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Thursday, June 1, 2006

Planting the Flag

James T. McKenna

Turbomeca aims to boost its standing in North American markets by expanding Turbomeca USA's manufacturing and overhaul capabilities, improving customer service and increasing the U.S. content of engines assembled here.

Turbomeca is staking claim to a bit more of Texas in hopes of grabbing a bigger slice of the U.S. market for helicopter engines.

The French engine maker's American unit, Turbomeca USA, is more than doubling its 45,000-sq.-ft. assembly and overhaul facility here as part of a continued ramp-up in production of Arriel and Arrius engines. Plans call for it to open a 67,000-sq.-ft. expansion of its plant this month (see photo above).

Turbomeca USA also is building a base of qualified suppliers in North America to supplement--and eventually replace--the parts coming through Turbomeca from France.

The moves are aimed at overcoming two key challenges facing Turbomeca USA. One is a shortage of parts that frustrates existing customers and prolongs delivery times for new engines (which are running at 18-24 months, but ideally should be 9-12). The other is criticism of it as a French firm leveled, sometimes (company executives say) to an uncomfortable degree, by competitors for government orders in the United States.

The moves are part of a worldwide effort by Turbomeca to boost its engine production capacity to satisfy growing demand and to improve customer service. The company has been struggling with the latter for several years; leaders at Turbomeca USA believe they may have identified a model for helping the global company conquer that problem.

Turbomeca is part of France's SAFRAN Group, the aerospace, defense and communications firm formed in 2005 by the merger of the aerospace and defense conglomerates Snecma (which owned Turbomeca) and Sagem. Headquartered in Bordes, France, Turbomeca has 14 production and support facilities, three subsidiaries and 25 TurboSupport Center maintenance shops around the world.

Turbomeca claims 48 percent of total worldwide turbine helicopter engine sales, with a 56-percent share of worldwide civil and para-public helicopter engine sales and 30 percent of military sales.

According to Turbomeca, its market shares include 51.3 percent of turbine helicopter engine sales in Europe, 18.7 percent in the United States, 15 percent in Asia, 12.1 percent in Africa and 2.8 percent in Australia.

Because of the vagaries of U.S. law, Turbomeca USA is set up as an independent U.S. corporation that is part of Chicago-based Safran USA. It is not technically a subsidiary of Turbomeca. It is linked to it through a support agreement.

"But our major customer is Turbomeca," said Turbomeca USA CEO Russ Spray. "We never forget that."

Headquartered here, Turbomeca USA has more than 270 employees supporting about 1,350 engines in service with 500 customers in the United States, Mexico and Central America. It assembles and tests most Turbomeca engines destined for the North American market--all Arriel engines for new-production Sikorsky S-76A++, C+ and C++ aircraft and most Arriels and Arrius engines for the pertinent Eurocopter and AgustaWestland models.

On occasion, Turbomeca has tapped it to produce engines for sale elsewhere in the world.

Turbomeca USA also provides maintenance, overhaul, and repair services for the Arriel and Arrius family of engines, modules, and accessories. It is among the worldwide network of TurboSupport Centers.

Turbomeca USA's business is growing. When Spray joined it in 2003, the company was producing 80 Arriels a year. Last year, 234 engines went out its doors. This year, it expects to produce more than 420, with plans for 550 in 2007.

Turbomeca's total worldwide production also is running at record levels, with 864 engines fielded last year, a roughly 10-percent increase over 2004, and orders for 1,200 more booked. It expects to deliver 1,000 powerplants this year.

"It's an important growth situation we face," said Turbomeca CEO Emeric d'Arcimoles. "Global growth is affecting all aspects. There is strong demand from the United States, China and India. We have made a 70-percent increase in industrial investment over the past two years, and we are continuing to expand production capacity for engines and spares worldwide."

In a sense, Turbomeca is playing catch-up. D'Arcimoles has said the company was surprised by the economic and industry upturn after 2001.

