Enstrom Continues Transformation

 - July 3, 2014, 2:45 AM
Enstrom’s acquisition by China’s Chongqing Helicopter Investment Company financed expansion of its Menominee, Mich. plant, where it plans to produce 35 helicopters this year.

For a minute, I think I am in the wrong place.

The Enstrom Helicopter headquarters I visited in Menominee, Mich., more than a decade ago was a ramshackle collection of small, rundown hangars and older low-ceiling buildings. The dated offices had furnishings stuck in the 1960s. There were plenty of empty parking spaces, few employees and the company was perennially beset by rumors of its impending demise.

Today, Enstrom is none of that. Last month workmen finished an $8 million plant and office remodeling and 77,000-sq-ft expansion that doubled the space under roof and you can’t find an empty parking spot. Inside, the factory floor is buzzing to the sound of air guns and power tools and people move about in an orderly, upbeat fashion but urgently advancing new helicopters down the assembly line.

The company has been on the upswing since 2009, propelled by a series of foreign military sales of its 480B turbine single, an aircraft known for its simple and rugged systems and good handling characteristics. It lost out in the competition for a primary training contract with the U.S. Army in 1992, but in recent years has found a home in Japan, Venezuela and Thailand, among other locales. This year, Enstrom plans to deliver 31 of them as well as four of its legacy piston models, the F-28 and 280. Total production likely will top 45 helicopters next year. Over the last five years, Enstrom’s employment has grown to 225 from 60 and the company is still hiring, stalled only by a shortage of qualified applicants. For the last three years it has turned a profit.

New Owner, New Model

Late last year, the company was sold to China’s Chongqing Helicopter Investment Company (CQHIC), part of a $530 million aviation arm of a $4.27 billion state-owned industrial conglomerate. The CQHIC purchase pumped new working and investment capital into the company, helping Enstrom finance its plant expansion and launch its new TH180 piston trainer, unveiled earlier this year at Heli-Expo in Anaheim. CQHIC (soon to be renamed Chongqing General Aviation Group to reflect its broader ambitions for helicopters and airplanes) should also help Enstrom in accessing the potentially lucrative Chinese market. CQHIC executives sit on Enstrom’s board, but are not involved in day-to-day operations.

The TH180 is slated to make its first flight in early fall and Enstrom is already cutting metal for it. Enstrom plans to use the common type certificate held by all its other models to speed the TH180’s development. Powered by the naturally aspirated Lycoming IO-390, the TH180 is expected to be able to use unleaded aviation fuels–when they are approved for the engine–and deliver relatively lower direct operating costs on fuel burns of less than 12 gallons per hour.

Enstrom thinks the time is right for a new piston trainer, particularly in the U.S. Robinson is focusing more of its resources on larger helicopters and Sikorsky seems uncertain of what to make of its Schweizer acquisition, announcing plans late last year to re-open production of that brand’s piston helicopters only temporarily while promising to improve product support. Enstrom intends that the TH180 will hit the market next year largely without competition. “There will always be a need for piston trainers,” said Orlando Alaniz, Enstrom’s director of sales and marketing.

These are heady days at Enstrom, perhaps its best times yet, after staggering along for decades, largely undercapitalized by a colorful collection of absentee owners with varying degrees of business aptitude. As good as things are, however, the company faces challenges on a number of fronts.

“We have competition [for the 480B] coming up in the near future that is going to be difficult,” acknowledged CEO Tracy Biegler.

Biegler took over as CEO earlier this year after more than a decade with the company and was largely responsible for finding new export markets for the 480B, particularly in South America and the Pacific Rim. Biegler’s immediate challenge is to wring cost out of the 480B through a combination of outsourcing and more efficient manufacturing practices. Enstrom currently manufactures 90 percent of the parts used in its helicopters in-house, including cabins, windshields and main rotor blades. That has helped the company maintain overall quality standards and quick turns for customers needing replacement parts, but is not always the most economical method of manufacture.

However, Biegler understands that outsourcing is a balancing act. “My philosophy is that, while we will be outsourcing, we want to be able to maintain the capability to produce it here if we have to. I don’t want to be so dependent on outsourcing that we can’t react to the customer,” he said.

Enstrom plans to use the TH180 not only to make inroads in the primary training market and increase overall sales but also as a template to revamp its engineering and manufacturing practices company-wide for all of its models. “This company is going from a low rate to a high-rate production facility and there are growing pains that go with that,” Biegler said. “There is nothing wrong with growth, but to grow you have to change.”