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The kit fill rates that we’ve talked about for some time that were hovering in those mid to low 50s, were up into the mid 70s, so we’re starting to see material flow which is a big part of the continued productivity story at RND.
material flowing into factories in rmd--kit fill rates
Transcript
2023 Q2
30 Jul 23
We have contracts and special support agreements that are out there, so we’ll work through that but it’s going to take time.
I guess the main point, though, is by the end of next year, this inspection program will be almost all complete and the 2025 outlook really shouldn’t be impacted, other than as Neil said, potential margin impact as some of these costs roll through the GTF support contracts. But again, we’ve got two years to work through that and we will figure that out, but in terms of the cash, really probably not a big difference as you get out to 2025.
not big difference to 2025 outlook
Transcript
2023 Q2
30 Jul 23
For the Pratt issue, it seems like the free cash flow impact in 2024, 2025 is still a little bit unclear. How should we think about how this affects your 2025 free cash flow outlook of $9 billion, and is that still the number you’re reiterating or should we think about potential downside risk?
Neil Mitchill
Hey, good morning Kristine. I’ll take that to start.
Clearly all things equal, the issue we just talked about is going to put some pressure on Pratt margins and would put pressure on cash.
I think it’s too early to put a number on that.
We’re going to need some time to go through and understand what’s the work scope, how does that intersect with already planned work scope and the profile of those shop visits, and of course we’re always focused on trying to drive more out of our businesses and we would do the same here.
I think I’ll leave it at that.
We will come back to you over the next couple of months with more detai
not clear on the 9bn
Transcript
2023 Q2
30 Jul 23
and do we think about $500 million of Pratt impact for 200 engines, is that the rate we should assume going forward in future years or is that something you guys are working through?
Neil Mitchill
Thanks Sheila. This is Neil, and good morning. I will take that one.
First of all on the half a billion dollars, I wouldn’t extrapolate that. We need some more time, as I said earlier in the call, so let’s just focus on ’23.
FCF impact in the future?
Transcript
2023 Q2
30 Jul 23
I would tell you, that is exactly the way the process is supposed to work, and so we’re going to pull back 200 discs, or 200 engines and look at the discs here in the next 90 days or so. In the next year, based upon those findings from the first 200, we think there’s probably another 1,000 out there, so 1,200 out of a little over 3,000 engines out there have to be inspected.
looking at turbine discs
Transcript
2023 Q2
30 Jul 23
This is an issue that we first uncovered back in 2020 when we had an incident with a V2500 turbine disc.
As a result of that investigation, we determined at that point that we had some contamination in this powdered metal that we make. It occurred very, very rarely, but it did happen, and it actually resulted in the turbine disc failure on an airline.
As a result of that, we went through and did two things.
First of all, we went out and inspected the V2500 fleet, but we also went back and we took a look at the powdered metal process to determine how this contamination happened.
Through a lot of work, through a lot of discovery, we figured out what the contaminants were and by the end of 2021, about a year after that, we were able to manufacture powder that was, I would say, contaminant-free to the best of our ability. At the same time, we knew that this contamination had occurred between late 2015 and late 2020, early 2021, so we knew we had a suspect population in the fleet. We went out and so we started inspecting. We inspected the turbine discs as they were manufactured, we inspected turbine discs as they came back in, not just for the V but for the whole GTF fleet, in fact the entire fleet of Pratt products that were manufactured during this time frame. Those inspections, and there were over 3,000 of those inspections, yielded a very, very small fall-out rate, less than 1%.
how issue was uncovered
Transcript
2023 Q2
30 Jul 23
es, so we actually manufacture the powder in our facility in New York. That powder is then processed down in our Columbus, Georgia forge into a number of different parts. The parts we’re talking about here are turbine discs, but they are all internally manufactured with a proprietary powder.
self manufzcturesd powder
Transcript
2023 Q2
30 Jul 23
Given the thousand and the fact that a number of those are also already scheduled for a shop visit, we still need some more time to go think through that.
As it relates to the cash flow, similar train of thought there - we really do need a little bit more time to go through this, but we’ve put a risk into our outlook because we know that we’ll have some calls on cash over the rest of the year. I would say there’s two things that are impacting the cash flow.
need time to see the impaxct of the 1000 extra engines needing checking
Transcript
2023 Q2
30 Jul 23
. Again, we talked about the comments upfront, GTF is going to have a lot of shop visits here in the back half of ’23 and into ’24.
gtf shop vists h2 23 and into 2024
Transcript
2023 Q2
30 Jul 23
But if you step back, this is not a GTF design issue, this is a manufacturing process issue on our part with metal.
not a desaign issue
Transcript
2023 Q2
30 Jul 23
we had lower productivity than we expected in the first half of the year, including costs associated with fixed price development programs, and similar to Q1, we anticipate another contract option exercise that will lead to a headwind in third quarter.
lower productivit than expected
Transcript
2023 Q2
30 Jul 23
Raytheon
raytheon
Transcript
2023 Q2
30 Jul 23
r Pratt,
p & w
Transcript
2023 Q2
30 Jul 23
Collins
collins
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2023 Q2
30 Jul 23
While powdered metal parts have been widely used throughout Pratt’s product lines for decades, Pratt has bounded the potentially impacted material. It has concluded that this condition was present in rare instances in powdered metal produced from approximately Q4 2015 into Q3 2021.
The PW1100 engine fleet which powers the A320 Neo will experience the most significant impact due to production volumes during this period. Based on the current assessment, Pratt anticipates by mid-September that approximately 200 PW1100 engines will be removed for enhanced inspection.
Beyond the initial 200 engines, Pratt also anticipates that approximately 1,000 additional PW1100 engines will need to be removed from the operating fleet for this inspection within the next 9 to 12 months, though the exact number of engines and the timing of those removals is not yet finalized.
It’s important to note that some of the engines that must be removed for inspection in 2023 and 2024 are already forecasted for a regular shop visit during this time period, and so the incremental impact to the fleet is still under evaluation
colour on engine issue "some of the engines that must be removed for inspection in 2023 and 2024 are already forecasted for a regular shop visit"
Transcript
2023 Q2
30 Jul 23
previously determined that a rare condition in powdered metal used to manufacture certain engine parts may reduce the life of those parts. It’s important to note upfront that the current production of powdered metal parts is not impacted and Pratt will continue to deliver both new engines and new spare parts across all product lines.
new engine deliveries not impacted
Transcript
2023 Q2
30 Jul 23
Pratt & Whitney
P & W
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2023 Q2
30 Jul 23
Collins
collins
Transcript
2023 Q2
30 Jul 23
In the quarter, RINS had $3.1 billion of bookings, resulting in a book-to-bill of 0.96 and a backlog of $17 billion. Bookings at Q2 in RINS included about $1.1 billion in classified award and $322 million for federal and civil cyber defense services. On a year-to-date basis, RINS has a book-to-bill of 1.15.
RIS bookings/backlog
Transcript
2023 Q2
30 Jul 23
RINS
RIS
Transcript
2023 Q2
30 Jul 23