For the Cedar Rapids-Iowa City Gazette June 11, 2019
[This article was one of a half-dozen stories I reported and/or curated over several days beginning on a Saturday evening, ahead of and directly following the announcement of a proposed merger involving Cedar Rapids’s largest employer.]
While Raytheon Technologies — the new aerospace and defense technology giant to be birthed from the proposed merger of United Technologies Corp. and Raytheon Co. — would retain “corporate presence” in their respective existing communities, what that will look like for UTC’s Collins Aerospace in Cedar Rapids and other Iowa cities remains to be spelled out.
The two businesses announced Sunday they intend to merge in an all-stock deal. The merger would be completed by mid-2020, they said.
The combined corporation — Farmington, Conn.-based UTC develops avionics and communications systems and Waltham, Mass.-headquartered Raytheon Co. is a U.S. defense contractor best known for manufacturing the Patriot missile defense system — would be the second-largest U.S. aerospace company, just behind Boeing Co.
It would be valued at more than $100 billion after UTC’s planned spinoff of Otis elevator company and Carrier air-conditioner business, according to Wall Street Journal estimates. Corporate headquarters would be in Boston.
During an early morning conference call, the heads of the two businesses — UTC Chairman and Chief Executive Officer Greg Hayes, Raytheon Co. Chairman and CEO Thomas Kennedy, along with their respective chief financial officers — said, more than once, operations would not be affected by the actual process of the two entities coming together.
“We’re not going to take out a lot of employees,” Hayes said during the call. “In fact, we’re going to add jobs.”
In echoing comments from Raytheon Co.’s Kennedy, Hayes noted UTC “is on track to hire 10,000 (employees) this year.”
On Sunday, the officials had stated the merger would see reduction of about $1 billion in annual costs.
When asked by The Gazette for more specifics, a spokesperson later on Monday said no “significant impact” in employment was expected locally or for UTC as a whole.
The fact sheet accompanying the conference call listed a greater focus on research and development among increased career opportunities in the combined corporation.
Also, more information would be forthcoming during next week’s Paris Air Show, the aerospace industry’s massive annual event, Hayes said.
REACTION
Iowa-connected officials had varying responses to the news.
The offices of Iowa’s U.S. Senators both expressed concern.
Sen. Chuck Grassley’s office said Monday Iowa’s senior senator has been in touch with UTC and Raytheon Co. and plans to “express his concern about potential layoffs and to urge the companies to consider the impact on UTC employees in Iowa in an in-person meeting this week.”
Sen. Joni Ernst’s office said she already had discussed the deal with Collins Aerospace representatives over the weekend and will be speaking more with this week.
“UTC is an important institution that provides good jobs to Iowans across Iowa’s 1st District,” U.S. Rep. Abby Finkenauer said in an emailed statement. “I have asked UTC for information about what the impact of this will be and will be monitoring it closely, advocating every day for working families across Iowa.”
Rep. Dave Loebsack also has been in contact with the two companies and said he was told there would be “no significant loss of jobs.”
In Cedar Rapids, officials said on Monday they believe this could be a “long term positive” but acknowledge it’s based on what’s been publicly reported and they may not know what the tickled down will be for the next six to nine months as the deal develops.
“We see this as a long-term positive, but we don’t know that yet,” said Jeff Pomeranz, Cedar Rapids city manager. “Greg Hayes is a very strategic individual who has great respect for Collins Aerospace. We see this as being a centerpiece of the new company.”
Pomeranz plans to meet with Phil Jasper, head of the Collins Aerospace’s mission systems unit, next week to discuss this and other matters. His goal is to listen and concedes he may not learn much more at that point.
“We are not laying back,” Pomeranz said. “But this is newly announced and details are still developing. We want them to know how much we value Collins Aerospace and UTC in Cedar Rapids. They’ve been highly open with us and we’ve had a great relationship.”
Cedar Rapids Mayor Brad Hart also expressed some optimism for the new deal.
“My initial reaction is not one of concern,” Hart said. “The companies don’t have much overlap from what I understand, and the statement said they are going to invest billions in (research and development). That is remarkable and should bode well.
“I don’t know enough about it to say it’s a positive, but from what we know, I don’t see anything where it would have a negative impact on the Cedar Rapids location.”
A spokeswoman for Debi Durham, head of the Iowa Economic Development Authority and the Iowa Finance Authority, said by email that Durham has been “closely connected” with Collins Aerospace leaders “and has no indication operations in Iowa will be impacted. In fact, she believes this only further solidifies their leadership and offers increased opportunity for employees and innovation.”
President Donald Trump also offered an opinion, saying on Monday in a CNBC interview that he was a “little concerned” about the proposed merger but gave a mixed message as to whether he believed the $121 billion deal should go forward.
“I want to see that we don’t hurt our competition,” Trump said in an interview with CNBC. “I hope the Raytheon deal, I hope it can happen. But I don’t want to see where we have one less person that can compete for an order.”
Trump’s acting Secretary of Defense, Patrick Shanahan, previously was a Boeing senior vice president.
HYPERSONICS
The executives during the call said they had begun working in earnest on a potential merger in January. Kennedy said, once Otis and Carrier are stripped away, an examination of what UTC would bring to the deal was “looking at Raytheon in the mirror” in terms of complimentary functions.
One area of big growth for the combined corporation: hypersonics. The U.S. Department of Defense spending has slowed in recent years, and the DOD has put an emphasis on modernization of technology, Kennedy said.
Raytheon brings to the table a competency in weapon-system integration as well as advanced guidance and control, among other aspects, according to information provided as part of the conference call. UTC has developed, along with other competencies, high-temperature materials and advanced thermal management.
Together, these specialized areas would help with reducing heat buildup — one of hypersonics key challenges — for missile development, Kennedy noted.
“One plus one equals three,” he added.
UTC purchased the former Rockwell Collins in late November for $30 billion including debt. It combined Rockwell with UTC Aerospace Systems to form Collins Aerospace.
Two units — avionics and mission systems — are based in Cedar Rapids.
All told, some 9,350 employees based in Cedar Rapids, Coralville, Decorah, Bellevue and Manchester were reported for Collins Aerospace operations in 2018’s fourth quarter.
The companies said Raytheon Technologies would consolidate business units comprised of intelligence, space and airborne systems, and integrated defense and missile systems. The new businesses would join UTC’s Collins Aerospace and Pratt and Whitney to form the four business units of the merged corporation.
Collins Aerospace, Cedar Rapids’s biggest employer, would see about $22 billion sales under Raytheon Technologies, according to a 2019 fact sheet from UTC and Raytheon Co.
Gazette reporters James Q. Lynch and B.A. Morelli, as well as Reuters, contributed to this report.
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