Air of success at Rockwell Collins
Flight electronics firm rebounds
By Melissa Allison
Tribune staff reporter
Published March 15, 2004
CEDAR RAPIDS, Iowa -- The timing could not have been worse for Rockwell Collins Inc.
Two months after the aviation electronics firm was spun off at about $23 a share in 2001, the Sept. 11 terrorist attacks torpedoed its stock price to less than $12. Rockwell Collins depended on the commercial plane industry for 60 percent of its business.
Some wondered how the Cedar Rapids company that brought Neil Armstrong's "giant leap for mankind" message from the moon would survive.
Chief Executive Clayton Jones, a former fighter pilot, found few attractive options. "Almost everything we did was going to suffer," he said.
With scant information from customers about how severe their losses might be, Rockwell Collins quickly cobbled together a survival plan that pulled it successfully through two of the most difficult years in aviation history.
The company boosted its net income by 85 percent over the past two fiscal years, and its shares recently have traded mostly between $30 and $35.
This month, Rockwell Collins was named as a supplier of displays, communication and other systems for Boeing Co.'s proposed 7E7 jetliner.
If the 7E7 attracts enough customers to go into production, that business could mean $2.5 billion to $3 billion in revenue to Collins over the life of the program.
One reason Collins attracted the 7E7 business is that it refused to cut back on research and development after Sept. 11, Jones said.
"It was literally the last thing on our list. We said we could exhaust everything else, but let's don't eat our seed corn," he said.
Rockwell Collins was founded as Collins Radio Co. in 1933 by Arthur Collins. He sold the business in 1971 to Rockwell International, now called Rockwell Automation, which spun off the company in 2001.
Collins equipment provided radio contact for Rear Adm. Richard Byrd's expedition to the South Pole in 1933, and in 1969 was the conduit for Neil Armstrong's message from a far more distant location.
The company delivered the first transmission of a photograph via satellite in 1960 and today uses satellite technology and hand-held devices to provide soldiers with better information about where they are on a battlefield.
Experts credit Rockwell Collins' swift action for its strong recovery after Sept. 11.
"They had a rough start, and they came back more quickly than I would have expected," said Paul Nisbet, an aviation analyst with JSA Research in Newport, R.I.
Jones said the firm's hastily constructed survival plan worked due to "a heavy dose of luck, combined with hard work and people thinking the best thoughts they could think at a time like that."
Using educated guesses about the extent of damage that might be sustained by airlines, private jet-makers and other Collins customers, senior executives decided to lay off 16 percent of its workforce, freeze salaries and cut incentive bonuses in half.
It was important to Jones that the big decisions be made by Sept. 30, the end of Collins' fiscal year, and that there be no surprises in the next fiscal year.
"We could have cut 8 percent and said, `Let's see how it goes.' But we didn't want to do the death of 1,000 cuts," Jones said.
As a result, Collins was on more solid footing in 2002 than many aviation firms.
Its business mix has shifted, with commercial customers representing about half of its $2.54 billion in fiscal 2003 sales, and government contracts making up the difference.
And the company has made several purchases to improve its market position. Collins' in-flight entertainment business, which it bolstered with an acquisition in 2002, could take off quickly as airlines begin to recover, said Tony Boase, an analyst with A.G. Edwards & Sons in St. Louis.
"Even the discount airlines are considering in-flight entertainment more seriously," Boase said.
Collins often gets rave reviews from customers and partners.
Brent Blackwell, an American Airlines captain who worked with Collins on a state-of-the-art air traffic control system in Miami, said he knows contractors that would have given up on the project.
"We are in awe of their technical skills and the level of determination they have," Blackwell said.
Scott Carson, president of Connexion by Boeing, which provides in-flight information and entertainment systems, is particularly impressed with Jones, who joined Rockwell International in 1979 and became head of Collins in 1998.
On Christmas Eve, Jones called Carson to say how much he enjoyed working with the Connexion team.
"That's a supplier," Carson said, explaining how rare such moments are. "It's very special."
Copyright © 2004, Chicago Tribune
