2015 UTC Supplier Forum
Transcription
2015 UTC Supplier Forum
2015 UTC Supplier Conference April 29, 2015 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS NO CAMERAS OR RECORDING DEVICES The use of cameras, video equipment or recording devices is prohibited UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS THANK YOU TO OUR GOLD SUPPLIERS Southgate, MI Peterborough, Ontario Manchester, CT Tillsonburg, Canada Ellijay, GA Rzeszow, Poland Quebec & Ontario, Canada New York, NY Kulim, Kedah, Malaysia NJ, USA Evansville, IN Ronkonkoma, NY Rancho Cucamonga, CA Aurora, CO Albany, OR Dallas, TX Huntsville & Berryville, AR Leicestershire, England Kalisz, Poland Belo Horizonte City, Brazil Lincoln, UK Corinth, TX Longueuil, QC Hoogerheide, Netherlands Hyderabad, India Manchester, CT Kent, WA Auburn, MA Jeffersonville, IN UTC │ UTC AEROSPACE SYSTEMS │ Dunedin, FL Framingham, MA PRATT & WHITNEY │ SIKORSKY │ Biłgoraj, Poland Santa Fe Springs, CA UTC BUILDING & INDUSTRIAL SYSTEMS THANK YOU TO OUR GOLD SUPPLIERS Akashi, Japan Lincolnshire, IL Kure, Japan Atlanta, GA & St. Laurent, Quebec Miramar, FL Windsor, CT Guangzhou, China Bloomfield, CT New York, NY Verdi, NV Hemmingford, Quebec, Canada Macomb, MI & Witton, U.K. Mumbai, India Glastonbury, CT Munich, Germany Santa Ana, CA Mankato, Minnesota Trumbull, CT Jiangsu, China & Darley Dale, U.K. Belcan Windsor, CT Laval, Quebec East Hartford, CT & Palm Beach Gardens, FL Zamudio, Spain Randolph, NJ Boca Raton, FL East Hartford, CT Deer Park, NY Cranbury, NJ Kozy, Poland UTC │ Farnborough, Hampshire UTC AEROSPACE SYSTEMS Joplin, Missouri Stanley, UK │ PRATT & WHITNEY │ SIKORSKY Quebec, Canada │ UTC BUILDING & INDUSTRIAL SYSTEMS QUESTION? If you have a question during today’s presentation, please submit it to: [email protected] UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS EMERGENCY EXITS UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS WELCOME Benoît Brossoit, UTC Vice President, Operations UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS AUDIENCE QUESTION In the past two years have you personally attended a UTC or UTC business unit supplier forum? 1: Yes 2: No UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC VISION FOR FUTURE Greg Hayes, UTC President & Chief Executive Officer UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC SUPPLIER / PARTNER RELATIONSHIP Benoît Brossoit, UTC Vice President, Operations UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS AUDIENCE QUESTION Is at least one of your sites part of the supplier gold program? 1: Yes 2: No 3: I don’t know UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS POSITIONED FOR GROWTH Building & Industrial Systems Growth drivers Addressable market segment ($ billions) ~ 210 ’14-’20 CAGR ~5% Urbanization Replacement / modernization Life safety Security 160 30 1990 UTC │ 2014 UTC AEROSPACE SYSTEMS 2020 │ PRATT & WHITNEY Efficiency & environment │ SIKORSKY │ Regulatory changes UTC BUILDING & INDUSTRIAL SYSTEMS POSITIONED FOR GROWTH Pratt & Whitney Large Engines Small Civil Engines (Projected number of engines) (Delivery outlook) Next generation product family F135 Legacy 2014E UTC │ 2015E 2016E 2017E 2018E UTC AEROSPACE SYSTEMS │ 2019E 2020E PRATT & WHITNEY 2015E │ SIKORSKY 2016E │ 2017E 2018E 2019E 2020E UTC BUILDING & INDUSTRIAL SYSTEMS POSITIONED FOR GROWTH UTC Aerospace Systems CSeries A320neo Shipset values Embraer E-Jet (Major programs, indexed to 2000 shipset value) 7 6 Vehicle Health Management Air Management Systems Ice Detection/ Prevention 5 Actuation Systems 4 Pilot/Crew Seats Exterior/Interior Lighting 3 Cockpit Controls 2 Sensors Fuel Systems Fire & Overheat Protection Systems Pylons Nacelles Engine Controls & Components UTC │ Wheels & Brakes Landing Gear Cargo Systems UTC AEROSPACE SYSTEMS 1 Escape Slides 0 Power Generation & Distribution Systems 2000 2011 Hamilton Sundstrand │ PRATT & WHITNEY │ SIKORSKY │ 2012 2020E UTAS UTC BUILDING & INDUSTRIAL SYSTEMS POSITIONED FOR GROWTH Sikorsky 2014 New Program Wins Production BLACK HAWK Development Naval hawk™ CH-53K CRH S/H-92™ S-76D™ CMHP S-97 RAIDER™ VH-92 M28® UTC │ Lights UTC AEROSPACE SYSTEMS │ S70i™/ T-70 PRATT & WHITNEY │ SB>1 Defiant™ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS POSITIONED FOR GROWTH UTC consolidated supplier spend ~6% CAGR Goodrich acquisition Non-product $33B Non-product Aero product Aero product BIS product BIS product 2011 UTC │ 2012 2013 UTC AEROSPACE SYSTEMS 2014 │ 2015 2016 PRATT & WHITNEY 2017 │ 2018 SIKORSKY 2019 │ 2020 2021 2022 UTC BUILDING & INDUSTRIAL SYSTEMS UTC ACE OPERATING SYSTEM CUSTOMERS │ EMPLOYEES WHAT WE DELIVER HOW WE WORK QUALITY LEAN PROCESSES products & services information & product flow TOOLS UTC SUPPLIERS UTC AEROSPACE SYSTEMS COMPETENCY │ PRATT & WHITNEY │ SIKORSKY CULTURE │ UTC BUILDING & INDUSTRIAL SYSTEMS INVESTING IN OURSELVES Facilities & Manufacturing Technology UTC │ UTC AEROSPACE SYSTEMS People & Processes │ PRATT & WHITNEY │ SIKORSKY IT Systems │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC EXPECTATIONS Quality Velocity Cost UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC EXPECTATIONS Supplier performance (Aero product only) 39 UTC Underperforming (% key spend) 2014 breakdown by category (% Spend) Gold (8%) Underperforming Underperforming (26%) 26 Progressing (22%) Performing Performing (44%) 0 - 5% 2013 2014 2015 Goal Driving tremendous inventory & cost to meet customer requirements UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS SUPPLIER PERFORMANCE ISSUES Key causes Escapes OTD Major Quality Escapes 52% Material planning / Lean flow Major ethical compliance 2010 Inconsistent processes and quality 2014 Sub-tier management 2014 Performance (Aero prod. only) Process control Underperforming Capacity Flowdowns (tier 1 & 2) Progressing Sub-tier management We have the tools in place to work together to fix these issues UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS SUMMARY UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS INDUSTRY CHALLENGES & OPPORTUNITIES Tom Captain, Deloitte Vice Chairman, Global and U.S. Aerospace & Defense Leader UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS Aerospace and Defense Industry Challenges and Opportunities: What's Different? Tom Captain, Vice Chairman, US Aerospace & Defense Leader, Deloitte LLP; Global Aerospace & Defense Leader, Deloitte Touche Tohmatsu Limited. United Technologies Supplier Conference, April 29, 2015 25 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Background • Industry undergoing stress and disruption - Technology - Business model - Supplier relationship • The customer is requiring ever lower acquisition and operating costs, and innovative functionality • Resulting in industry transformation, consolidation and acquisitions Is this the automotive, personal computer or consumer electronics industry? Yes, and now it is in full swing in the aerospace and defense industry 26 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Commercial Aerospace 27 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. The good news – how long will it last? • 5 consecutive years of record orders, revenues, production and backlog − Global demand for travel due to global middle class growth and wealth creation − Airline capacity discipline resulting in profitable airlines − Technology advances in propulsion, materials science and avionics, driving obsolescence • What is wrong with this picture? Plenty • Let’s start first with historical trends and interesting data 28 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Long term increases in travel demand are due to global demographics and wealth creation • 900 million to 3+ billion PAX annually from 1981 to 2015 • 1 trillion to 6+ trillion annual RPKs over same period • Load factors at an all time high 90% 7 Passenger load factor 80% 6 70% 5 Number of passengers and Revenue Passenger Kilometers 60% 4 Revenue Passenger Kilometers 50% 40% 3 Number of passengers 2 1 20% 10% 0% 0 RPKs (Trillion) 29 30% Pax Load Factor (%) Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Passengers (Billion) Copyright © 2015 Deloitte Development LLC. All rights reserved. Resulting in increased orders and production volume • To respond to rising PAX demand • To replace obsolete aircraft • Deliveries increasingly destined for China, Middle East and India 787, 737NG, A320, A330, A350 3,000 737 Max, A320 NEO, A350 2,500 2,000 1,500 757, 767 747-400, MD90 737NG, 777, A320, A330, A340 1,000 500 Post 9/11 recession Great recession 0 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015F 30 Orders Production 7 Year Moving Avg. Production Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Backlog and deliveries are doubling in 8, 10,12 years Year Backlog Deliveries Years of Backlog 1998 3,092 792 3.9 1999 2,957 914 3.2 2000 3,238 802 4.0 2001 2,932 852 3.4 2002 2,598 684 3.8 2003 2,514 586 4.3 2004 2,551 605 4.2 2005 3,948 668 5.9 2006 4,930 832 5.9 2007 6,759 894 7.6 2008 7,308 858 8.5 2009 6,863 979 7.0 2010 6,995 972 7.2 2011 8,208 1,011 8.1 2012 9,055 1,189 7.6 2013 10,639 1,274 8.4 2014 12,175 1,352 9.0 * Box indicates years to double 31 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Aircraft production forecast shows declining rate of growth starting in 2019, but….. • Calculated rate of growth is decreasing, based on current market forecasts by OEMs, but… • Market forecasts keep increasing each year, which now total ~33,000 aircraft delivered over the next 20 years • But will OEM forecasts increase through 2035? 1,718 1,734 1,750 1,816 1,686 1,702 1,799 1,671 1,782 1,655 1,766 1,640 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 1,900 1,403 1,507 1,595 1,610 1,435 1,580 1,625 2015 2016 2017 2018 2019 2021 1,700 1,500 ? 