With Cessna back in the new piston airplane business, Lycoming should soon be top dog of the OEM engine market. But while they're busy gearing up for Cessna, the company still plans to expand its overhaul and parts business.
November 9, 1995
|Will the piston engines of tomorrow incorporate new technology
of will they just be more of the same? Do piston aircraft engines
even have a future? To answer these questions, we've been touring
the country talking to as many engine experts as we could find.
This is the second article in a periodic series on the current
state and future of the engine business. The
first article in this series
recounts our visit to Teledyne-Continental Motors. A companion piece
presents our long and revealing one-on-one
interview with Lycoming's CEO.
When we embarked upon our grand tour of engine plants and shops
last fall, a mechanic we know advised us to brace for a shock
when our travels took us to Textron Lycoming's plant in Williamsport,
"You won't believe that place," he said. "It's
like a ghost town."
While that admonition proved to be an exaggeration, there's truth
to it, too. Lycoming's aviation engine business is a fraction
of what it was in the late 1970s, during the heyday of general
aviation manufacturing in the U.S. The plant is a working monument
to the term "sunset industry," but it also shows that
even in the midst of a declining market, a determined company
can prosper at a volume of business that would have seemed preposterously
low by 1970s standards.
As has Continental, Lycoming has survived by brutally downsizing
itself during the late 1980s and by ruthlessly cutting costs.
But unlike Continental, which plans to capitalize on what may
be a modest recovery by investing in new plant, Lycoming will
continue to shrink its Williamsport workforce and to outsource
most of its primary manufacturing. In effect, the plant is evolving
into a large, highly specialized assembly operation whose competition
is field overhaul shops and the companies that make engine parts.
As we reported in the August Aviation Consumer, Continental is
investing substantial money into clean-sheet engine designs while
Lycoming intends only incremental improvements, with no revolutionary
products in the works. (At least none that they would tell us
What limited R & D money it has goes into improved and more
efficient manufacturing processes and—an industry buzzword these
days—"enhanced customer service."
Shortly after our third visit to Lycoming, Cessna announced that
all of its new production will use Lycoming engines, thus Lycoming
will soon be far ahead of Continental in new engine sales.
Yet even though Lycoming execs seemed happy with this development,
they weren't exactly dancing in the streets at Williamsport. Cessna
hasn't ordered production-run engines yet and in general, we sensed
that at Lycoming, any euphoria over a glorious recovery is tempered
by the trauma of cutbacks that seem all too recent.
The Old Line
A visitor to Lycoming's Williamsport plant is struck by one thing:
the place is old, seemingly but a generation beyond the days when
factories ran on steam-driven lineshafts. Lycoming's "modern"
history—meaning the manufacture of airplane engines—dates to
early 1920s, when it produced a nine-cylinder radial, the R-680,
which powered such aircraft as Stinsons and Stearmans.
Before that, the Lycoming Company, on the same site it now occupies,
manufactured auto engines for the Cord, Auburn and Duesenberg
and before that, it made a successful line of sewing machines.
(The company files still contain spec sheets and price lists for
the sewing machines; evidently, before turning to engines, Lycoming
(then called Demorest Fashion and Sewing) achieved no small success
in the sewing and garment industry.)
In 1932, Lycoming got gobbled up by the Aviation Corporation (Avco),
which already consisted of 81 companies, including Fairchild,
Bendix, Fokker and several airlines. Through the 1930s and 1940s,
it built aircraft engines of all designs (including radials) and,
eventually, tank and turbine engines.
In 1986, Avco was bought (including Lycoming) by Textron, yet
another old-line industrial conglomerate that evolved from the
New England textile industry (hence the name). Cessna wound up
in the Textron fold in 1992, having been bought from General Dynamics.
Like Continental, Lycoming had been going great guns through the
1970s. The industry seemed to accept periodic downturns but everyone
assumed the inevitable rebound would yield yet ever higher demand
for engines. The crash of 1980-81 changed all that. In little
more than three years, piston production sagged from a high of
17,000 to barely 3500 in 1982. The engine industry practically
went down the tubes with the OEMs.
