Rockwell Collins and Europe: Positioning Rockwell Collins for the New World Order

Transcription

1 Remarks at the opening of Rockwell Collins European Headquarters February 8, 2011 MARRIOTT HOTEL CHAMPS ELYSEES PARIS, FRANCE Clay Jones Chairman, President & CEO, Rockwell Collins Rockwell Collins and Europe: Positioning Rockwell Collins for the New World Order Introduction We re here today to talk about a major step forward in the future of Rockwell Collins. More than a year ago, we announced a significant organizational change to help position our company to take advantage of emerging global opportunities. Like most companies, we were adapting to macroeconomic shifts taking place across the globe, and our place in a new world order as emerging countries and their economic growth influenced the playing field. As part of all these changes, we recognize Europe s essential and important ongoing role in aerospace and defense. In fact, a look at our financial statements tells us that Europe, already nearly a quarter of our revenues, is a smart investment for today and will continue to be in the future. And so, I d like to describe for you the future of Rockwell Collins both in Europe and beyond in that new world order. Rockwell Collins overview For those of you who may not be familiar with our company, let me start with a brief overview. Rockwell Collins is a $4.7 billion global company with approximately 20,000 people worldwide. For more than 75 years, our customers have depended on us to provide innovative communication and aviation electronic solutions to solve their toughest challenges. A look at our financial statements tells us that Europe, already nearly a quarter of our revenues, is a smart investment for today and will continue to be in the future.

2 Today, our aviation electronics systems and products are installed in the flight decks of nearly every air transport aircraft in the world, and our airborne and ground-based communication systems transmit nearly 70 percent of all U.S. and coalition military communication. Growing in a new world Today, we generate about one-third of our revenues outside the United States, where we are headquartered. But we re not satisfied with our positions internationally. In our Government Systems business, we provide airborne and surface solutions to the U.S. Department of Defense, global Ministries of Defense and manufacturers of military platforms. Our communication, navigation and display solutions as well as integrated solutions and services enable battle space superiority and enhanced situational awareness for airborne, ground and shipboard applications. In our Commercial Systems business, we supply avionics and cabin electronics to business aviation and commercial air transport operations worldwide. Supporting new and retrofit applications, our capabilities include next-generation information and flight display systems that enhance flight crew performance and reduce workload, cabin information systems and in-flight entertainment systems. While we operate around the world, we have a particularly strong heritage in Europe, and significant operations in France, Germany, the U.K. and Sweden. We want to play a larger role in the Middle East, Africa and Asia. And we want to play a bigger role in Europe as well. We intend to continue growing by doing what we do best: bringing innovative solutions to our customers. We also believe that the new world order brings great opportunities to realize this growth. Because amid this sea of extraordinary and accelerating change, we see several global trends in which technology and customer needs will require a transformation of our industry. We believe Rockwell Collins is uniquely positioned to play a leadership role in that transformation. Let me summarize three of these trends that I believe will shape the future of our industry and our company. Mobile connectivity The first global trend is mobile connectivity. We strive to maintain a balance of commercial and government customers that helps us leverage developments across both markets and enables our company to reduce costs, extend product viability and enhance the capabilities of our systems. We have an international customer service network that ensures Rockwell Collins resources are never far away, and our advanced simulation systems offer training and operations support. While we operate around the world, we have a particularly strong heritage in Europe, and significant operations in France, Germany, the U.K. and Sweden. One of the great technology advances over the past decade has been the proliferation of mobile connectivity that has changed the way we live and work. In the consumer market, we ve seen the blistering growth of smartphones, laptop and tablet computers, and other mobile devices. We ve also seen connectivity act as an agent of change across the world. Most recently we saw it in Egypt, as disparate groups and individuals used the Internet, Facebook, Twitter and text messages to organize and push change at a pace that no one expected or was prepared for. 2

