Raytheon Technologies opened for business in mid-April just as the coronavirus pandemic accelerated and essentially shut down commercial aerospace, but the new company wants its workers in that market to simply move over to defense.
What is happening to commercial aerospace because of the coronavirus pandemic is certainly seismic for that market and there is very little any companies involved there can do about the larger factors there.
But the just-merged Raytheon Technologies has ongoing efforts underway to keep employees in its two aerospace businesses working even with the global freeze on air travel and slowdowns in production. During RTC’s first quarter earnings call Thursday, CEO Greg Hayes outlined how the company is “trying to keep as many jobs as we can.”
The bad news is that a hiring freeze and some furloughs are in place for the Collins Aerospace and Pratt & Whitney businesses that represent legacy United Technologies Corp. Raytheon combined five of its pre-merger segments into two for the merger that are now called Intelligence & Space, and Missiles & Defense.
“I expect that there will be further reductions as we sort through all of these volumes,” Hayes told analysts. “There’s a lot of pain to come yet, a lot of very tough decisions ahead of us in terms of production volumes.”
But Hayes also had some good news regarding employees who have seen their work on aerospace programs reduced or halted because of COVID-19.
“Legacy Raytheon businesses have 2,000 openings today, and we are actively working to try and take engineering and other talent we’ve got at the legacy (UTC) business and move those folks over to programs on the Raytheon side,” Hayes said.
“The key is we don’t want to cut the talent so deep that when the recovery happens, we don’t have the right people.”
While not as clearly stated as other points, that function of moving employees around helps explain the aerospace-and-defense giant’s belief as to why the merger that created it in April makes sense.
Based on 2019 pro forma revenue of $74 billion, RTC estimates 55 percent of that is in defense and government with 45 percent commercial. Fifty-two percent of sales is in the U.S. and the rest around the globe.
“As the world’s most advanced A&D systems provider, our portfolio is balanced and diversified against commercial aerospace and defense, as well as across geographies,” Hayes said. “This enables us to be resilient across business and economic cycles.”
Hayes pointed as evidence to the $51.3 billion backlog that Raytheon brought to the merger, which closed just as they and legacy United Technologies Corp. ended the first quarter. That backlog grew 25 percent from the prior year period, while Raytheon also booked $10.3 billion in awards for the quarter at roughly double the level from last year’s period. UTC’s defense backlog totaled $20 billion as of the first quarter’s end.
But the new Raytheon Technologies is just not ready to give a corporate-wide revenue or earnings forecast this year because of the commercial aerospace headwinds.
There is some visibility for the two Raytheon segments that are substantially all tied to U.S. and international governments. Chief Financial Officer Toby O’Brien said those two businesses should register revenue growth of 6-to-8 percent this year even when considering a $200 million impact from COVID-19.
The rest is in a wait-and-see mode.
“For now, there are clearly a number of moving pieces with more unknowns than knowns,” O’Brien said.
To support the COVID-19 response, RTC has donated 1.5 million units of personal protective equipment to health care workers and first responders, three-dimensionally printing 20,000 face shields per month and working with suppliers to source parts for producing ventilators.