1,300 1,100 900 700 500 300 100 (100) 32 2020 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Supplier economics starts with falling airfares that impact the value chain….. • 46% decrease (CPI-adjusted) in airfares since 1990—creating demand for travel • 150+ bankruptcy filings 1998-2003 caused by overcapacity, unaffordable cost structure and pension obligations 9.0 8.4 Revenue per Passenger Kilometer— 1990 to 2013 8.0 7.0 Annual revenue per passenger km (inflation adjusted) 6.0 (in cents) 5.0 4.5 4.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Real Average Passenger Revenue Per Passenger km 33 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Which is disrupting the business model of where profit is distributed • Even though airlines are finally making profits, falling airfares are having a disruptive influence on the value chain • Different supply chain tiers have varying operating margins 18% Operating Margin Performance 2010-2013 16% 14% 12% 10% 8% 6% 4% 2% 0% Tier 2 34 Propulsion Tier 1 2010 Margin Electronics 2011 Margin Tier 3 2012 Margin Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? OEM 2013 Margin Services Aerostructures Copyright © 2015 Deloitte Development LLC. All rights reserved. What’s the impact of this on commercial suppliers? • Airline PAX pricing pressure, requires less costly airline operations and aircraft CAPEX • Aircraft OEM response has been to challenge the supply base: − Risk sharing partnerships − Pay to play schemes − Technology innovations; less power, miniaturization, longer maintenance cycles, less weight, more fuel efficiency, expanded functionality − YOY cost reductions, price concessions, partnering or equivalent • Supplier capacity and capability challenges: − Design engineering − Program management − Supply chain management − Industrial capacity; machines, tooling, skilled people 35 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Defense 36 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. DOD customer has reduced spending, but are we at the cyclical bottom? • Declining budgets due to cessation of armed conflict in the Middle East and the Budget Control Act (BCA) of 2011 (sequestration) − $500B over 10 years, with modified relief (~50%) due to the BBA of 2013 • 2016 Presidents DOD budget is $534B plus $51B for OCO; $585B − Ignores sequestration with $35B above the BCA cap of $499B. Congress? 37 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Not clear about BCA relief, where no Congressional action may result in another round of cuts • SECDEF and service chiefs all predict draconian actions would be required under sequestration • Pundits expect a compromise somewhere in the middle • PB16 increases readiness and investment accounts: 38 - $6.3B (10%) in RTD&E - $14.1B (15%) in Procurement - $14.4B (7%) in O&M Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Reduced budgets impacting defense contractors • Global defense subsector forecast to decrease by 1.3% in 2015 • U.S defense contractors have been shrinking for 4 years − Have lost 167,000 employees since 2010 − Only 4 of top 20 firms have grown revenues − Overall revenue declines of 9.7% since 2010 (~$29B); 2.5% in 2013 • Percentage employment losses at mid and small firms were larger 2010 2013 1,030,387 863,623 -16.2% Employees at top 20 (large) defense companies 768,002 651,132 -15.2% Employees at mid-sized defense companies 155,137 126,952 -18.2% Subtotal of employees at top 20 (large) and mid-sized defense companies 923,139 778,084 -15.7% Employees at small defense companies 107,248 85,539 -20.2% Total defense company employment 39 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Change Copyright © 2015 Deloitte Development LLC. All rights reserved. But financial performance is improving US defense industry has improved operating margins, employee productivity and ROIC, despite revenue declines − Anticipatory cost cuts, plant closures, − Spin-offs of low margin and declining SBUs 11.5% Revenue in US$ millions 255,000 250,000 11.0% 245,000 240,000 10.5% 235,000 230,000 10.0% 225,000 220,000 9.5% 215,000 210,000 Operating margin percentage • 9.0% 205,000 2010 2011 2012 2013 2014E Year Revenues (US$ millions) 40 Operating margin percentage Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Revenue growth is the business imperative now • Foreign military and direct commercial sales • Must win DOD competitions • Acquisitions to bolt-on capabilities or consolidate competitors • Create new markets and demand; e.g., SpaceX, Scorpion, Predator • New product development 41 - ISR - Digital warfare - Cyber - Adjacent markets - Precision strike (rail gun, directed energy, laser) Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Create value thru innovation • Integrate engineered improvements and innovations into existing products • Contribute to reducing direct operating cost, maintenance, weight, power, and size • Increase affordability • Apply process automation to become more efficient and less labor intensive • Take calculated risks on new programs, with measured investments • Can’t continue to cut costs indefinitely; revenue growth is an imperative • Don’t wait for the RFP – create new demand 42 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Supplier Guidance 43 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. What trends are affecting suppliers? • Suppliers are merging to gain scale economies or selling out • Labor being replaced with process automation and robotics • In-sourcing, work recall • 3-D manufacturing—will be a game changer • Inevitable march towards commoditization, or, moving “up and to the right” to take pricing premiums − Systems of systems provider − Unique IP Premium Value 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 1 44 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? 