Hawker Beechcraft sold to the Chinese

denverpilot

denverpilot

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And to think...

I got someone all cranky here at PoA with my opinions about Corporate leaders just yesterday.

http://www.avweb.com/avwebflash/news/HawkerBeechcraftAgreesToOfferFromChineseCompany_206946-1.html

Corporate CFIT. Bow to your new owners.

' "The decision to move forward with Superior was based on two key factors," said Chairman Bill Boisture. "The bid for the company was the most attractive we received during the strategic review process and the going-forward plan offered the most continuity for our business, allowing us to preserve jobs, product lines and our ability to maintain our commitments to our customers." The company will maintain a "strong presence" in the U.S., Boisture said, retaining its current employee base and management team.'

Translation: They were the only investors that would give us crap-tons of cash to pull our butts out of the fire after a decade of losses, who would also let us keep our management jobs -- even though we failed miserably to keep it profitable. Over $2B in debt.

Note that he didn't say for how long on any of those promises. Probably long enough for him to find another job. Gotta give him some time to pull the ripcord on the golden parachute.

It's such a strong "going-forward" plan. Where's my buzzword BINGO card?

They announced in May how strong the company was after restructuring debt, then missed their March 10K filing by two weeks, prepping for the PR backlash, now it's June and they're sold. Buh-bye Hawker-Beechcraft.
 
denverpilot said:
Translation: They were the only investors that would give us crap-tons of cash to pull our butts out of the fire after a decade of losses, who would also let us keep our management jobs.
Click to expand...

I work for a guy who tells a story about a previous employer of his.

The company was in an industry with serious headwinds. The company was underperforming compared to the rest of the failing industry and didn't have the cash to go forward. In stepped a famous buy and sell off the pieces guy.

Management didn't like the idea of selling off the company. Instead, they sold the employees on the idea of investing their retirement fund into the company so it would be an employee owned company. Everyone got to keep their jobs and things were to be rosy from then on.

But the industry headwind didn't die, and regardless of who owned the company (stockholders or employees), the business was on the skids. So the existing management began selling off pieces (just like the investment guy would have) to generate cash to pay the bills.

In 3-4 years all of the sellable pieces were gone, the company went out of business, and the "employee owners" were out of a job and had wasted their retirement fund.

But the senior management team came out OK, relatively speaking. Keeping the company alive for another 3-4 years meant their big paychecks continued coming in for much than they would have under the breakup guy...

The bottom line is that you've gotta pay a lot of attention when a company is going down the tubes. The people who are making the deals often cut themselves much better deals than they cut for everyone else.
 
Sad, sad, day IMO. The pride of any country is what it produces for the world, even in recent times we could take pride in knowing we were still a leader in Aerospace production. Now, Cirrus, Continental, Hawker-Beech, are Chinese owned, who's next? BTW- I don't give a crap what the press releases say, large pieces of those operations will be moved to China over the coming years. The knowledge just has to be sucked out first. This is like some kind of alien invasion movie, but scarier, much, much, scarier.
 
Alexb2000 said:
Sad, sad, day IMO. The pride of any country is what it produces for the world, even in recent times we could take pride in knowing we were still a leader in Aerospace production. Now, Cirrus, Continental, Hawker-Beech, are Chinese owned, who's next? BTW- I don't give a crap what the press releases say, large pieces of those operations will be moved to China over the coming years. The knowledge just has to be sucked out first. This is like some kind of alien invasion movie, but scarier, much, much, scarier.
Click to expand...

Chinese culture will make it difficult to move a lot of high end manufacturing there. The culture is full of a "that looks about right" mindset, and often rebels against a systematic, step by step approach like is required in aerospace.

That's why you don't see the primary manufacuters of high end stuff locating to China. You see lots of assembly work - tab A into slot B, but the high tech components were made elsewhere...
 
kyleb said:
Chinese culture will make it difficult to move a lot of high end manufacturing there. The culture is full of a "that looks about right" mindset, and often rebels against a systematic, step by step approach like is required in aerospace.

