Posted on 02/22/2005 9:20:22 PM PST by anymouse
Boeing Co. on Tuesday agreed to sell off a key part of its commercial jet-building operations and a rocket engine unit in two separate deals worth about $2 billion.
The deals come as Boeing tries to sell off manufacturing capacity and cut costs amid fierce competition from European rival Airbus, the world's top aircraft maker, in the commercial airline market.
Boeing sold its commercial plane manufacturing operations in Kansas and Oklahoma to Canadian leveraged buyout firm Onex Corp. for $1.2 billion including $900 million in cash and the transfer of certain liabilities, such as employee pension costs.
The sale to Onex, which will court Airbus as a potential customer, will result in long-term savings, Boeing executives said in a conference call with reporters. It expects to take a noncash loss on the transaction, Boeing said.
The sale of plants employing 9,000 people is Boeing's latest move toward outsourcing the components of its jets.
"If it doesn't fit in with making the numbers, it gets sold, that's the message," said aviation consultant Richard Aboulafia. "They believe the future lies in being horizontal, and only supplying the top end of the food chain."
The purchased operations include Boeing's commercial aircraft manufacturing facilities in Wichita, Kansas; and in Tulsa and McAlester, Oklahoma. The new business will enter into long-term supply agreements with Boeing.
"Boeing will benefit from lower procurement costs," said Boeing Commercial Airplanes President and Chief Executive Alan Mulally in a statement.
AGGRESSIVE APPROACH
Onex said the unit -- representing about $2.5 billion in annual costs -- was the largest manufacturing division ever to be sold by Boeing.
Boeing's defense systems businesses in Wichita and in Oklahoma are not included in the transaction.
Separately, Boeing sold its rocket engine unit Rocketdyne Propulsion & Power to United Technologies Corp. for around $700 million in cash.
The deal would expand the line-up of rocket propulsion products at United Tech's jet engine unit, Pratt & Whitney, and spur consolidation in an industry suffering from a decline in commercial satellite launches and fewer space launches.
Rocketdyne's sales totaled nearly $700 million in 2004.
Both deals had been expected for some time, but their completion is a sign of a more aggressive approach by Boeing under Chief Executive Harry Stonecipher, who took the helm at the company in December 2003 in a bid to put a series of defense procurement scandals behind it, an analyst said.
"In the year he's been (CEO) you've seen a lot of action in terms of getting rid of warts and pushing ahead dynamically," said Heidi Wood, an analyst at Morgan Stanley, adding that the Wichita and Rocketdyne sales were "the biggest, most noteworthy" asset sales Boeing had in the pipeline.
Boeing could look to use the cash from the deals to better fund employee pensions, buy back shares or raise its dividend, she said, adding that major acquisitions were unlikely.
Boeing expects to recognize a one-time gain from the sale of Rocketdyne Propulsion & Power, best known for making rocket engines for the U.S. space program.
Shares of Boeing closed down 63 cents, or 1.2 percent, at $52.15 on Tuesday on the New York Stock Exchange, outperforming a 2.0 percent drop in the Amex Defense index.
One wonders who is really behind this Onex group in Canada?
I'm not surprised that Boeing grew weary of Rocketdyne. That place has had management problems for decades and it didn't fit the typical Boeing management paridigm. I wonder if the Anti-trust folks at DoJ will be happy about the two major rocket manufacturers combining? DoD and NASA might not like the results either.
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Also noticed Reuters putting this laughable header banner on top of this article:
"Reuters.com - No Spin. No Agenda. Just the Facts. As they happen."
Who are they trying to fool? Rooters is all about spin and agenda. They must be feeling the heat of the blogosphere. ;)
Space and aviation ping.
Boeing's defense systems businesses in Wichita and in Oklahoma are not included in the transaction.
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It computes. The commercial market is in 'over-supply'. There have been rumblings within the Boeing establishment of slimming the commercial side, due to the socialist-subsidising of AirBus making competition very difficult, plus a finite market that is presently soft.
Going for the "big margin" business appears to be the current strategy...
Oh, they'll still sell airplanes (for a while, anyway).
They just won't build them (or at least not much of them, anyway).
It's the Stonecipher business model, the one that was so successful at MacDonnell Douglass...
Boeing would sell these too if it could, but they can't sell a defense vendor to an overseas corporation.
Bush needs to start strongarming Western Europe....
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Yes he does, and about a WHOLE LOT of issues, like selling arms to Commie China. An absolutely MAD IDEA that needs to be squashed hard! --- while Bush has given some lip-service to this issue, I would publicly announce the consequence of TOTALLY SEVERING any type of high technology transfer or trade with Western Europe. (Hello France and Germany). GWB had better get REAL TOUGH on this issue. Big-time.
He can get tough with Europe all he wants, but it's far too late. The media on this side of the Atlantic has done a terrible job of education America about the sea change in attitude by the driving forces behind the EU. Even many of our most "internationally minded" congresscritters (McCain to name one, though he seems to be very slowly getting it) don't seem to understand what's staring us in the face. I sincerely hope that the glad-handing and smoke-blowing over Bush's fence-mending trip to Europe does not become pervasive. The trip should be the final nail in the coffin of decoupling, proving to us once and for all that Europe is not and will never again be a hand-in-hand partner.
The trip should be the final nail in the coffin of decoupling, proving to us once and for all that Europe is not and will never again be a hand-in-hand partner.
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I am sure that GWB realizes that but he must get through this "stoke job" so he can say, the EU socialists were given every chance. I think we ALL know where it is all going. Once the EU finally collapses, things will come to fruition...but the useless Congress keeps obstructing the efforts to face the reality that the left keeps trying to mask reality. Only a strong President can accomplish this, and put the world back in perspective...
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