United Technologies announces exit from helicopter business

AP News
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Posted: Jun 15, 2015 12:48 PM
United Technologies announces exit from helicopter business

HARTFORD, Conn. (AP) — United Technologies Corp. announced Monday it is shedding Sikorsky Aircraft, and whether it ultimately sells or spins off the helicopter maker, the union that represents its workers and local officials are confident that the exodus of well-paid manufacturing jobs in Connecticut will not play out again.

Following a three-month review, the aerospace and building systems conglomerate said it will focus on high-technology products for the aerospace and building industries.

Mayor John A. Harkins of Stratford, where Sikorsky is based, doesn't see the manufacturer leaving.

"As far as we're concerned, they're in Stratford for a long time," he said. "Anything can happen, but there's no intent right now of moving."

The helicopter maker is the town's No. 1 taxpayer, with a real estate property tax bill of more than $2.5 million a year, he said. About 6,200 employees work at the plant, representing about 40 percent of Sikorsky's 15,200 workers.

The Hartford-based United Technologies launched a review a few months ago of options for Sikorsky's future, saying it was no longer a good fit for its portfolio. The decision ends an 86-year relationship that began with the purchase of Sikorsky by United Technologies' predecessor, United Aircraft and Transportation Corp.

It will decide by the end of the third quarter whether it will sell or spin off Sikorsky.

Manufacturing jobs have dwindled in Connecticut over the past decade or more, becoming a sharp political issue and a source of contention between unions and their advocates and businesses and their allies. That may not be the case at Sikorsky.

Rocco Calo, business agent for Teamsters Local 1150, which represents about 4,900 Sikorsky workers, said the contract, which expires in 2018, would remain in place in a deal with a new company. He said he'd prefer a spin-off because the union could negotiate contracts with Sikorsky unfettered by involvement by United Technologies.

"It really gives us the ability to control our own future," Calo said.

Workers are concerned about Sikorsky's future, but a sale or a spin-off is a "foregone conclusion," he said.

"One of those things is going to happen and we're going to have to react to it," Calo said.

Cowen and Co. analyst Cai von Rumohr said in a note to investors that a sale would be better than a spin-off for United Technologies shareholders, who would receive all net proceeds from a sale. He estimates a spin-off would yield just $1.5 billion to $2 billion to United Technologies.

Weaker Sikorsky operations "could frustrate efforts to sell the business," he said.

Excluding Sikorsky, United Technologies expects 2015 earnings per share of $6.35 to $6.55 on sales of $58 billion to $59 billion. With Sikorsky, earnings per share are expected to be $6.55 to $6.85, down from a previously stated $6.85 to $7.05.

Analysts surveyed by FactSet expect earnings of $7 per share on revenue of $65.1 billion.

United Technologies expects 10 cents to 20 cents per share of separation costs and a 10-cent per share decline in Sikorsky operations due to oil and gas market weakness.

Gregory Hayes, president and chief executive of United Technologies, said exiting the helicopter business "is the best path forward for United Technologies."

Sikorsky's military and commercial helicopter businesses have been under pressure as the U.S. reduces its presence in Afghanistan and Iraq, and falling oil prices have cut production and exploration and the need to shuttle workers by helicopter to offshore platforms.

Sikorsky has been a marquee company for United Technologies. It's the manufacturer of the Black Hawk helicopter, a household name and military work horse, and presidential helicopters. Sikorsky helicopters also have returned astronauts home after they splashed down in the Pacific Ocean at the end of their space travels.

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