That's why you don't see the primary manufacuters of high end stuff locating to China. You see lots of assembly work - tab A into slot B, but the high tech components were made elsewhere...
Click to expand...

Bottom line, lets say you own a nice A36. You need new wing bolts. The only place they're made is China. Buy em, take your chances, and keep flying; or play more golf?

Those are the decisions we're going to be faced with.
 
When did it come about that CEO's and other top level executives were worth the kind of salaries they are paid when their performance is so bad? There was a time when this kind of behavior would not have been tolerated.
 
somorris said:
When did it come about that CEO's and other top level executives were worth the kind of salaries they are paid when their performance is so bad? There was a time when this kind of behavior would not have been tolerated.
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Executive compensation is often incestuous. I'm on the compensation committee at your company and you're on the compensation committee at my company. I scratch your back, you scratch mine. Eventually, it gets way out of hand.
 
kyleb said:
Chinese culture will make it difficult to move a lot of high end manufacturing there. The culture is full of a "that looks about right" mindset, and often rebels against a systematic, step by step approach like is required in aerospace.

That's why you don't see the primary manufacuters of high end stuff locating to China. You see lots of assembly work - tab A into slot B, but the high tech components were made elsewhere...
Click to expand...
Used to be true. Not any more. iPads/iPhones, most computers etc....
 
Fifty years ago, Dr. Tom Lehrer wrote a song called "Wehrner von Braun," about the life of the German (later American) rocket scientist, "a man whose allegience is ruled by expedience." The final couplet was:
In German oder English I know how to count down...
...und I'm learning Chinese, says Wehrner von Braun.
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Nailed it, the professor did, albeit perhaps not as quickly as he might have thought.
 
kyleb said:
But the industry headwind didn't die, and regardless of who owned the company (stockholders or employees), the business was on the skids. So the existing management began selling off pieces (just like the investment guy would have) to generate cash to pay the bills.

In 3-4 years all of the sellable pieces were gone, the company went out of business, and the "employee owners" were out of a job and had wasted their retirement fund.

But the senior management team came out OK, relatively speaking. Keeping the company alive for another 3-4 years meant their big paychecks continued coming in for much than they would have under the breakup guy...

The bottom line is that you've gotta pay a lot of attention when a company is going down the tubes. The people who are making the deals often cut themselves much better deals than they cut for everyone else.
Click to expand...

This is a very insightful assessment of the direction our entire nation could be heading, if you think about it.

Bit by bit, we are selling them our nation. They are buying land, companies, even some of our infrastructure. The only ones who will come out on top of this "deal" will be those who sold early.

One day, in the not too distant future, it is very possible the "breaking news" on your local TV station will be announcing that we are now all citizens of the new Eastern Chinese province, "Amelika." Followed with how you can download your instructions on how to be a happy citizen.

Not a shot will be fired, we will have sold it to them for the what will be by then, a worthless dollar.

-John
 
kyleb said:
That's why you don't see the primary manufacuters of high end stuff locating to China. You see lots of assembly work - tab A into slot B, but the high tech components were made elsewhere...
Click to expand...

Don't know how many components are made there, but all of my HP servers have "Foxconn" plastered all over every available flat place a logo can be printed inside of them. The chipsets inside aren't fabbed in the U.S. anymore either, definitely not the ones that say "Intel" on them.

Foxconn now sells the cheapest mini desktop PCs I've seen with specs that rival traditional Via, Acer, and other low-end PC manufacturers, and they sell direct via mail-order.

They're not just an assembly shop anymore. They started that way.
 
Ron Levy said:
Nailed it, the professor did, albeit perhaps not as quickly as he might have thought.
Click to expand...

At the time, at least in the 50s, the US wasn't very nice to one of the JPL founders, Hsue-Shen Tsien who'd also worked with Von Braun for the early JPL efforts.