3 These levels of mobile connectivity are also transforming the aerospace and defense industry, from a world filled with communication devices that don t share information well, to a world driven by users with a thirst for immediate information. In the commercial airspace, we will soon be able to bring aircraft closer together safely by treating all aircraft like nodes on a network, allowing us to more efficiently use our airspace. In the commercial airspace, we will soon be able to bring aircraft closer together safely by treating all aircraft like nodes on a network, where we can precisely track location and trajectory without radar, allowing us to more efficiently use our airspace. Another transformation is conquering what has become one of the last frontiers of connectivity: the cabin of an airplane. My guess is that each of you has a web-enabled device with you right now that has voice, data, streaming video, internet access and GPS navigation. Unfortunately, that same capability is being used by our enemies, who are already using simple connectivity to communicate and transfer knowledge with alarming rates of success. This highlights the fact that our adversaries now understand that access to information is critical. And so, our challenge in the battle space of tomorrow is to enable our future war fighters to see through a new fog of war that I believe will be more pervasive, more persistent, and more global than anything we ve experienced before. This universal need, for connectivity and information in aerospace and defense markets, becomes a world of opportunity for Rockwell Collins. Our heritage capabilities in voice and data communications, combined with recent investments in computation, networking and integration expertise, puts our company at the core of this rapidly developing market area. This example is perhaps more germane to you and me as business professionals because it involves the ability to have uninterrupted connectivity in the air, to check your , file your stories, stay on top of the latest news, or watch a football game, all live. Another extraordinary transformation will be on the battlefield. The rapid growth of smartphones that I talked about earlier has led to an interesting dilemma: the fact that all of you in this room have more mobile connectivity than any of our coalition soldiers operating around the world. All of you in this room have more mobile connectivity than any of our coalition soldiers operating around the world. Unfortunately, that same capability is being used by our enemies, who are already using simple connectivity to communicate and transfer knowledge with alarming rates of success. In defense markets, connectivity and situational awareness means securely and reliably ensuring the interoperability of all the elements of the operation. Those elements range from high altitude aircraft to unmanned vehicles to satellite surveillance in ad hoc networks, giving leadership and coalition troops unprecedented intelligence information to complete their missions effectively. These networks need to be seamless and invisible to the war fighter as information and sensor data is transmitted across varying domains to the fighting asset as needed, with the goal of getting the right information to the right person at the right time. 3

4 Rockwell Collins is developing and delivering networking solutions today that will deliver this level of communication. And we are forming partnerships to ensure our solutions meet the needs of customers around the world. For example, we re working with Thales to develop the international software-defined radio, and our joint venture with BAE Systems, Datalink Solutions, is producing the next generation of battle space connectivity, called MIDS-J. In commercial markets, our avionics and communications systems engineers are developing the technologies to provide near-real-time information on the location of aircraft to flight controllers and other pilots. Our advanced flight decks will provide pilots with a high-resolution graphic representation of the world ahead of them for safer navigation and landing even in challenging conditions. Our cabin management systems will bring the connected lifestyle we experience everywhere else into our flight time. We re connecting passengers with the Internet, as well as customized news, sports, and entertainment options through systems easily manageable through your smartphone or laptop. Mobile connectivity also reaches beyond the boundaries of a given set of hardware. Last fall we introduced Ascend Flight Information Solutions to enable business aircraft owners and operators to instantly access the intelligence they need through a menu of applications that help them wirelessly manage flight operations, maintenance and passenger services. In the aggregate, while all these advancements in mobile connectivity have been remarkable, I believe the pace of change that we ve seen over the past decade will be nothing more than a slow, methodical warm-up for the new world we re about to enter. And Rockwell Collins is well positioned to provide that connectivity for the aerospace and defense industry of the future. Revolution in the global airspace The second global trend we see that will contribute to our future growth is the coming revolution in global airspace management. From the dawn of aviation and throughout the first century of flight, rapid advancements in technology addressed the aerospace industry s most challenging problems. These technologies enabled aviation to grow into an economic powerhouse and a vital element of the global transportation infrastructure. But despite the drumbeat of new technologies during the first century of flight and the extraordinary contributions of aviation across the globe, our industry faces a significant challenge. Demand for world air travel has increased an average of five percent annually over the past 30 years. We expect that trend to continue, which means in 10 to 15 years global air travel will double. Demand for world air travel has increased an average of five percent annually over the past 30 years, which means in 10 to 15 years global air travel will double. In the United States, despite a slight reprieve as a result of the recent recession, crowded skies and airports have the potential to hamstring everything from personal travel to commerce with recurrent delays. Here in Europe, it s also a major issue, with 33,000 flights daily and growing in a much smaller geographic area. And if you look at global projections for population growth, Asian countries will soon be sharing the pain. If we do not act quickly, the inconvenience all of us will experience from airport delays will be the least of our problems. 4

