Author Topic: Reuters: UTX exploring sale of Rocketdyne (Read 70928 times)

geoallegrezza · « **on:** 09/07/2011 05:37 pm »

http://www.reuters.com/article/2011/09/06/us-aero-arms-summit-rocketdyne-idUSTRE7856Z820110906

Lars_J · « **Reply #1 on:** 09/07/2011 07:11 pm »

Quote from: edkyle99 on 09/07/2011 07:04 pm

From the article, the statement "Rocketdyne -- the world's largest manufacturer of liquid-fueled rocket propulsion systems." has to be wrong!

I'm sure the metric here has to be the $ income - not the # of engines produced.

But that does beg the question - how many rocket engines *does* Rocketdyne build per year? Do they have any other active product lines other than the RS-68 and RL-10?

jimgagnon · « **Reply #2 on:** 09/07/2011 07:20 pm »

Generally in an acquisition the part of a company that suitors find most attractive is its cash flow and customer list. However, an acquisition of Rocketdyne would give a NuSpace company instant credibility and a ton of legacy technology in addition to their current line of products. You can name a number of companies that such a marriage would be a good fit.

simonbp · « **Reply #3 on:** 09/07/2011 07:53 pm »

If Gencorp were to buy it, then all three of the original 50s-era liquid rocket makers (Aerojet, NAA-Rocketdyne, and Pratt & Whitney Rockets) would under one corporate roof...

Lurker Steve · « **Reply #4 on:** 09/07/2011 07:56 pm »

Quote from: jimgagnon on 09/07/2011 07:20 pm

Generally in an acquisition the part of a company that suitors find most attractive is its cash flow and customer list. However, an acquisition of Rocketdyne would give a NuSpace company instant credibility and a ton of legacy technology in addition to their current line of products. You can name a number of companies that such a marriage would be a good fit.

I wonder if Rocketdyne could survive as a stand-alone entity. They have been passed from one large defense contractor to another. There is a certain amount of overhead / profit expectations that come from being associated with the likes of Boeing / United Technologies / etc. Do they need support from a larger parent to cover the peaks and valleys of their revenue stream that are related to the life cycle of various engine designs ? Are they getting any synergies with the jet-engine folks @ P&W at all ?

Antares · « **Reply #5 on:** 09/07/2011 10:44 pm »

Yawn. Did anyone not see this coming?

This is more like Boeing -> ULA where the parent company sees big margins in its other lines of business and then sees junk margins / revenues in Rocketdyne.

I think it would be hard for them to exist alone because they have a lot of real property in CA and FL to pay for. They'd have to sell a good chunk of it and have a set of officers that can manage commercially, not that the current ones can't.

PWR would never survive a NuSpace merger. The cultures and infrastructure are too different.

rsnellenberger · « **Reply #6 on:** 09/07/2011 11:19 pm »

Quote from: edkyle99 on 09/07/2011 07:04 pm

Will people still hate ATK if it makes RL10 engines?

- Ed Kyle

Absolutely, once they convert it to solid fuel...

Lars_J · « **Reply #7 on:** 09/07/2011 11:23 pm »

What is the problem with many aerospace corporations (or subsidiaries) where they refuse to shrink to stay profitable?

Call it the "ATK disease", or whatever. If demand shrinks, they should shrink as well. I realize that the lack of real competition has let them get to this point. They are sitting on good contracts, where they can just increase unit costs to match their expenses. But it is so frustrating to see.

Robotbeat · « **Reply #8 on:** 09/07/2011 11:58 pm »

Quote from: Lars_J on 09/07/2011 11:23 pm

What is the problem with many aerospace corporations (or subsidiaries) where they refuse to shrink to stay profitable?

Call it the "ATK disease", or whatever. If demand shrinks, they should shrink as well. I realize that the lack of real competition has let them get to this point. They are sitting on good contracts, where they can just increase unit costs to match their expenses. But it is so frustrating to see.

And if everyone shrinks, everyone's out of a job.

Yes, it totally makes sense (from the individual or company's perspective) for individuals or companies to decrease their spending in order to increase profitability. When the whole country does it, demand plummets and you get a depression.

Lars_J · « **Reply #9 on:** 09/08/2011 12:21 am »

Of course. This is not a communist planned economy. What's your point? That it is ATK or RocketDyne's responsibility to society to never lay off or shrink? You have to take the good with the bad.

The "merge yourself to profitability" disease of domestic aerospace needs to end, or we'll have only one aerospace corporation left in a really bad shape.

Antares · « **Reply #10 on:** 09/08/2011 03:58 am »

Because of all the FAR 15 requirements on both contractors, there is a lot more fixed overhead than in a non-government-dominated industry/market. The ability to shrink, while possible, does not follow the same rules or proportions.

As long as there is only one customer, it's going to be bad. I'm a conservative, but when the government is the only customer they may as well all be civil servants (minus the OPM protections anyway).

Patchouli · « **Reply #11 on:** 09/08/2011 06:53 am »

Quote from: Lars_J on 09/08/2011 12:21 am

Of course. This is not a communist planned economy. What's your point? That it is ATK or RocketDyne's responsibility to society to never lay off or shrink? You have to take the good with the bad.

