmanned vehicles, there has not been large volume production.
That will take time.
“There’s nothing on the horizon,” he said. “We’re well over a decade away from any kind of large-scale manufacturing activities on any given program.”
Another way to grow the defense business could be through acquisitions.
“When we think about growing, we don’t limit ourselves to just organic growth,” Anderson said. “We always look at mergers and acquisitions, acquiring if we need to.”
For example, Spirit is exploring how to obtain work on Lockheed Martin’s F-35 fighter jet program, which is well along in the development cycle.
Work has already been placed with outside suppliers, Anderson said.
Could Spirit buy a company with work on the F-35 program?
“Absolutely,” Anderson said.
There is no company that’s a target for an acquisition today, however.
It’s an area to explore, he said. “We’re at the starting line is the right way to think about it.”