Flying High on Market Confidence

Article excerpt

If, like me, you find jet travel an act of faith, then it is probably unwise to think too hard about what stops those hunks of metal from dropping out of the sky.

But you can at least console yourself with the thought that whatever it is keeps an awful lot of people employed in the Midlands.

The regions aerospace industry is busy enjoying one of its best spells for years fuelled by booming passenger numbers and the return of economic confidence to key markets like the US.

British firms are well-placed to take advantage of this increased demand for aircraft, thanks to the presence of world-beating giants like Rolls-Royce and British Aerospace.

These two alone mean that aerospace along with pharmaceuticals and finance is one of those rare British industries still fighting above its weight in the global marketplace.

Just as Glaxo Wellcome or the City of London act as national champions for the rest of the economy, dominant aerospace players like Rolls are carrying a lot of other companies along with them.

The latest to benefit is Lucas Aerospace, part of the Anglo/American engineering group Lucas Varity.

Since the merger with US-based Varity in September, 1996, Lucas has been rapidly changing.

It still relies on the automotive sector for most of its turnover, but recent disposals such as the pounds 800 million sale of diesel engine business Perkins to Caterpillar are fast reshaping that balance.

Over-capacity continues to blight the sluggish world car market and aerospace could prove an important engine for growth at least while the aircraft boom lasts.

City gossip suggests Lucas is eyeing up the aerospace business of rival engineering group TI.

Dowty Aerospace is valued at around pounds 400 million and would make a good fit with Lucass existing flight control business.

Certainly there is no shortage of cash. The company can now afford to spend an estimated pounds 1 billion on acquisitions without significantly altering its debt gearing.

And a bid for Dowty would not be the first shift towards aerospace. In 1996 Lucas Varity bought Boeings cargo systems business, a move that turned the group into the worlds biggest supplier of powered cargo systems.

Now Lucas Aerospace has global sales of pounds 510 million and 7,000 employees scattered around the world, although its heartland remains the West Midlands.

Three factories in Birmingham York Road, Shaftmoor Lane and Marston Green employ around 1,500 people, while Wolverhampton, Solihull and Coventry add another 1,200 to the total.

Among the most high-tech are the electronic management systems for jet engines, which are designed and assembled at the York Road site.

Each box of printed circuits and custom-made chips can cost pounds 50,000 or more, and although some automation is used, the sheer variety of different engine designs means a lot of highly skilled work is still carried out by hand.

Vibration simulators check the delicate electronics are not shaken to bits in the air, while giant ovens take the temperature from minus 30 degree centigrade to boiling point and back every few minutes to see if metal expansion will be a problem.

Low volume production means the site does not quite have the robotic production line atmosphere of larger consumer electronics factories.

But much of the apparent chaos is also due to rapid investment and the need to integrate new acquisitions. …