Expansion Strategy Leads to SCV Firm

An expansion into the aerospace market was behind the purchase of HR Textron in Santa Clarita by Woodward Governor Co. Woodward paid $365 million in the deal that closed this month and adds to Woodward’s airframe systems business unit formed in the fall. HR Textron employs more than 900 people at its Santa Clarita headquarters and smaller facilities in Pacoima and England to develop and manufacture actuators and controls used in aircraft, weapons, turbine engines and combat vehicles. Through its aerospace division, Woodward serves engine manufacturers such as General Electric and Pratt & Whitney. Company executives had been looking to expand into supplying airframe components and took a step in forming the new division with the acquisition in October of MPC Products Corp. in Illinois. The newly renamed Woodward Textron is “appropriately” sized and no layoffs are expected, said company spokesperson Rose Briani-Burden. The Textron acquisition was a good fit in that it provides electromechanical actuators whereas MPC focuses on hydraulic actuators. “It complements MPC and therefore adds a complementary technology, customer base and market capabilities,” Briani-Burden said. HR Textron had been part of a subsidiary of global firm Textron Inc. Woodward financed its purchase with cash, a $105 million loan and new term debt financing. Textron Inc. is expected to receive $265 million in after-tax cash proceeds from the sale. Woodward Textron is among a number of companies in the Santa Clarita Valley serving the aerospace industry. Others include Aerospace Dynamics, Stellar Microelectronics, ITT Aerospace Controls, TA Aerospace and Wesco Aircraft. The global economic downturn, however, is expected to reach into the commercial and military aerospace sectors as orders drop and available funding dries up. Like the automotive industry, aerospace has a large supply chain and small manufacturers in almost every state will be hurt as the assembly of new aircraft slows and military programs scaled back or eliminated. Textron has supplied parts to the C-17 Globemaster III transport plane, the AIM 9X Sidewinder, and M1 Abrams Main Battle Tank. The C-17 has been marked for elimination in the current defense budget although manufacturer Boeing Co. has foreign orders for the plane. Faced with those challenges, companies are taking one of three actions, said John Anderson, an aerospace expert with California Manufacturing Technology Consultants. They are conserving cash; cutting off workers and adopting a bunker mentality; or acting aggressively and expanding through acquisitions to better position themselves when the recovery starts, such as what Woodward has done. “People are looking to take market share now,” Anderson said. Woodward is building up its market for the airframe systems division, bringing in $51.6 million in sales for the first quarter. For the first quarter ending March 31, Woodward reported net income of $18.5 million, or $0.27 per diluted share, on revenues of $334.7 million. That is a 38 percent drop from the net income of $29.7 million, or $0.43 per diluted share, on revenues of $305.8 million for the same period in 2008.