The Red Scare phenomenon swept Tsien up as a suspected Communist sympathizer and he was treated quite badly, even though he wasn't Communist in the least. In the end, disillusioned with the way the US Government treated him, he was allowed to leave the US for China where he became the "Father of Chinese Rocketry"

--Carlos V.
 
Ron Levy said:
Fifty years ago, Dr. Tom Lehrer wrote a song called "Wehrner von Braun," about the life of the German (later American) rocket scientist, "a man whose allegience is ruled by expedience." The final couplet was:

Nailed it, the professor did, albeit perhaps not as quickly as he might have thought.
Click to expand...

He had many great songs in the 50s and 60s. "It Makes a Fellow Proud to be a Soldier" nailed some characters in my platoon in ROTC summer camp. :D

denverpilot said:
The chipsets inside aren't fabbed in the U.S. anymore either, definitely not the ones that say "Intel" on them.
Click to expand...

So, where does Intel have fabs? US, Israel, Ireland and one in China, which makes less than the latest technology. Where are the most fabs? The US. They're dropping $5 billion on a new one in Arizona as we speak.
 
kyleb said:
Chinese culture will make it difficult to move a lot of high end manufacturing there. The culture is full of a "that looks about right" mindset, and often rebels against a systematic, step by step approach like is required in aerospace.

That's why you don't see the primary manufacuters of high end stuff locating to China. You see lots of assembly work - tab A into slot B, but the high tech components were made elsewhere...
Click to expand...

My buddy outsourced labor to China, he went over and over and over and over the QA procedures with them and took a visit. Acetelyne will be set to X psi, oxygen set to X psi, argon set to X psi. He said as soon as he would walk away, they'd turn the gas on the welders back down. He pulled ops and brought it back to america.
 
Ghery said:
So, where does Intel have fabs? US, Israel, Ireland and one in China, which makes less than the latest technology. Where are the most fabs? The US. They're dropping $5 billion on a new one in Arizona as we speak.
Click to expand...

These are the HP Proliant stuff, so the Intel toys inside aren't brand new. Sandybridge on the top ones, is all.

HP gutted Compaq. Or Compaq gutted themselves, however you like...

Foxconn makes all that stuff now.

Most businesses aren't running the mid-sized blade stuff yet. Those get the love inside HP. They sell piles of them to Government and Financial companies. And also a significant number to companies taking out individual servers and virtualizing the entire farm.

But we're telecom. Our stuff just processes real-time switch data and stuffs it into RDBMS' for post-processing -- and that's rarely time-critical. Systems just sit and run. Majority of problems is failed disks, and pizza boxes with solid built-in RAID controllers do that role nicely.

Those come from Foxcon nowadays. Most of the tech support is out of India, judging by "Robert"'s accent. ;)
 
> tab A, slot B stuff

That is an incorrect characterization (understatement) of China's current capabilities.


Yes, there are still bottom feeding firms that will put on a good show for plant tours. But if you are willing to forego a bit more margin, China can indeed compete on a world class level.


I fear that our supply chain is already pown'd. The latest "FPGA" backdoor, troubles me greatly. It ain't the first, either.
 
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denverpilot said:
Don't know how many components are made there, but all of my HP servers have "Foxconn" plastered all over every available flat place a logo can be printed inside of them. The chipsets inside aren't fabbed in the U.S. anymore either, definitely not the ones that say "Intel" on them.

Foxconn now sells the cheapest mini desktop PCs I've seen with specs that rival traditional Via, Acer, and other low-end PC manufacturers, and they sell direct via mail-order.

They're not just an assembly shop anymore. They started that way.
Click to expand...

Foxconn is the prime example of a contract assembler putting tab A into slot B. I don't think anything is organic to Foxconn.
 
bartmc said:
My buddy outsourced labor to China, he went over and over and over and over the QA procedures with them and took a visit. Acetelyne will be set to X psi, oxygen set to X psi, argon set to X psi. He said as soon as he would walk away, they'd turn the gas on the welders back down. He pulled ops and brought it back to america.
Click to expand...

