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Joining Forces

By James T. McKenna | October 1, 2004
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Sikorsky Aircraft, built on the 100-year-old dreams of one pioneering man, is turning to a company created by a family of aviation pioneers to help it prosper in the 21st century.

The Stratford, Conn. unit of United Technologies Corp. expects by now to be starting the process of integrating Schweizer Aircraft into its own operations. The two companies reached an agreement in August that allowed Sikorsky to acquire the Elmira, N.Y.-based aerospace company for terms that have not been disclosed.

Management of Schweizer would remain unchanged under the deal, except that Randy Simpson of Sikorsky would come on board as general manager. He formerly was director of the S/H-92 program.


Schweizer President Paul H. Schweizer said the company's technical and parts support for the existing fleet would not be degraded. In fact, he said, the addition of Sikorsky's experience and its worldwide support network should result in improvements in Schweizer's support.

The deal requires the approval of several agencies of the U.S. and other governments. Top officials of each company said they expected signoffs from those agencies in time to close the deal by September's end. Once those approvals are in hand and the deal is done, Sikorsky Senior Vice President Paul Martin said, "The top priority is to begin to integrate Paul and his group" with those of the maker of the Black Hawk and S-76.

That Schweizer, currently president of the company that bears his family name, is anxious to start the integration process. As he sees it, the acquisition by Sikorsky "makes Schweizer a much stronger company than it was before."

The deal was welcome on both sides of the negotiating table, for it comes at challenging times for each company. Officials involved in the talks said that with its recent growth Schweizer has neared the limits of its resources. "Clearly we needed to be part of a larger infrastructure to market and technically support" current and future products, Schweizer said.

Sikorsky holds solid market positions supplying the United States and other military services with medium- and heavy-lift helicopters and S-76s to corporate and business operators. But it has been locked out of the promising market for unmanned aerial vehicles (UAVs) and it has no position in the light commercial helicopter market segment. Schweizer can fill those voids.

Beyond that, as a development and engineering organization, Sikorsky has become ponderous. Top company officials lusted after the rapid, innovative prototyping capabilities like those that are a Schweizer trademark. In a nostalgic vein, the Schweizer acquisition returns Sikorsky to its roots. Igor Sikorsky, the �migr� who founded the company, began his career designing multi-engine, fixed-wing transports in Russia.

The Schweizer company was born in 1930 when the three Schweizer brothers--Ernest, Paul H. and William--decided to build gliders. The company carrying their name continues to have success in the fixed-wing market. Its SA2-37B and RU-38A surveillance aircraft are operated around the world. Is it an accident that Sikorsky's Martin, in describing Schweizer's potential, said he thinks "there's an awful lot of runway left" for the company?

(Another reason for the Sikorsky deal touched on nostalgia. As Paul H. --William's son--said, "there's not going to be a third generation of Schweizers taking over the business." Paul runs the company today with his brother, Stuart, and cousin Les, Ernest's son. Ernest died at the age of 88 in 2000. Paul A., 91, died in mid-August.)

According to Schweizer's totals, since it was incorporated in 1939 the company has produced 2,650 agricultural aircraft, 2,160 seaplanes, 60-plus special-purpose fixed-wing aircraft and unmanned vehicles and more than 850 helicopters. The company says its aircraft are flying in more than 70 countries.

Schweizer has a long-standing relationship with Sikorsky. Since 1942, a key part of Schweizer's business has been making parts and assemblies as a subcontractor to other manufacturers. For 25 years, it has done that for Sikorsky's Black Hawk and variants of that aircraft, as well as for the H-53. Schweizer also subcontracts for Boeing, Lockheed Martin and Northrop Grumman.

The companies expanded their relationship in 2002 when Sikorsky's unit in China, Shanghai Sikorsky Aircraft Co., reached an agreement to manufacture Schweizer helicopters in that nation under license.

Schweizer broke into the helicopter business in 1983, when it struck a deal with Hughes Helicopter to take over as the licensed manufacturer and product supporter of the Hughes 269 and 300C aircraft. Three years later, it bought the product line from McDonnell Douglas Helicopter Corp. Its 300 and 300CBi are based on that product line. The turbine-powered 333 is derived from the 330 that Schweizer developed for the U.S. Army's National Training Helicopter competition in the late 1980s and early 1990s. Schweizer lost that bid, which went to Bell Helicopter.

