Northwest Aerospace News February | March 2018 Issue No. 1 | Page 23

But for most, the reality is that Boeing
“kind of wants your margins and if you’re
not prepared to fight back, they’re going
to get them. Winter,” the Game of Thrones
fan quipped, “is coming.”
So how does one fight back against the
House of Muilenberg and its vast army of
well-armed supply chain managers?
“One way,” Aboulafia said, “is to do what
the Tier 1 suppliers have been doing—get
bigger.
Portland-based PCC is a leading exam-
ple of a supplier that has gotten so big
and controls so many aspects of airframe
production that it can push back against
Boeing. They can say ‘No, and good luck
doing it without us.’
“If you’re not backed by Warren Buffet,
like PCC, it may be tougher, but there are
still opportunities to get bigger through
partnerships—and even mergers—with
your company’s customers and/or suppliers
up and down the supply chain.
“You ought to be bigger, in general, and as
you go up the value chain, you want to be
as diverse as possible.” That means, don’t
become too reliant on revenue streams
integration services to your core business,” “We’re still looking for big mergers in
Aboulafia said. “How can we add value in the aerostructures area,” he said. Analysts
multiple stages of production?” have their eye on potential deals involving
major airframe parts suppliers like Alenia,
Adding value in this way could also help
if and when it comes time for an owner to
leave the industry.
GKN, Spirit, Triumph—even the Japanese
heavies (although Aboulafia questioned
whether the Japanese government would
from any one airplane program. Or you can “There are a lot of potential buyers these allow Kawasaki, Mitsubishi or Suzuki’s
try to get better. days,” Aboulafia noted. “Wall Street aerospace units to be swallowed up.) “If
venture capital firms are attracted to the you’re them, there are benefits to bulking
historically robust margins, solid near-term up,” he said. “It makes a lot of sense.”
“The best chance for
a small, independent
shop to stay small and
independent is for it to truly
become best-in-class
at whatever it does,”
Aboulafia said.
demand in the aerospace supply business,
and Tier 1 and Tier 2 suppliers that have
to emerge with their profit margins—even
“Even the OEMs themselves are shopping
Boeing’s buyout of Virginia-based, UAV
builder Aurora Flight Sciences being a
you’re so good at what you do, and so prime example.”
(your margins). Be ‘specific and unique.’”
biggest and best are the ones most likely
against the OEMs.
“If they (Boeing) can look at you and say
good to deal with, maybe you can protect
message: big change is underway, and the
decided to bulk up to maintain leverage
for suppliers with specific expertise, with
All that means there will be some signif-
icant changes among the players in the
Or add capabilities. For a machine shop, industry, particularly closer to the top of
this could mean “adding engineering or the supply chain.
All that underscores the underlying
their businesses—intact.
The analyst’s bottom line advice? Forge
alliances before the snows start to fall.
“This is an industry that size more than
ever matters,” Aboulafia asserts. “Critical
mass, more than ever, matters.”
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