I had the same thing on a work boat build I got sent over for. I came home in a week, I couldn't keep them to keep the shield gas flow high enough, I even marked the flow meters with a Sharpie, "This much gas flow." " Ok, yes..." as soon as I turn around, back down to nothing again. I had a big assed boat hull with not one good weld in it. At the end of the week I called the office "I can't do this, you have to send 50 of me, plus there are several miles of weld that you're gonna have to cut out and redo to pass x-ray. I'm coming home, nothing I can do here and I suggest you cut your time loss and get out of this boat now.
 
I seem to recall the same thing being said about Japan and it's buying all the US assets 25 years ago. It does not seem that we are a Japanese colony now and I don't think it will change for China nor the Middle East. I'm not happy about the fall of America capital but it is the way things go.
 
jtheune said:
I seem to recall the same thing being said about Japan and it's buying all the US assets 25 years ago. It does not seem that we are a Japanese colony now and I don't think it will change for China nor the Middle East. I'm not happy about the fall of America capital but it is the way things go.
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Never compare China and Japan, not even in the same league of ability. Also we were ripping the Japanese off selling at the top of a market. China is here cleaning up at fire sale prices. All in all not bad because it's all old tech crap that we sell them along with debt, they can have that crap, however we are not exactly doing our part developing new technology.
 
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Henning said:
I had the same thing on a work boat build I got sent over for. I came home in a week, I couldn't keep them to keep the shield gas flow high enough, I even marked the flow meters with a Sharpie, "This much gas flow." " Ok, yes..." as soon as I turn around, back down to nothing again. I had a big assed boat hull with not one good weld in it. At the end of the week I called the office "I can't do this, you have to send 50 of me, plus there are several miles of weld that you're gonna have to cut out and redo to pass x-ray. I'm coming home, nothing I can do here and I suggest you cut your time loss and get out of this boat now.
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Having spoken to some folks who sought to have some pretty simple manufacturing done there, this is consistent with what I have heard. It is not that the Chinese are incapable of proper manufacturing - but rather, that the ingrained culture of corruption makes it difficult to implement true quality.

You get goods that look outstanding, but simply do not have the inherent quality. The problem is, because they *look* good, makes it difficult to spot the bad stuff, and further, creates the understandable (and unwarranted) perception of quality.

Apple has managed to install a sufficient QC process (as have some other manufacturers), but you just cannot know.

Good friend from Houston rebuilt the front suspension of his Ford truck with great-looking parts, all from China (via eBay), enough less expensive he went for it; lasted about five months before rattling and clunking began. The rubber was all wallered-out, and there was one casting that was chipping away. Redoing the whole kit'n'kaboodle with Moog parts. This is now, not years ago.

You just cannot know.

Of course, by the time they're done, we won't have the manufacturing base here to which to recover.
 
Henning said:
I had the same thing on a work boat build I got sent over for. I came home in a week, I couldn't keep them to keep the shield gas flow high enough, I even marked the flow meters with a Sharpie, "This much gas flow." " Ok, yes..." as soon as I turn around, back down to nothing again. I had a big assed boat hull with not one good weld in it. At the end of the week I called the office "I can't do this, you have to send 50 of me, plus there are several miles of weld that you're gonna have to cut out and redo to pass x-ray. I'm coming home, nothing I can do here and I suggest you cut your time loss and get out of this boat now.
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It's not just the welds, it's the quality of the steel, as well. When I worked at Caterpillar, I was a welder, and occasionally we would get a load of Chinese steel, as there was a steel shortage. Man, we hated welding that stuff. Very difficult to get a good weld into it.
 
Alexb2000 said:
Sad, sad, day IMO. The pride of any country is what it produces for the world, even in recent times we could take pride in knowing we were still a leader in Aerospace production. Now, Cirrus, Continental, Hawker-Beech, are Chinese owned, who's next? BTW- I don't give a crap what the press releases say, large pieces of those operations will be moved to China over the coming years. The knowledge just has to be sucked out first.
Click to expand...