Despite that defeat, Schweizer turned the 333 into a commercial success. Likewise, the 300 models have found markets with a variety of private, commercial and governmental operators.

In addition, the 333 became the basis for the RQ-8B Fire Scout UAV that Northrop Grumman is building for the U.S. Navy. The Navy intends to buy 34 Fire Scout systems, which include ground units and a total of 102 aircraft. Each aircraft runs about $2.2 million. Six have been delivered.

Deliveries of production models are expected to start in March. Northrop Grumman projects that total sales of Fire Scouts to U.S. and other government's agencies could reach $1 billion. Schweizer also is pursuing further development of the RU-38 surveillance aircraft. The company in early September was preparing for the first flight of the next-generation RU-38B.

Today, the 421-employee company is doing about all that it can to keep up. "We have our hands full with development and engineering projects," Schweizer said. "We'd like [Sikorsky] to help."

In addition, sales of existing products continue to grow. The company delivered 38 aircraft in 2003. It expects the number shipped to total 56 this year and 65-70 next year. Sales totaled about $36 million in 2003 and should hit $45 million this year, Schweizer said.

With all those developments, he added, "the company had really changed focus." In circumstances like that, "you have to reinvent yourself."

The most expeditious way to do that was to find a partner, particularly one with deep pockets, a worldwide reach and the ability to serve as a systems integrator for projects based on Schweizer products.

Obviously, Northrop Grumman--the system integrator for Fire Scout--would be a logical candidate. Schweizer officials said they'd received a number of proposals from different companies. Paul Schweizer acknowledged that more than one company was involved in the final bidding, though he declined to name the loser. But he and others at Schweizer said Sikorsky always came out on top.

Martin said some Schweizer benefits to Sikorsky may be obvious and some may not be. The company "provides product reach we didn't have."

The light aircraft line now gives Sikorsky the ability to package broader training deals as part of its government sales of Black Hawk-based aircraft.

The deal gets Sikorsky back in the UAV game. It had pursued this market, but was cut along with its partner Raytheon after the initial round of the U.S. Army's Unmanned Combat Armed Rotorcraft competition. Previously, Sikorsky had tried to field a version of its Cypher 2 UAV for the U.S. Marine Corps' Dragon Warrior/MARINER programs, but those efforts faltered. In late 2003, it joined with Northrop Grumman, one of the two surviving teams in the competition. The other is Lockheed Martin. Taking over Schweizer could strengthen Sikorsky's UAV relationship with Northrop Grumman.

That aerospace conglomerate is already partnered on the VH-92, Sikorsky's bid to sell the United States on the S-92 as the next presidential helicopter transport.

(In the Byzantine campaigns to win the VXX competition, the Schweizer acquisition could weaken the hand of Sikorsky's competitor, the Lockheed Martin-led team of Agusta Westland and Bell. That team had the political backing of the New York state congressional delegation, including Democratic Senators Charles Schumer and Hillary Rodham Clinton. That support would at least be nullified by the fact that a key and prestigious state employer is a wholly owned subsidiary of Sikorsky. Sikorsky hasn't yet said whether Schweizer will get any subcontracting work if it wins the VXX race.)

Fire Scout also holds commercial potential. Paul Schweizer noted that the UAV is more powerful than the 333 on which it is based, and the possibility exists to develop a manned version of Fire Scout into a commercial model.

Perhaps the most tempting aspect of Schweizer, Martin said, is "its wonderful quick prototyping capability." The 333 would give Sikorsky a new platform on which to try out ideas like new designs for blades, airfoils, swashplates and other dynamic components.

"We do a considerable amount of R&D every year," Martin said. "We want them to be an extension of our advanced development arm."

Schweizer's "quick and innovative prototyping capability" contrasts with the current situation at Sikorsky. "It's more difficult to do things quietly and rapidly in Stratford."

There are a couple of things that Schweizer will not do for Sikorsky, officials of both companies said. It will not take on engineering work. Sikorsky has irked its employees and Connecticut politicians with plans to establish a new engineering center out of the state.

Company officials have visited Indiana and Montana, among other states, in search of the best site for that center.

The Schweizer deal also is not viewed as an entry into new U.S. Army competitions for utility and reconnaissance aircraft in the wake of the RAH-66 Comanche's cancellation.

"We're not looking at Schweizer opening a window into those competitions," Martin said.

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