5 There will be economic impacts projected at up to $40 billion annually in the U.S. by 2033 as well as significant safety concerns and the potential for unnecessary environmental impacts. Second, we re developing the avionics equipment that transmits an aircraft s four-dimensional position to the air traffic control system, called Automatic Dependent Surveillance-Broadcast or ADS-B. In the United States, the FAA is leading the charge for NextGen, which promises to fundamentally change the way air traffic control is handled throughout U.S. airspace. The optimists point to 2025 for the NextGen system to be fully online, but rising deficits, legislative bickering and the nagging issue of who pays for the equipage have slowed the project, which is expected to cost at least $40 billion and probably much more. Here in Europe, the Single European Sky commission identified the problem early in the last decade and turned the details of the program over to the SESAR Joint Undertaking, a partnership between private and public entities. given progress so far, I believe Europe is leading the United States in the efforts to move forward [in airspace modernization]. Once fully implemented, air traffic controllers and eventually, pilots will be able to see every aircraft s location in near-real-time, giving an exponentially more accurate and reliable picture of the airspace at any given moment. Ultimately, the system-wide results of modernization will be remarkable. Tighter spacing will allow more aircraft to operate safely in the same airspace. Continuous descent patterns and direct routing will save fuel costs and reduce emissions. And fewer delays will make everyone more efficient and happier. This partnership has allowed Europe to avoid some of the problems we ve experienced in the United States, and you are better for it. In fact, given progress so far, I believe Europe is leading the United States in the efforts to move forward. But ultimately it s not about winning a race. It s about creating a seamlessly interoperable global air traffic management system so people and goods can move across the globe as efficiently as possible. At Rockwell Collins, we re highly invested in the effort, particularly in two areas. First, we leveraged that connectivity and information technology I discussed earlier to develop the datalink communications between air traffic controllers and pilots. Essentially, controllers can text instructions instead of speaking them for more efficiency and clarity. While that ability has yet to reach the United States, Rockwell Collins helped develop the technology for Europe last decade, and it s being adopted across the airspace today. Rockwell Collins engineers are exploring future technologies that can take advantage of the foundation of airspace modernization. The technologies available today are simply building blocks for future innovations: secure, efficient information pipelines that connect airplanes to ground crews to back offices in a worldwide network. As we realize the potential of this network to deliver information in virtually real time, the possibilities become endless. Enhanced sensing, visualization, and control technologies will enable nearly flawless on-time performance in all weather conditions, while passengers in the cabin receive their pre-programmed drink orders and enjoy customized entertainment systems. Additionally there must be a role in the airspace of the future for unmanned aircraft to safely perform their missions in a shared airspace. 5

6 I believe the avionics and systems Rockwell Collins has developed that play a role today in controlling unmanned aircraft in Afghanistan and Iraq will help those aircraft become a fundamental part of our civilian airspace in the next years. The avionics and systems Rockwell Collins has developed will help [unmanned] aircraft become a fundamental part of our civilian airspace in the next years. Commercial and military integration The third element that will enable Rockwell Collins to grow on the world stage is our leadership in commercial and military integration. Since we pioneered the use of open systems in our commercial avionics systems, we have now transferred that architecture across all of our markets. Our initial effort and still our greatest success has been using this approach in the business and regional jet market. The most recent example, Pro Line Fusion, has been extremely well-received by customers throughout the world. Our Pro Line Fusion integrated avionics system will launch this year on a Bombardier platform and will be the first of ten global programs in development that will deliver over the next five years. Elements of our open systems architecture are being used in new aircraft currently being developed around the world, including the Russian MC-21, China s COMAC ARJ 21 and C-919, Embraer s Legacy 450 and 500, Mitsubishi s MRJ and Bombardier s C series. What the computer industry brought to the world three decades ago, we ve brought to the integration of commercial and military technologies in the aerospace and defense industry. Our approach began in 1997 with the development of an avionics system based on an open systems architecture an idea without precedent at that time. It was designed with widely accepted specifications, allowing hardware and software components to be easily replaced or upgraded without requiring changes to any other component within the system. The benefits from this design include lower development costs, faster time to market, easy technology insertion for functionality upgrades, connectivity between current and future systems and lower life-cycle costs. In the air transport market, many of the components for the Airbus A350, the Boeing 787 Dreamliner and all of which will have significantly more Rockwell Collins content than we ve ever had on an air transport aircraft came from this common architecture. Military Integration The benefits from [an open architecture] design include lower development costs, faster time to market, easy technology insertion for functionality upgrades, connectivity between current and future systems and lower life-cycle costs. We ve also worked hard to combine our best practices developed and tested on the commercial side of our business to support the growing need for information superiority for coalition military forces. And again, we ve been enormously successful at winning programs in the military market with our open systems architecture-based avionics. An early example was Rockwell Collins KC-135 Tanker Global Air Traffic Management award. This program took advantage of technology first developed for commercial markets, tailored only as necessary to meet specific military needs. 6

