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Teledyne-Continental Bought by Chinese Interests

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Teledyne Continental Motors has been sold to Technify Motors, a subsidiary of AVIC International, a Chinese government-owned holding company with diverse business interests in the aerospace sector. The sale price, according to AVIC and Teledyne Technologies, was $186 million, and terms of the sale included a commitment to remain in Mobile, where Continental has been on the former Brookley Air Force base since the 1960s.

The sale will result in an infusion of new capital to rapidly develop the diesel technology Continental bought from SMA last spring, for both the Chinese and the international market, according to Teledyne's Jason VanWees, Teledyne Technologies' vice president for business development. He said that once the sale has cleared regulatory hurdles, it should become final by the end of the first quarter of 2011. Until then, Teledyne will continue to oversee TCM.

VanWees said Tuesday that AVIC executives met with Mobile city officials recently and committed to keeping TCM on its large Brookley site, where it shares a complex of former military facilities with a number of aerospace companies on what is now Mobile Downtown Airport. He said AVIC is also impressed by other business interests in Mobile, including a potential EADS plant to build A330 tankers for the U.S. Air Force and an expanding ThyseenKrupp steel mill.

Although TCM's business has fallen off dramatically since 2008, it has remained in the black, but only through aggressive cost control. TCM's sales represent only a tiny fraction of Teledyne's $1.8 billion in revenues but, according to VanWees, as the corporate parent has acquired more technology companies, aerospace manufacturing is not considered its core competency.

Of the 34 acquisitions Teledyne has made, most are in the electronics and instrumentation segment, with a smattering of defense-related businesses.

"You have to have an international strategy. We're not an aviation company," VanWees added. He said that with its extensive business relationship with companies like Boeing and Honeywell, AVIC represents a much better fit for TCM.

One immediate goal, says VanWees, is an infusion of capital to rapidly develop the diesel technology TCM bought last spring from SMA. Although no one is sure of the timing, the Chinese general aviation market is seen as a significant growth opportunity, and the diesel engine could be pitched into that market in the two- to five-year time frame.

"We've been talking to the OEMs, and most of them would like to have a diesel engine," VanWees said. As for keeping the plant in Mobile, VanWees said AVIC has made a strong commitment to do so.

"This is Chinese ownership, no doubt. We've got a great low-cost lease at the former Brookley. How are you going to build a fully FAA-certified manufacturing facility in China? Why do that?" he said.

VanWees told AVweb that the current TCM management team will remain in place and that neither company expects any changes before March and perhaps not after that, either.

Although capital will spur the diesel development, VanWees said TCM will continue to face the challenge of high-mix, low-volume manufacturing because the stability of the business depends on the legacy aftermarket. But the growth will likely come in the international market with new products.

"I don't think the plant is ever going to look like a car plant, where you have only a bunch of robots touching things," VanWees said. Nonetheless, TCM has invested in new manufacturing and quality control technology and is expected to continue to do so.

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