2 3 4 5 6 7 8 9 10 11 Copyright © 2015 Deloitte Development LLC. All rights reserved. New supply chain value model is here to stay • Financial, talent & operational requirements and implications of becoming a ‘super supplier’ • Constrained ability to meet production volume demands, leading to risks of schedule delays • Consolidation and fewer, larger suppliers controlling pricing • Mitigation: OEMs are taking steps to reduce risk among supplier base − Bringing some design authority back in house − Recalling some manufacturing work packages − Execution of supplier development & surveillance programs − Providing financial support to help certain suppliers • For suppliers, the new reality is that continual cost reductions and pricing pressure are here to stay 45 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. Summary guidance for suppliers • Factors of competition still valid − Scale economies − Risk taking, technology innovation − Agility, skills/talent, customer presence/intimacy − Growth imperative • “Better” before “cheaper”—less parts, use less power, smaller, longer maintenance cycles, less weight, fuel efficiency, and expanded functionality • Costs - overhead, labor, supply chain • Aerospace and defense story is compelling • Equity markets are bullish 46 Commercial Aerospace Supply Chain Challenges and Opportunities: What's Different? Copyright © 2015 Deloitte Development LLC. All rights reserved. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a detailed description of DTTL and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2015 Deloitte Development LLC. All rights reserved. 36 USC 220506 Member of Deloitte Touche Tohmatsu Limited BREAK UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS CUSTOMER INTRODUCTION Bennett Croswell, P&W President, Military Engines UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC SUPPLIER EXPECTATIONS Sam Abdelmalek, UTC Vice President, Global Supply Management & Integration UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS AUDIENCE QUESTION Are you aware of the UTC supply chain transformation? 1: Yes 2: No UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS WHY THE TRANSFORMATION? Growth Lack of Performance UTC R &Investment D ($B) ($B) Underperforming Underperforming Progressing 3.1 3.4 ‘10 ‘11 4.0 4.7 5.0 ‘13 ‘14 Performing Performing Cost of Goods Customer Impact ‘12 Internal Processes UTC Supply Base “We all want more for less” UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC SUPPLY CHAIN TRANSFORMATION ALIGNED STRATEGY Reorganizing Supplier performance Common processes / tools Investing in talent R.A.C.I. = Responsible, Accountable, Consulted, & Informed Journey towards a world-class Supply Chain Enterprise System UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS IT TRANSFORMATION ELEMENTS UTC Spend Analytics Contract Lifecycle Management (CLM) Demand & Material Management Command Centers Supplier Portal SAP │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS SOURCING PROCESS TRANSFORMATION 2014-15 Strategy & Supplier Designation Selection Criteria RFQ & Contracts Maintain Exit Add’l costs Total cost elements Grow x Logistics costs Rewards Unitary cost + NRE x certified GOLD x Financial costs x Performance costs _________________ Aligned UTC strategy & one common award process UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS GOVERNANCE – TICKET TO ENTRY 2014-15 Supplier Gold Certification Benefits One Company Approach Productivity - 0 headwind & cost reduction Payment Terms Buffer Stock 90 days 4 weeks 75 days 2 weeks No Performance Guarantees / QN Admin. Charges Supplier Selection Benefits / Business Opportunities 90+ day payment terms OTD performance guarantees Quality Notification (QN) charges Minimum buffer stock Supplier Gold commitment UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS V2 / SMARTCHOICE Cost reduction through productivity Lean manufacturing Technology & automation Footprint optimization Cost of Poor Quality (COPQ) reduction Low Cost Sourcing (LCS) Volume growth Driving year-over-year cost reduction UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS ONE UTC SUPPLIER MANAGEMENT Supplier Relationship Management (SRM) Supplier Performance Management Supplier Customer Improvement Plan (SCIP) Supplier Development Supplier Health Assessment (SHA) Andon Report OVERDUE TO