The "merge yourself to profitability" disease of domestic aerospace needs to end, or we'll have only one aerospace corporation left in a really bad shape.

I agree it is bad for the industry.

There are some good potential markets for RocketDyne esp with the EELVs finding use in commercial crew and private space flight.

Though if anyone was to buy RocketDyne it would be ULA as they'd get engine design in house then.
I think the RS-84 would be something they'd want.
http://www.astronautix.com/engines/rs84.htm

DARPA-86 · « **Reply #12 on:** 09/08/2011 12:26 pm »

Quote from: jimgagnon on 09/07/2011 07:20 pm

Generally in an acquisition the part of a company that suitors find most attractive is its cash flow and customer list. However, an acquisition of Rocketdyne would give a NuSpace company instant credibility and a ton of legacy technology in addition to their current line of products. You can name a number of companies that such a marriage would be a good fit.

Two thoughts come to mind - first is the depreciation schedules - since United Technologies acquired this division in 2005 a fair amount of their assets would be subject to the 7 year scheudules, or even the 5 year, and possibly some 3 year. As the sun is starting to set on those so goes the tax advantages with it. I know of one set of capital equipment that is on it's fourth deprecation table without any significant investment - the various entities keep trading them among themselves or creating new ventures that hold the service contracts and sell the inputs.

Second is the issue of repatriated capital - which seems to have gained some traction in the past few weeks. CEO's and CFO's pay a lot of money to advisors to learn about things like this days, or even weeks in advance of everybody else reading about it on the front page of the WSJ or watching a segment on Kudlow. If you are going to have jobs that is going to require an investment risk upon the part of the would be employer -tax advantages can and do help to mitigate that risk.

One billion to One billion and a half for a sale price would be a good return for a company acquired in 2005 for $ 700 million, that would give United Technologies further cash on the balance sheet and a boost (apparently already on just the news) to their share price. And a billion dollars is a drop in the bucket compared to the money that is currently sitting on the sidelines, both domestically and offshore.

NuSpace, Old Space, or even outside of traditional space players could be suitors if a) the business case is solid enough from a big picture view and b) the window of opportunity for financing stays open long enough before it's slammed shut.

Jim · « **Reply #13 on:** 09/08/2011 12:35 pm »

Quote from: Patchouli on 09/08/2011 06:53 am

Though if anyone was to buy RocketDyne it would be ULA as they'd get engine design in house then.
I think the RS-84 would be something they'd want.
http://www.astronautix.com/engines/rs84.htm

They don't have the money and it goes against their purpose.

mmeijeri · « **Reply #14 on:** 09/08/2011 12:48 pm »

Quote from: Antares on 09/08/2011 03:58 am

As long as there is only one customer, it's going to be bad. I'm a conservative, but when the government is the only customer they may as well all be civil servants (minus the OPM protections anyway).

Well, technically the US government isn't the only customer, ULA, USA and NASA are. They must have commercial clients for thrusters too. And ULA does have some commercial clients of its own. And even the USG is more than one client. But as you say as long as most of the money ultimately keeps coming from the USG it's going to be bad. However, if commercial crew isn't cancelled and Atlas starts getting a lot more government business, then it might become more competitive and take away some business from its competitors.

But would ULA be interested in buying Rocketdyne? They certainly have sent some signals they don't want to be dependent on RL-10, but maybe if they can restructure Rocketdyne that might change things.

Aerojet and ATK were mentioned in the article and that seems logical enough. I wonder if Northrop Grumman could be interested too. Their website indicates they are still in the rocket engine business, but it looks as if it hasn't been updated since the days of SLI.

mmeijeri · « **Reply #15 on:** 09/08/2011 12:49 pm »

Quote from: Jim on 09/08/2011 12:35 pm

They don't have the money and it goes against their purpose.

RS-84 or an acquisition of Rocketdyne?

Jim · « **Reply #16 on:** 09/08/2011 12:50 pm »

Quote from: mmeijeri on 09/08/2011 12:49 pm

Quote from: Jim on 09/08/2011 12:35 pm
They don't have the money and it goes against their purpose.

RS-84 or an acquisition of Rocketdyne?

both

mmeijeri · « **Reply #17 on:** 09/08/2011 12:59 pm »

Can you explain? Because it looks as if soon they are going to be the sole customer of Rocketdyne's first and second stage engines, while conversely Rocketdyne will be their only supplier of engines. Isn't that a very unhealthy situation for two companies to be in?

kevin-rf · « **Reply #18 on:** 09/08/2011 01:40 pm »

Quote from: mmeijeri on 09/08/2011 12:59 pm

Can you explain? Because it looks as if soon they are going to be the sole customer of Rocketdyne's first and second stage engines, while conversely Rocketdyne will be their only supplier of engines. Isn't that a very unhealthy situation for two companies to be in?

Depends on which business fad you follow these days

It has positives and negatives...

Positives:
The two work very closely together to optimize the product, reduce waste, innovate, and have a mutual interest in a successful product. (Oh, and everyone gets a pony)

Negatives:
The customer is at the mercy of the supplier

btw. This is one of the things they constantly push in Toyota...

yg1968 · « **Reply #19 on:** 09/09/2011 07:07 pm »

Another article:
http://www.ctpost.com/news/article/Pratt-might-jettison-Rocketdyne-2159907.php