October 6, 2022

Analyst: Pratt HQ may stay, but Raytheon could move manufacturing | Business

Raytheon Technologies Corp.’s recently announced plan to cut more than 15,000 jobs and review its factory footprint is stoking concerns that the aerospace and defense conglomerate could eventually move some of its long-standing operations from Connecticut to less expensive locales.

While senior company officials have not said where the layoffs will take place or disclosed what sites they may seek to migrate or shut down, they did indicate that Collins Aerospace, East Hartford-based Pratt & Whitney, and Raytheon Technologies’ corporate offices would bear the brunt of the belt-tightening.

And it is no secret that Connecticut, with its high utility costs, well-educated workforce, and ailing transportation infrastructure, is among the most expensive states in the nation for businesses.

Richard Aboulafia, who serves as vice president of analysis at aerospace and defense market research firm Teal Group, said Pratt & Whitney’s central campus in East Hartford, where the company makes engines that power the F-35 combat jet, is unlikely to be uprooted. But the same might not hold true for other manufacturing units.

“It’s not realistic to move entire production lines like what they have in East Hartford,” Aboulafia said. “It’s just not practical. But could a lower-level fabrication operation be moved to a lower-cost state like Florida? Sure.”

While Pratt’s military engine work has stayed strong, its commercial engine business has dropped dramatically since March as airlines reduced flights during the COVID-19 pandemic.

In July, Pratt reported sales of $3.48 billion for the second quarter, down from $5.15 billion in the second quarter of 2019. The segment posted an adjusted operating loss of $151 million due to a significant reduction in shop visits and declining spare parts sales while Raytheon overall posted a nearly $4 billion loss for the quarter.

Raytheon Technologies CEO Gregory Hayes announced the new round of layoffs on Wednesday during a virtual conference hosted by Morgan Stanley. Hayes said the cuts are necessary for the company to weather the economic fallout unleashed by the coronavirus pandemic, which has essentially halved global air traffic volume compared to the same time last year.

The new estimate of 15,000 lost jobs is almost double the 8,500 positions Raytheon Technologies officials predicted would be eliminated back in July.

Reductions in headcount are part of a broader streamlining effort meant to secure $2 billion in cost reductions and $4 billion in cash conservation.

In May 2018, Hayes said United Technologies Corp. — which merged a year later with Raytheon — would hire an additional 2,000 employees in Connecticut for its Pratt & Whitney and UTC Aerospace Systems divisions within five years. UTAS was then absorbed into Collins Aerospace after UTC purchased Rockwell Collins for $30 billion later that year.

Collins Aerospace has a major facility in Windsor Locks.

At that time, UTC officials said the company had 18,000 workers in Connecticut. When the planned merger with Raytheon was announced in June 2019, the companies said UTC had 19,000 workers in Connecticut, indicating 1,000 jobs had been added.

Aboulafia said he largely agrees with Hayes’s prediction that global air traffic volume will probably not reach 2019 levels again for another 2½ to three years.

“The thinking is, a vaccine plus 18 to 24 months, because you need time to distribute the vaccine and then the psychological effect has to set in,” he said. “So assuming there’s a vaccine by mid-2021, that would put us into 2023.”

Zach cover all topics that fall under business. His coverage can include openings and closings of local businesses, trends in unemployment, details of developments from major companies and utilities, and investigating the impact of state politics and regulations on the private sector. For more updates about business in north-central Connecticut, follow Zach on Twitter: @ZachVasileJI.

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