Book excerpt

When terrorists used hijacked airliners to attack the United States on Sept. 11, 2001, Rockwell Collins was just 74 days into its new independence. The effect on the commercial airline market was immediate, with a dramatic reduction in travelers and a resulting sudden, sharp decline in orders. Aircraft manufacturers laid off thousands of employees, and Rockwell Collins stock fell to $12.95 per share within days.

While Rockwell Collins ended the year with $2.8 billion in sales – a 12 percent increase over 2000 – revenue expectations from commercial aviation were reduced going forward. Company executives responded quickly, taking measures that were later credited with minimizing the long-term impact on the business. In the fourth quarter, the company announced plans to reduce its workforce by approximately 2,800 employees, and salaries and bonuses were frozen.

The expected transition to free-flight, satellite-based navigation slowed in the wake of the September 11 attacks, as did other commercial segments of the business, including the market for in-flight entertainment and information management products. More resources worldwide were being focused on safety and security rather than on technology that would allow more direct, fuel-efficient routes.

Rockwell Collins shifted its strategic emphasis toward government business to offset the impact of the commercial downturn. Its largest product portfolio – communications, navigation and situational awareness (CNS) products and systems – had applications for both government and commercial customers. The company was well established as a leader in military electronics, including data links development through its JTIDS and MIDS participation. It continued to be the leading source of radio communications and GPS technology for both airborne and ground force navigation, and also had significant content in precision munitions.

The acquisition of K Systems, which had been completed just a week before the spinoff was announced in December 2000, increased Rockwell Collins’ already substantial strength and presence in the military sector. Its San Jose-based Kaiser Aerospace and Electronics subsidiary had supplied more than 21,000 display systems for tactical aircraft, including the Comanche helicopter and F-18 fighter aircraft and the new Joint Strike Fighter. Its core products included head-down, head-up and helmet-mounted displays for pilots. Another Kaiser business, Electro-Optics, provided helmet-mounted displays for soldiers. Kaiser also controlled 50 percent of Vision Systems International, whose core business included helmet-mounted displays for several fixed-wing military aircraft.

The adjustment in emphasis, combined with some key wins in Government Systems in fiscal year 2002, made for a marked change in the balance of the business. Government business accounted for 45 percent of sales that year while 55 percent was commercial. The biggest success was Rockwell Collins’ selection as part of a Boeing team to produce the industry’s first Joint Tactical Radio System (JTRS)-compliant communications systems for the U.S. Army. The contract required the development of a software-reprogrammable radio for ground vehicles and rotary-wing aircraft.