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As the traditional revenue engine of Textron Inc. experiences a stall, sales of military drone planes sold under the company’s Wilmington-based aerospace and defense unit are flying high.
Textron Systems Inc., which produces products from guided missiles to armored military transporters, posted a $61 million year-over-year jump in revenue to $502 million in the third quarter as its parent company saw revenue plunge 27 percent to $2.55 billion. Sales from its marquee Cessna aircraft segment dropped 40 percent.
Much of Textron Systems’ growth came from the military’s insatiable appetite for its unmanned aerial systems — drone planes that fly over battlefields collecting data — and company officials expect that trend to continue even as defense appropriations are likely to wane.
“Our view is that the defense budget indeed will decrease over the next few years, and even at that rate the procurement and research-and-development areas of the budget are going to be pressured,” said Textron Systems CEO Frank Tempesta. “I think we are in several areas that are really priorities of the new administration. Over the next three years we’re going to grow, and I would say we would expect growth of 8 to 10 percent.”
The subsidiary, at 5,500 employees, is much smaller than other prime contractors, such as Waltham-based Raytheon Co. or Chicago’s Boeing Co. Its size means Textron must focus its efforts on high-end specialty products like ground sensors and precision weaponry, as well as acquire businesses to fill in the gaps.
Textron bought AAI Corp., the Hunt Valley, Md., maker of the Shadow reconnaissance drone and the control systems behind it, for $1.1 billion in 2007 after the U.S. Coast Guard put development of a drone by Textron’s Bell Helicopter unit on hold. Since then, the Shadow has flown in 445,000 hours over 100,000 missions.
“The reason why UAVs have all kinds of budget allocations is because they provide all kinds of value. There’s cooperation between UAVs and manned aircraft; they’re a force multiplier,” Tempesta said.
Fairfax, Va., defense consulting firm Teal Group expects global expenditures for drone projects will nearly double in the next 10 years to $8.7 billion.
The drone business, combined with a series of contracts for Textron’s sensor fused weapon system program, have buoyed the segment in the face of soft sales of Lycoming aircraft engines and even its armored security vehicles. In the first nine months of 2009, aircraft engine and armored vehicle sales fell $62 million and $28 million respectively from 2008, while sensor fused weapons sales and UAS sales rose $35 million and $28 million.
Locally, Textron System’s Wilmington-based Textron Defense Systems unit dodged a big bullet with the wind-down of the U.S. Army’s Future Combat Systems program. The program, which was panned for being over-budget and behind the times for current military needs, had contracted with Textron Defense to provide unattended ground sensors for building surveillance, and the unit was working with Boeing for command and control systems work. While the FCS program is no more, the Army is fast-tracking the sensor systems to go into production next year, and Boeing will continue the command and control subcontract.
Even as the economy recovers and Textron Inc.’s other, larger businesses such as Cessna and its industrial products segment bounce back, officials look to the Systems unit to be a significant factor in the company’s growth plans and strategy.
“We all know that on military contracts you’re not going to see high levels of profit, but then you take those as a good solid base of business,” said Scott Donnelly, CEO-elect of Textron in a conference call with investors. “It’s a business that is going to clearly stay a solid double-digit (margin) business.”
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