Industry Perspective: Bell helicopter
Last year, Bell Helicopter president and CEO Richard Millman surprised the helicopter world with the announcement that the company planned to shut down production of the 206B3, 210, 427 and 430 by 2010. The move allows Bell to focus on more profitable and popular models like the 206L4, 407, 412 and soon-to-be-certified 429. At the same time, it can apply resources to its growing backlog, which is now at $6.2 billion. Bell expects to deliver 180 helicopters this year, up slightly from last year’s 167. Despite the dire state of the world economy, Millman still sees plenty of opportunity for Bell to soar, thanks especially to the 55/45-percent split between its military and commercial helicopter markets.
Was it the right decision to phase out the 206B3, 210, 427 and 430?
Those aircraft were and are excellent, but the order rates had diminished to the point where you still need a lot of space for the flow line and contracts with
suppliers to make the parts specific to those models. We could be much more efficient, because some of our other products are in such demand, and use the physical space to produce more of the 407s, the 429s, the 412s and also reduce the number of transactions and the number of parts that our supply base has to make. If we can only make 100 of something and we stop those productions lines, we now can make 120. If the demand is there, it makes everything more efficient.
Last year, Bell discussed possible upgrade programs for the 206L, 407, 429 and 412EP. What is the status of these upgrade programs?
The 429 was announced as the first version of a family, but our major focus is on finishing up the certification activities. There are two different variations being looked at. One’s a little further along than the other. But you’ve got to finish one before you deploy the troops against the second. We always have several ideas in the preliminary conceptual design phase to see how they match up with our customers. We have customer advisory boards and [we] put ideas in front of them, understand their future needs and their view of their future needs, and then make our decisions.
Is Bell’s strategy to continue expanding its capabilities in the aftermarket?
When you’re buying an expensive and complex product, you rely on the OEM to support that product long into the future. I would consider an OEM that does not do that disadvantaged. One of the issues is having a facility for service located near where the helicopter owner is operating. Bell has a large number of licensed service centers. We’re in 120 countries. Ever watch [the TV show] M.A.S.H.? What kind of helicopter is that? [Bell 47] So who supports them? Bell Helicopter. We’re still making parts. We’re still supporting those helicopters, and Bell’s customers know that. All that support is more than parts and service, it’s also training, education, communications and working on safety.
How is Bell handling the current economy?
We have had some cancellations. In most cases we’re able to sell those aircraft to other customers. In a down cycle like this a company has to have the flexibility to use its capacity to ramp up or ramp down, as the case may be. That’s difficult in a long-cycle business because if you have lead times that are a year and a half for parts, you’ve got to be careful about what you plan to build and how much flexibility you put into things. Given where we are today, in what looks like a downturn that’s been going on for a year, we try to predict how many commercial helicopters we will sell this year and therefore ought to build. That’s a tough game. We’re not going to build as many as we’d planned to build three months ago. [We’re] in the process of slowing some things down, but we want to be prepared should these things turn around to ramp up quickly. We’re trying to organize the company so we have that capability.
What are your priorities?
Military spares. We’ve got U.S. soldiers in the fight, when they need spare parts you’ve got to support the troops in the field. We have contracts on the military
products and we have contracts on the commercial products, so our obligation is to deliver those aircraft on time with high quality. And as the revenues and profitability go up and down, what do you stop doing? Basically, we are stopping doing all nonessential things except keeping the mandatory capital flowing to move capacity and what we consider mandatory, which is the [research-and-development] activities. It’s very difficult for us to give up that kind of funding. The old statement is true: you don’t have a long term if you can’t get through the short term. But you also don’t have a long term if you don’t continue to focus on it.