INPUT Supplier 10 1 RM BUFFER 1 11 1 WIP 0 8 2 FG BUFFER 2 8 3 1 Comments: LEGEND: GREEN = 0 pcs Overdue to Input GREEN = RM > 4 weeks GREEN = WIP > 90% of requirements GREEN = FG > 2 weeks YELLOW = X pcs OD to Input < 1 week's req's YELLOW = RM = 2 -4 weeks YELLOW = WIP 75% - 90% of requirments YELLOW = FG 1 - 2 weeks RED = X pcs OD to Input > 1 week's req's RED = RM < 2 weeks RED = WIP < 75% of requirements RED = FG < 1 weeks Present trends since last meeting or last quarter for ANDON elements Indicate actions to correct/improve or maintain trends, as applicable P&WC Proprietary Information World-class collaborative standard work being deployed UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC SUPPLIER GOLD VISION Expectations for suppliers Exit Underperforming by EOY 2015 Performing status…then Certify GOLD asap 2014A 2015P 2020 VISION Take the journey to Gold before it is too late UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS REVAMPED SUPPLIER GOLD From “Recognition” to “Supplier Performance” program Old New Not integrated with our processes Fully integrated with our processes Sourcing processes Clear sourcing process benefits Contracts Standard contractual incentives Focus on Gold / Performing combined UTC policy obj. for Underperforming & Gold Existing programs - top spend New key programs required UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS FUTURE SOURCING OPPORTUNITIES New Product Introduction Process CH53K VH-92 Raider / JMR Small civil MA700 E2 ATEC engine 777X ~$2B potential annual awards still to come UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ Risk Management NPI Sourcing Process Cert / PPAP Production Readiness V2 & Governance Supplier Gold UTC BUILDING & INDUSTRIAL SYSTEMS IN SUMMARY UTC Commitments Supplier Expectations Investing in our processes & people Supplier Gold certification Steady journey toward a world-class supply chain Invest in growth and production readiness One Company is here to stay Year-over-year productivity commitments (V2 & SmartChoice) Revamped Supplier Gold program with clear incentives One Company contract with UTC governance Improving the way we work together UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS SUPPLIER GOLD…THE WAY FORWARD Steve Bohlman, UTC Director, Supplier Performance UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS WHY REVAMPED SUPPLIER GOLD Essential Committed Customers Performance Growth Our Customers demand it UTC │ UTC AEROSPACE SYSTEMS │ Aligned Our Processes Corporate Citizen Joint improvement We’re raising the bar Integrating GOLD into our processes PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS 2015 UTC Supplier Conference April 29, 2015 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS NEW LOGO REPRESENTS OUR JOURNEY UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS TWO KEYS TO REVAMPED SUPPLIER GOLD Improving our GOLD program Making GOLD relevant for both of us Supplier Health Assessment (SHA) Integrating GOLD into the foundation of what we do together UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS BUILDING GOLD INTO THE FOUNDATION Key program alignment Strategy & Supplier Designation Supplier Gold Certification Benefits / Contracts Selection Criteria Relationship Management New Gold KPI Supplier Gold Program integrated into every step UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS CHANGES TO SUPPLIER GOLD PROGRAM Eliminating Underperforming Progression to Gold Customer Satisfaction Longer view SHA Sustainment required Revised Supplier Health Assessment (SHA) Sustaining Gold 18 months on-site recert Monthly leading KPI 50% 50% Today Driving the journey to meet our vision of a Gold supply chain UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS WHAT / WHY THE SHA? 4 Basic Categories Lean Highlights systemic issues Quality Process Management (Key elements) Sub-Tier Management Business Processes Business Continuity Planning (BCP) Internal Operating System Demand & Material Management etc… Resource Management & Corporate Responsibility +7% OTD 3.5x lower PPM A tool to satisfy your customers and improve your bottom line UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS KEY REVISED ELEMENTS OF SHA Driving sustainable performance Drastically reduces escape risks Aligned with UTC 2020 vision Available in Q3, but effective 2017 Enhanced the tool to drive more value and eliminate risk UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS PROGRESSION TO GOLD LEVEL Supplier Gold Level OTD Quality Customer Satisfaction (MFA) Supplier Health Assessment (SHA) 6.0 out of 7 overall > 80% score on all 4 categories & zero Gold questions missed < 500 > 5.0 out of 7 Zero Gold questions missed > 85% < 1500 Gap plan in progress ≤ 85% ≥ 1,500 Start your journey GOLD 100% PERFORMING > 95% PROGRESSING UNDERPERFORMING 0 Gap plan in progress Start your journey Early engagement of MFA and SHA to accelerate your journey to GOLD UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS AUDIENCE QUESTION What percentage of your sites have completed a Supplier Health Assessment (SHA)? 