7 This use of existing technology allowed the U.S. Air Force to leverage hundreds of millions of dollars already invested in developing these products for the commercial market. The KC-135 program was touted by the U.S. Air Force as a model program for meeting or exceeding delivery and cost requirements, leading to additional upgrades for U.S. Air Force and international C-130 transports. This strategy has allowed us to move beyond fixed-wing aircraft and into the helicopter or rotary wing market, despite the fact that just a decade ago we had virtually no positions in that market. [Rockwell Collins open architecture strategy] has allowed us to move beyond fixed-wing aircraft and into the helicopter or rotary wing market, despite the fact that just a decade ago we had virtually no positions in that market. The role of Paris The three trends I ve outlined mobile connectivity, the revolution in airspace modernization, and commercial and military integration are important elements of our future global growth. But we also understand that taking our capabilities to diverse customers around the world requires a level of requirements knowledge in each country or region to enable us to provide value-added solutions that fit a variety of customer needs. To best align our business to serve those customers, we have organized into three global regions: the Americas, Asia Pacific, and Europe, Middle East and Africa. As part of that new organization, we opened an office last month in Shanghai. This month we will open one in New Delhi, and there are more to come. Today, we re providing avionics for both new and retrofit helicopter applications, using our Common Avionics Architecture System or CAAS cockpit. And today I m pleased to announce that Paris will become the central hub for our operations in Europe, the Middle East and Africa. In Europe, we were selected by AgustaWestland for their AW149 helicopter and we are working with Eurocopter on their program to upgrade the German CH-53. We ve taken an innovative approach with our open systems architecture to give our customers reasonably priced solutions with great capability to simplify integration and provide easy technology insertion for upgrades. We believe this is the right approach, especially in an era of budget austerity, and our customers seem to agree. By centralizing our position in Paris we can optimize our core positions in Europe and beyond, while enabling us to also expand in markets which we believe have high growth potential. By centralizing our position in Paris a hub of international business and home to many valued partners we can optimize our core positions in Europe and beyond, while enabling us to also expand in markets which we believe have high growth potential. Being closer to our customers will help ensure our responses are instantaneous, not transatlantic. But even more than a location to be closer to our customers, this headquarters in Paris represents our efforts to stay ahead of the new world order. It will serve as our model for outreach to other regions, and we are excited to celebrate its opening. 7

8 Long-term growth To put all of the trends and opportunities I ve talked about into perspective, we recently developed a plan for our global growth aspirations. And from that analysis we project that our international revenues should grow from about a third of our revenues today to about 40 percent of revenues by That translates to revenue growth that could triple in Europe, from about $1 billion annually today to about $3 billion over the next decade. And to handle that revenue growth, we would also nearly triple our number of European employees, from about 2,000 today to about 6,000 by [Our analysis projects] revenue growth that could triple in Europe, from about $1 billion annually today to about $3 billion over the next decade. To handle that growth, we would also nearly triple our number of European employees, from about 2,000 today to about 6,000 by The opening of this headquarters for Europe, the Middle East and Africa here in Paris will play a significant role in achieving that growth. Now I d like to ask Bruno Rambaud, Vice President and Managing Director of our EuMEA operations, to wrap up with his perspective, and then we ll move into the Q&A portion of our meeting. About Clay Jones Clayton (Clay) M. Jones has served as chairman, president and chief executive officer of Rockwell Collins since June 2002, and has led the company since it spun of from Rockwell International in A native of Nashville, Tennessee, Jones joined Rockwell International in 1979 after serving in the U.S. Air Force as a fighter pilot. Jones is the former chairman of the Aerospace Industries Association, and continues to serve on its Board of Governors. He is on the Board of Directors of the General Aviation Manufacturers Association (GAMA) and the Smithsonian National Air and Space Museum (NASM), and is a member of The Business Council and the President s National Security Telecommunications Advisory Committee (NSTAC). Jones is an Honorary Fellow of the American Institute of Aeronautics and Astronautics (AIAA) and a director of Deere & Company. 8