Re: Rolls-Royce Pratt & Whitney Merge

From:         chuanga@wis.com (Andrew Chuang)
Organization: International Internet Association.
Date:         05 Oct 95 13:25:59 
References:   1 2
Followups:    1
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Drakeal (drakeal@aol.com) wrote:
: I work at Pratt.  This rumor has been circulating for the last three
: years, and is always vehemently denied by top management from both
: companies...which makes me think there must be some truth to it.

IMHO, Pratt is more interested in the merger than R-R, though, Pratt
will not openly admit it.  Pratt CEO had stated many times that there would
eventually be two players only, and Pratt would be here to stay.  R-R
is fighting to stay in the business, acquiring Allison is a perfect
example.

: The
: reasons cited for not doing it are: 1) RR is already doing poorly compared
: to PW & GE, so there is no reason for UTC add another slack performer when
: it already has PW to carry around; and,

R-R's RB211-524 and Trent may not do as well as the PW4000 or the CF-6,
but the few customers that use the -524/Trent are extremely healthy
airlines (for example, Cathay Pacific and British Airways).  The RB211-535
has 75-80% of all the B757 customers and between 55%-60% of all the
installed engines on the B757.  Furthermore, R-R has a much more mature
marketing than Pratt in the industrial applications of their turbo fan
engines (which account for a significant amount of R-R's business).  In
the past few years, I believe R-R's profits are comparable to Pratt's.
Furthermore, France's SNECMA has terrible financial results, but it does
not stop GE from doing business with SNECMA (and CFMI is very successful).

: 2) Governmental regulations on
: both sides of the Atlantic tend to restrict the flow of patented
: technology between the two business units.

If R-R can buy Allison, there is no reason why P&W cannot establish a
joint venture with R-R (or buy R-R) and work around all the touchy issues.
After all, P&W and R-R have already been working together on the V2500
for many years.

: A counterargument would be
: that PW would gain significant access to EC markets through association
: with RR.  I tend to doubt a merger.

I tend to doubt a merger, too.  However, if Daimler-Benz does sell MTU
to BMW, I think Pratt will need a new European partner.  R-R *IS* the only
sensible choice (much more so than BMW)!

--
  H Andrew Chuang   chuanga@iia2.org