1: 75-100% 2: 50-74% 3: less than 50% 4: 0% 5: Don’t know UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS THERE ARE RESOURCES AVAILABLE Training material Professional Support Network Networking opportunities available today UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS SUMMARY Address Gaps & Opportunities 15 years of ACE Deployment Dedicated Identifies Gaps & Opportunities UTC │ UTC AEROSPACE SYSTEMS Leadership Operating System / Standard Work │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS SUPPLIER PERSPECTIVE Tony Reardon, Chairman & CEO, Ducommun UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS Ducommun Incorporated 2015 UTC CEO & Partner Conference Anthony J. Reardon Chairman & Chief Executive Officer Ducommun History With UTC • • • • • 78 Business Units United Technologies Goodrich Hamilton Sundstrand Pratt & Whitney Sikorsky Aircraft Programs • • • • • • • • • • Black Hawk S-76 CH-53 Super Stallion CH-53K Heavy Lift S-97 Raider F-35 JSF F100/F135 F-16 Fighting Falcon 787 Dreamliner A320/A330 Programs Partnering with UTC – Our Relationship Objectives • UTV2 Partnership • Profitable Growth • Headwind Mitigation • Partnering on cost out • Supplier Gold Performance • One Company MTA (Master Terms Agreement) • One Company MTA (Master Terms Agreement) • Performance Guarantees • Long Term Technical Partnerships • Technology Collaboration • Integrated Solutions Provider • Strong Engagement Strategy 79 • Technology Collaboration Our Historical Relationship With UTC and Our Marketplace Needed Work Ducommun Yesterday UTC Value Streams Appleton, Wis. 787 Dreamliner Berryville, Ark. A320neo Coxsackie, NY S-76 El Mirage, Calif. S-92 Gardena, Calif. Huntsville, Ark. Joplin, Mo. Monrovia, Calif. Orange, Calif. 80 Site-driven relationships CH-53 Super Stallion CH-53K Heavy Lift F100/F135 F-16 Fighting Falcon Parsons, Kan. F-35 JSF Phoenix, Ariz. H-60 Black Hawk Tulsa, Okla. S-97 Raider Historical value stream driven by site relationships Transforming How We Do Business . . . To strategic business units that align capabilities and create synergies 81 Electronic Systems Group Advanced Systems Group Structural Systems Group Area of expertise: Manufacturing services for interconnect, electronic and electromechanical applications Area of expertise: High-tech proprietary systems and engineered products for defense, aerospace and industrial applications Area of expertise: Structural components and assemblies for aerospace and other applications Strategic Business Units: Strategic Business Units: Strategic Business Units: Interconnect Solutions Circuit Board Solutions Engineered Solutions Aerospace Integrated Solutions Industrial Integrated Solutions Systems Development & Integration Structural Systems Solutions Structural Assembly Solutions Bonded Component Solutions Ducommun’s Integration Of Capabilities and Strategy For UTC Ducommun Today UTC Value Streams 787 Dreamliner Solutions-Focused A320neo • Full-service collaborative approach • Broad-based capabilities – Electronic solutions – Engineered solutions – Structural solutions • Value-added services – Design for cost and manufacturing – Solutions innovation, design, and engineering – Lean enterprise engagement – Technology and product development 82 One-Ducommun Approach • Capabilities • Relationships • Value Strategy Today’s value stream is driven by One Ducommun S-76 S-92 CH-53 Super Stallion CH-53K Heavy Lift F100/F135 F-16 Fighting Falcon F-35 JSF H-60 Black Hawk Ducommun’s Path to Partnership • Commitment to Gold performance at all sites that support UTC • Collaboration on cost targets and cost strategy for existing and new business • Negotiated One Company MTA (Master Terms Agreement) • New business awards for Ducommun based on demonstrated value and UTV2 benefits Committed team of Ducommun and UTC partners collaborated over 14 months to deliver win-win UTV2 results encompassing 22 contract opportunities 83 One Company Agreement = New Strategic Partnership • Significant milestone in Ducommun’s growth strategy – Expands current involvement on key programs with UTC – Opens new opportunities to provide electronic and structural assemblies across UTC’s aerospace business units • Commitment to world-class quality and delivery at a competitive cost • Committed to expanding Gold status to all our sites that support UTC 84 Ducommun Overview • Founded in 1849 • Oldest company in California • Ducommun is a global leader in providing innovative manufacturing solutions for the aerospace, defense and industrial markets – Complex electronic, engineered and structural applications – Broad capabilities support more advanced, higher value-added Tier 2 systems and assemblies – High-mix/low-volume – Focused, niche approach in sync with growing market demand – Long-term relationships with blue-chip customers • 3,200 employees companywide 85 Ducommun