"The economic outlook seemed bleak following the 9/11 attacks in 2001," he said. "We had asked our suppliers to trim down as we expected the market to shrink, and yet precisely the opposite occurred."

Like most aerospace companies, Turbomeca also has been strained by the shortage of critical materials--in its case, steel and titanium.

Those factors, combined with growing pains with the new-model Arriel 2 and Arrius and its own customer-service missteps, left Turbomeca with a less-than-happy customer base.

"If you talk to customers, the first thing they'll say is,'Parts,'" Spray said. "The second item will probably be communication. Communication is, 'When do I get my parts? When do I get my engine?'"

Turbomeca experienced some hitches as it ramped up production and weak links in its supply chain failed, said Spray, who before joining Turbomeca USA was one of the engine maker's biggest customers as CEO of Rocky Mountain Helicopter.

The technical issues with the Arriel 2 and the Arrius added to the problems. For instance, the Arriel 2 had torque metering problems, which Spray said accounted for 40 percent of removals. It also suffered oil leaks and an unsatisfactory level of chip contamination as a result of component flaws.

Today, the torque-metering problem has been addressed and "now we don't see them being removed," Spray said. "We've gone through a whole recovery program on chips. On the new product coming out of assembly, they've reduced about 60 percent of the chip events. So that engine has become exceedingly reliable. In fact, its time between overhauls has been extended now from 3,000 to 3,500 hr. for most variants."

At Heli-Expo this year, Turbomeca announced that the Arrius had surpassed 2 million flight hours. That engine "is now averaging a mean time between unscheduled removal of 8,400 hr., which is almost unheard of in engines," Spray said. "That means the engine is only coming off for overhaul."

The engine problems, parts shortages that led to long delivery lead times and the industry's high level of activity have combined to create a situation in which competitors are coming after parts of Turbomeca's market. Honeywell, for instance, has teamed with Soloy on a supplemental type certificate to replace the Arriel on Eurocopter AStars with the LTS101. That is one more reason for Turbomeca USA to speed its production and bolster customer support.

In addition to expanding its Grand Prairie plant (and Turbomeca putting a third shift on its French production lines), the company is qualifying U.S. suppliers to provide parts for engines sold in North America. D'Arcimoles goal is for Turbomeca USA to produce engines made entirely with U.S.-supplied components.

The company has a three-year plan to increase the U.S. content of its engines. It is driven in part by its commitment to the U.S. Army to produce engines that are 70-percent U.S. made (by value) in three years should its EADS North America-led team's EC145-based bid win the Light Utility Helicopter contract. It is also driven by common sense.

"We need to double-source," Spray said. The first parts from new U.S. suppliers arrived in February.

In addition to the U.S. efforts, Turbomeca in France is focusing executive attention on parts supply. It has created a Supply Chain Div. charged with primary responsibility for managing the flow of parts into it and out to various engine assembly and maintenance support sites.

Turbomeca USA also has overhauled its customer-service operation. "We didn't have as strong a management and technical backbone in our support group as we wanted," Spray said. He tapped a field representative, Leo Morrissette, to run support operations. He has pursued development of an integrated support team.

"Turbomeca has had great pockets of support, in field reps, in service engineering, but nobody really putting it together for the customer," he said. Customers essentially had to figure out who in the company could get their problems addressed.

"Now we've taken all that work for the customer and brought it back into our house, to figure out how to support the customer best instead of them having to figure out how to do it themselves."

Turbomeca USA also separated regular customer support from AOG support.

"It used to be the same group of people that supported the day-to-day and the emergency needs of the customer," Morrissette said.

"There was distraction there for that day-to-day support when an AOG came up." There is now a team whose main focus is AOGs "so that the follow-up with that emergency for that customer doesn't detract from the day-to-day for the other customers."

Spray and Morrissette said the advances in customer support in Grand Prairie have gotten the attention of executives in France.

"Turbomeca USA is becoming a benchmark in our company for customer support," Morrissette said. "Now we're talking about expanding that out to all the different sites" of Turbomeca worldwide.

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