Textron Buys Beechcraft in Industry Shakeup

Textron Buys Beechcraft in Industry Shakeup

Textron Inc., maker of Cessna airplanes and Bell helicopters, is buying Beechcraft Corp. in a deal that may signal the start of more consolidation within the U.S. defense industry.

Providence, R.I.-based Textron, whose business segments include Cessna and Bell Helicopter, which helps make the military’s V-22 Osprey tilt-rotor aircraft, announced the $1.4 billion acquisition last week. The Wichita, Kan.-based Beechcraft, owned by Beech Holdings LLC, manufactures Hawker business jets, King Air turboprops and the military’s T-6 trainer, among other aircraft.

“The acquisition of Beechcraft is a tremendous opportunity to extend our general aviation business,” Textron Chief Executive Officer Scott Donnelly said in a statement. “The iconic King Air product line perfectly complements our Caravan and Citation jet line-up and our combined global service network will deliver the superior level of services expected by our Cessna, Beechcraft and Hawker customers.”

The deal may be the first in a series of such transactions within the U.S. aerospace and defense industry after a federal budget deal that lessens — but doesn’t eliminate — automatic spending cuts. As budgets decline, contractors may increasingly seek mergers and acquisitions to maintain profit margins.

The Defense Department faced about $1 trillion in spending cuts over the next decade as part of 2011 deficit-reduction legislation known as the Budget Control Act. That included almost $500 billion in reductions already planned and another $500 billion in automatic cuts.

The recent budget compromise will undo some of those reductions. Specifically, the Bipartisan Budget Act crafted by Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, and Sen. Patty Murray, D-Wash., his counterpart in the Senate, will restore about $31.5 billion in defense spending over the next two years, including $22.5 billion in 2014 and $9 billion in 2015.

Beechcraft earlier this year lost a bid for an Air Force contract to supply the Afghan military with light-attack aircraft. The company’s newly designed AT-6 aircraft was deemed higher risk than the A-29 Super Tucano, made by Sierra Nevada Corp.‘s Brazilian subcontractor Embraer SA.

Beechcraft, then known as Hawker Beechcraft, filed for bankruptcy last year amid falling demand for private jets. The company tried to sell all of its units except defense to a Chinese company, Superior Aviation Beijing, but the deal fell through. It received interest from at least three other firms, including Textron, Embraer and the Indian car-maker Mahindra & Mahindra Ltd.

“The team at Beechcraft has worked tirelessly to strengthen our core business and to maintain our position as a leader in a highly competitive environment,” Chief Executive Officer Bill Boisture, said of the deal. “Textron’s experience in the industry and its willingness to invest in and maintain the iconic Beechcraft brand make it an ideal parent company.”

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Won’t be long before Umbrella Corporation provides /everything/ to the military.

These mergers aren’t about a decrease in military spending. Hell, if that was true, why did so many mergers happen when the defense budget was skyrocketing? Mergers are about big companies that have already been stripped of engineering talent and manufacturing capability buying companies that still have some vestiges of talent and capabilities so they can strip those companies of their resources and continue to make money as slow motion corporate raiders. It’s funny, the DoD didn’t want T. Boone Pickens to raid Boeing all those years ago, but if Frank Shrontz and his successors do the same thing but slower, then its ok.

The armed forces need to stand up their own design houses now. The suck ass defense contractors are nothing but empty shells now. Every year that goes by makes up more vulnerable and causes one more year of brain drain that we already cannot afford. If we ever needed some patriots to step up for the good of the nation it is now.

Its called the Sherman anti trust act. It needs to be used and break up these mega corporations. Productivity will increase in the USA business sector once again, just as it did over 100 years ago.

“The armed forces need to stand up their own design houses now.”

Can’t happen. Of the Congressmen who claim to care about defense, most only care about defense jobs in their districts. Of the rest, most campaign on a “government can’t do anything right” platform. That doesn’t leave much room for replacing beltway bandits with feds, even if it were possible.

…which it isn’t. It’s easy to fire people and outsource; it’s almost impossible to bring those jobs back in-house once they (and the infrastructure that supported them) are gone.

It was easy enough to do when it was the defense contractors hiring all of the good people away from the government to justify the outsourcing of R&D. There is no reason that door can’t swing both ways. Basically once the government stops outsourcing R&D, the people who were working on contracted R&D projects for the defense contractors are out of jobs anyway. They’ll be just as happy (probably happier) to follow their jobs back to the government as they were to follow them to defense contractors. Just because defense contractors say something is impossible, doesn’t actually make it impossible. They have been known to lie. I know that will shock some of you.

“But things were good under the robber barons! People didn’t riot as much, therefore they were happy under the guard of the Pinkertons”

Omni Consumer Products (OCP) from Robocop was what I first thought of.


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