at a Glance 2014 Sales: $742 Million Industrial, 18% Commercial Aerospace, 33% 86 Defense Technologies & Structures, 49% Key Aerospace & Defense Customers Using Our Guiding Principles and Operating System as Our Path to Gold 87 Thank you! 88 UTC BUSINESS UNIT PERSPECTIVE Paolo Dal Cin, UTAS Vice President, Operations & Supply Chain John Palumbo, Sikorsky Vice President, Operations Benoit Beaudoin, P&W Canada Vice President, Operations UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC AEROSPACE SYSTEMS OPERATIONS & SUPPLY CHAIN Paolo Dal Cin, VP Operations & Supply Chain UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC AEROSPACE SYSTEMS Electric Systems Sensors & Integrated Systems Aerostructures Landing Systems Interiors Engine & Environmental Control Systems ISR & Space Systems Actuation & Propeller Systems 91 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC AEROSPACE SYSTEMS New programs fueling our growth New program ramp Achieved first flight First flight planned 2015 (commercial deliveries) New programs 787-9 A350-900 A320neo CSeries P-8 KC-390 A400M KC-46A Global 7000/8000 MRJ C919 737MAX E2 A350-1000 787-10 777X Legacy programs 2011 UTC 2012 │ 2013 2014 2015E UTC AEROSPACE SYSTEMS 2016E │ 2017E 2018E PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS 92 UTC AEROSPACE SYSTEMS Global manufacturing growth Manufacturing hours 2012 2013 2014 2015 Global footprint ~100 manufacturing sites 2016 93 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC AEROSPACE SYSTEMS Supply chain Product spend Organization Rishi Grover Vice President Supply Chain 2012 2013 2014 2015 Sourcing New product introduction & delivery Supplier performance Commodity and contracts Functional business unit Regions 2016 ~400M pieces delivered per year UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ 94 UTC BUILDING & INDUSTRIAL SYSTEMS UTC AEROSPACE SYSTEMS Lean operations system Physical cell transformation Strengthened materials management Supplier integration Yield Supplier performance Usage and cost ~100 cells active in cell transformation process Cell Lean redesign and kitting Forward stocking of material Plan for every part Line back logistics 95 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS UTC AEROSPACE SYSTEMS Supplier integration essentials Capacity alignment Producibility New program ramp New programs 19 elements Legacy programs 2011 2012 2013 2014 2015E 2016E 2017E 2018E Forward stocking Performance Gold / Performing Underperforming 70 50 45 40 35 30 25 20 15 10 5 0 60 50 40 30 20 10 0 2013 UTC │ 1Q14 2Q14 100% available to pull 2013 UTC AEROSPACE SYSTEMS 2014 │ 2015 PRATT & WHITNEY 96 │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS SIKORSKY AIRCRAFT CORPORATION John Henry Palumbo, Senior Vice President, Operations UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS PROPRIETARY LEGEND WARNING: THIS DOCUMENT, OR AN EMBODIMENT OF IT IN ANY MEDIA, DISCLOSES INFORMATION WHICH IS PROPRIETARY, IS THE PROPERTY OF SIKORSKY AIRCRAFT CORPORATION, IS AN UNPUBLISHED WORK PROTECTED UNDER APPLICABLE COPYRIGHT LAWS, AND IS DELIVERED ON THE EXPRESS CONDITION THAT IT IS NOT TO BE USED, DISCLOSED, OR REPRODUCED, IN WHOLE OR IN PART (INCLUDING REPRODUCTION AS A DERIVATIVE WORK), OR USED FOR MANUFACTURE FOR ANYONE OTHER THAN SIKORSKY AIRCRAFT CORPORATION WITHOUT ITS WRITTEN CONSENT, AND THAT NO RIGHT IS GRANTED TO DISCLOSE OR SO USE ANY INFORMATION CONTAINED THEREIN. ALL RIGHTS RESERVED. ANY ACT IN VIOLATION OF APPLICABLE LAW MAY RESULT IN CIVIL AND CRIMINAL PENALTIES. DISCLOSURE TO CITIZENS OR ENTITIES OF CUBA, IRAN, NORTH KOREA, SUDAN OR SYRIA IS PROHIBITED BY U.S. REGULATIONS UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS HIGHLIGHTS Four strategic wins Canadian contract amendment Program performance Operations execution UTC │ UTC AEROSPACE SYSTEMS JOINT MULTI-ROLE (JMR) │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS RECORD BACKLOG UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS U.S. DoD PROGRAMS OF RECORD UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS MAJOR PLATFORMS Military BLACK HAWK Commercial CH-53K S-76™ SEAHAWK® CH-148 S-92® S-70i™ Executive Transport UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS OPERATIONS HIGHLIGHTS + ~ – Productivity Supplier OTD Supplier quality 100% OTD S-92® Supplier Gold UH/HH-60M 08 09 10 11 12 13 14 15E MH-60S UTC │ UTC AEROSPACE SYSTEMS Gold Progressing MH-60R │ PRATT & WHITNEY │ SIKORSKY │ Performing Underperforming UTC BUILDING & INDUSTRIAL SYSTEMS QUALITY Significant Customer Escapes Supplier Notification of Potential Escapes (NOPEs) Category I & II Business Process Confirmed No Escape 2014 Cat II: Commercial 16 Military 5 48 27 2010 UTC │ 2011 2012 7 16 21 2013 2014 UTC AEROSPACE SYSTEMS 184 177 124 25 4 23 16 168 │ 37 2 15 Q1 2015 2010 PRATT & WHITNEY │ SIKORSKY 2011 │ 2012 2013 2014 Q1 2015 UTC BUILDING & INDUSTRIAL SYSTEMS DELIVERY All Suppliers Large Aircraft (MRP) UTC (Delivery to contract) 90 90 91 90 88 86 