...Yes but the Vampire Squid sucked the money out of it first:

In 2006, Raytheon sold the company to a consortium of Goldman Sachs and Onex Corporation. This deal left the company with a heavy burden of debt which it struggled to support from the economic crisis of 2008 onwards. In April 2012 it defaulted on interest payments and was in breach of banking covenants; this caused widespread speculation that it would enter bankruptcy.
​
 
I have a slightly different perspective, being a small manufacturer whose product is produced in China.

If you've ever clicked the "hide-a-bulb" in my signature you will see the product. It is made in an injection molding machine, 4 at a time.

When I went to manufacturers here in the US, the least bid I got for the mold was $55,000. I didn't have that. Through the internet I got a bid from Shanghai. $1,300. I am a veteran and fly the flag right now outside my house. But that kind of disparity is forcing manufacturers off home soil.
 
kgruber said:
When I went to manufacturers here in the US, the least bid I got for the mold was $55,000. I didn't have that. Through the internet I got a bid from Shanghai. $1,300. I am a veteran and fly the flag right now outside my house. But that kind of disparity is forcing manufacturers off home soil.
Click to expand...


That kind of disparity can fund a lot of transportation costs. Wow.

Are the manufacturing the product reliably? Are you at that point yet.

Very interesting. Thanks.
 
On the electronics side of things, every friend who's "trial run"'ed prototype pr production circuit boards in China has found identical duplicate copies of their circuits being sold by companies they've never heard of a few months later.

Some have moved to Olimex in Mexico or other cheap board houses for prototypes, others have changed the layout of their boards in small ways that render them useless without manually cutting traces and only they know which traces to cut.
 
Another reason to not like the Beechies, their pubs may be printed in Chinese soon.

:rofl::rofl::rofl:
 
hopmedic said:
It's not just the welds, it's the quality of the steel, as well. When I worked at Caterpillar, I was a welder, and occasionally we would get a load of Chinese steel, as there was a steel shortage. Man, we hated welding that stuff. Very difficult to get a good weld into it.
Click to expand...

IIRC steel prices here have shot up in the past several years because the Chinese are importing our steel. I do know that one of the largest employers in my hometown in Mississippi will soon be a Chinese steel company.
 
bartmc said:
IIRC steel prices here have shot up in the past several years because the Chinese are importing our steel. I do know that one of the largest employers in my hometown in Mississippi will soon be a Chinese steel company.
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I didn't know they were importing our steel now. I've been out of that biz for 6 years.
 
hopmedic said:
I didn't know they were importing our steel now. I've been out of that biz for 6 years.
Click to expand...


They are importing raw materials as well as processed from everywhere in the world they can. Thing to remember is they are building at home with the steel they import because theirs doesn't meet engineering specs and if bad steel collapses a Chinese structure, the mill and construction supervisor manager get executed. They export stuff made from the junk.
 
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Around the time of Hurricane Katrina I worked customer service for a building materials supply company. The company did phenomenal business in the 2006-2007 timeframe, replacing the cheap Chinese wallboard that flooded into Louisiana during the early rebuilding effort. It all started breaking down and growing mold within 6-12 months after installation.

China can make quality products, but seldom does. It's simply so much easier and cheaper to build and sell junk. They still do best with "tab a/slot b" style manufacturing; even the most advanced processes can be broken down to that level in some fashion. However, there is no real quality control, and you run a very real risk of having your proprietary design stolen outright with little to no recourse.

McDonnell Douglas found that out. There's a reason the ARJ21 looks exactly like a DC-9.
 
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To bring the post back to subject, here is the latest news from Hawker Beechcraft.

Company executives have filed a motion to allow for bonuses valued up to 200% of their salaries.

Here is a great quote:

“It's important that Hawker and their management be incentivized to perform as well as they can to either come out of bankruptcy with the healthiest company that they can have, or to create an entity now that's going to be worth more to a potential buyer,”
Click to expand...

http://www.kwch.com/news/kwch-mds-news-hawker-
 
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