WASHINGTON — United Technologies is considering spinning off its Sikorsky subsidiary after concluding the helicopter manufacturer is no longer a fit for the company.
Greg Hayes, UTC's president and CEO, told an investor conference Thursday that the company is exploring options for divesting Sikorsky, the largest manufacturer of military helicopters in the US.
Sikorsky is "just not quite as attractive as the rest of the businesses," Hayes said, noting the subsidiary's role "as a platform provider, as opposed to a system provider, differentiates Sikorsky from the rest of the portfolio."
Hayes called the decision "not an easy one," but called it "the right one for Sikorsky's customers, for Sikorsky's employees, and for our shareholders."
In January 2014, Defense News reported that UTC was eyeing the sale of Sikorsky, best known for its popular Black Hawk helicopter line. UTC also owns aircraft engine maker Pratt & Whitney and UTC Aerospace Systems.
Asked by investors about whether a Sikorsky divestiture is based on expected sales projections, Hayes emphasized it's the question of being a platform manufacturer in a company full of system providers, but did acknowledge potentially flat sales for several years are on the horizon.
He pointed to the CH-53 program as an example of how Sikorsky is well positioned for the future, but has relatively flat sales planned for several years.
"That will be a great program, but we don't see any real volume until late into 2020s," Hayes said. "So the question is, between now and then, how do you survive?"
Hayes spent some time pumping up Sikorsky, noting that the $7 billion unit would still be a Fortune 500 company if it stands alone and highlighting that it won every competition it entered was in during 2014.
"It's still a very, very good business," he said. "It's just not quite the business that we want in terms of long term business potential, long term growth."
He also said the company is working out how best to spin Sikorsky off.
"Give us some time on the capital structure there," he asked investors. "If we spin Sikorsky out, we want to make sure they will be a successful, standalone company."
Sikorsky president Mick Maurer expressed confidence in his unit, saying "our competitive position is as strong as it has ever been in the long history of this company."
"[We're] in a very competitive position," he said. "I wouldn't want to trade places with anyone."
Richard Aboulafia, an analyst with the Teal Group, said he can see Sikorsky being spun off as a standalone unit, but warned not to expect another of the major rotorcraft firms to buy it.
"I don't think anyone has the stomach for a European firm buying Sikorsky," Aboulafia said. "Textron just doesn't have the cash to do this, so it won't be Bell Helicopter. As for Boeing, someone would kill that merger — It could be DoJ or DoD, there would be so many knives out there's no way."
He said Sikorsky should be able to stand on its own, comparing it to the 2011 spin off of Huntington Ingalls Industries, the shipbuilder that was previously part of Northrop Grumman.