80 2010 2011 2012 2013 2014 Q1 2015 2010 │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY 88 2011 │ 98 99 93 100 2012 2013 2014 Q1 2015 UTC BUILDING & INDUSTRIAL SYSTEMS EXPECTATIONS Perfect Quality … always On-time delivery … every time Continuous cost improvement UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS PRATT & WHITNEY OPERATIONS Benoit Beaudoin Vice President P&WC Ops & NGPF Industrialization UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS PRATT & WHITNEY Ramping up to face the growth Commercial Engines Military Engines UTC │ UTC AEROSPACE SYSTEMS P&W Canada │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS CERTIFICATION PROGRAMS ON TRACK PurePower® Geared TurbofanTM engine 24K – 35K thrust Airbus A320neo PW1100G-JM 18K – 24K thrust 14K – 17K thrust Bombardier CSeries PW1500G Mitsubishi Regional Jet PW1200G Testing summary Over 31,000 Over 16,000 Certified Certified Irkut MC-21 PW1400G In development Embraer 190/195-E2 PW1900G Embraer 175-E2 PW1700G Total cycles UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ Total hours UTC BUILDING & INDUSTRIAL SYSTEMS CERTIFICATION PROGRAMS ON TRACK GTF engine – industry leading performance Fuel efficiency Emissions reduction Noise reduction 16%+ fuel reduction 50%+ emissions reduction 75%+ noise reduction Best in class, best value … by far UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS CERTIFICATION PROGRAMS ON TRACK Commercial outlook – growing base and backlog GTF engine orders1 Commercial LEB Installed base (# of engines) (# of engines, cumulative) GP7000 More than 6,300 engines2 V2500 GTF P&W legacy 1980 1990 1 Announced UTC │ 2000 2010 2020 and unannounced firm engine orders, including options UTC AEROSPACE SYSTEMS │ 2030 2 Data PRATT & WHITNEY 2008 2009 2010 2011 2012 2013 2014 through February 2015 │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS PREPARED FOR GTF ENTRY INTO SERVICE 2x supplier spend growth PW Engine Forecast (# of engines) Large Engine Business Forecast (# of engines) 7,000+ GTF F135 V2500 Legacy ~4,500 2012 UTC │ 2016E UTC AEROSPACE SYSTEMS 2015 2016 2017 2018 2019 2020 2020E │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS MEETING CUSTOMERS EXPECTATIONS A320neo ramp up is NOW! Annual Engine Deliveries PW1100G-JM 2014A UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ 2017E 2020E UTC BUILDING & INDUSTRIAL SYSTEMS MC&OMC&O Facilities Facilities MC&O Facilities P&W GLOBAL INVESTMENT Over $1B in new programs P&WCP&WC Facilities Facilities P&WC Facilities MC&O Facilities MC&O Facilities P&WC Facilities P&WC Facilities MC&O Facilities MC&O Facilities P&W manufacturing UTC / P&W joint ventures P&W partners MC&O Facilities UTC P&WC │ U T C A E R Facilities OSPACE SYSTEM S │ P&WC PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS MANUFACTURING TECHNOLOGY Innovation deployment Horizontal Assembly Line Semi-automated Assembly Intelligent Cells Advanced Coatings Material Logistics Big Data & Analytics UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS OUR CHALLENGES Underperforming & high risk suppliers Supplier Gold Performance High Risk Suppliers Over 30% Underperforming 63% 60% 156 F135 PW1100G-JM Underperforming & high activity Underperforming High industrialization activities TOTAL SUPPLIERS Production Readiness Supplier Risks UTC High Medium Low 26 96 57 │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ 34 75 47 156 UTC BUILDING & INDUSTRIAL SYSTEMS INDUSTRIALIZATION READINESS Supply-based focused activities Dedicated Skills Regional Offices Proven Tools Joint Deliverables Producibility PIPT–ICMT–Regional Offices 7 Global Hubs Quality (Pro cert, UPPAP) Capacity Ramp Readiness Delivery Cost 7-step Quality Plan 100+ Suppliers Events 460 Production readiness assessments 500 parts on “Boost” validation Senior Management Meetings UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS RISING UP TO THE CHALLENGE Be personally committed Demonstrate capability to meet the ramp Leverage technology to drive quality, cost & productivity One common objective, exceed customer expectations. UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS SUPPLY CHAIN PANEL DISCUSSION Interactive Q&A with audience and UTC business unit Vice Presidents of Operations and Supply Chain Paolo Dal Cin John Palumbo Benoit Beaudoin Rishi Grover Janet Duffey Sergio Loureiro UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS QUESTION? If you have a question, please submit it to: [email protected] UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS CLOSING COMMENTS Dave Hess, UTC Sr. Vice President, Aerospace Business Development UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS MARK YOUR 2016 CALENDARS… UTC │ 2016 UTC Supplier Forum 2016 UTC Operations United Way Golf Tournament May 11 May 12 UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS 2015 UTC Supplier Conference April 29, 2015 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ SIKORSKY │ UTC BUILDING & INDUSTRIAL SYSTEMS