At its peak production, Lycoming had three shifts of workers,
turning out 1500 new engines a month. There was no need to bother
with remans or overhauls in those days. Now the output hovers
between 300 and 400 engines a month, most of them remans and factory
overhauls. The workforce stands at just less than 600, down from
a peak of about 1800 during the heyday. Two years from now, it
will decline to 300 or so, according to
Lycoming's CEO, with production at or above the 300-engines-a-month
level and plenty of additional capacity.
On the Factory Floor
The downsizing is obvious to even a casual observer touring the
Williamsport plant. The factory is a complex of classic, old-style
industrial buildings, with high ceilings dimly lighted with fluorescent
tubes and populated by rows of old machine tools, some dating
to the 1940s and 1950s. Large areas of the plant floor are given
over to...nothing. As production plummeted, Lycoming laid off
workers and did away with defunct and unused machinery. Until
recently, the Williamsport plant made parts for the turbine division
in Bridgeport, but that business was sold to Allied-Signal and
now all that remains are a few pieces of advanced CNC machinery.
During our tours, we were shown some machine tools upgraded with
numerical controls, but generally, the factory runs on the tools
it had 20 or 30 years ago. During the early 1970s, Lycoming built
a high-output line for connecting rods and a fully automated crankcase
machining line that trundles cases from one machining operation
to the next on a little trolley. It was state of the art for its
day and still holds its own. But it has far more capacity than
Lycoming has orders.
We were told that incremental improvements are made on machining
and tooling processes, but no capital-intensive upgrades of the
sort we saw at Continental are planned. Instead, the Holy Grail
at Lycoming is outsourcing. Lycoming insists that it's more than
profitable enough to invest in new plant, but it chooses not
"We are in the position to invest," says Phil Boob,
"but that would be the wrong answer for us. The reason is
that other people have already made that investment in modern
equipment that's being under utilized. There's just tremendous
excess quality machining all over the world and in the U.S. As
long the quality is there in the finished product, the customer
doesn't care who makes it."
Continental, of course, also outsources but it has aggressively
invested in modern machinery, a strategy that Boob says Lycoming
considered but rejected.
"I'm wondering what the financials are going to look like
when they start getting hit with the depreciation on that equipment
in a skinny market. Five years from now, are they going to wake
up and find that the company can't be profitable because of the
depreciation? One of us is gonna be right and one of us is gonna
be wrong. The world isn't going to vertical integration anymore.
It hasn't been for years. Why fight the world?"
Managers at Lycoming are fond of the phrase "added value"
and throughout our tours, we were shown operations in which
Lycoming workers were machining or processing parts which had
originally been produced by another manufacturer. About 75 percent
of its manufacturing is "value added," meaning that
25 percent of what goes into a Lycoming engine arrives at the
factory in finished condition, with no need for the factory to
do anything but install it.
Within two to three years, that number will be closer to 95 percent.
The factory will require a fraction of the floor space it now
occupies and the workforce is expected to stabilize at about 300
The Quality Issue
For all its benefits, outsourcing has its problems. If the vendors
aren't competent the quality will suffer and if they aren't reliable,
the parts won't arrive on time. Lycoming admits that this has
been a problem in the past, if only in terms of the sheer volume
Engineer Rick Moffett told us that as recently as a year ago,
the company was dealing with some 300 vendors; 80 companies alone
supplied fasteners and hardware. By this summer, the vendor list
had been winnowed to 130 and eventually, most of Lycoming's outside
work and parts will be supplied by fewer than 100 companies.
Quality control is one reason for this. At Continental, we saw
a QC program built on periodic inspections of each process
and part and Lycoming does the same, at least for now. They hope
to rapidly move toward a system of certified vendors, whereby
companies supplying the parts demonstrate they can produce quality
work and inspect parts in their own plants before shipping them.
"It makes no sense to inspect parts over and over,"
says Moffett. "It just adds cost, but no value." Instead,
he says, "At some point, a vendor's quality is at the point
where we wouldn't catch any problems unless we inspected every
On the engine assembly line itself, Lycoming operates two distinct
lines, one for new engines and one for remans and overhauls. Exchange
overhauls are done in the factory while customer overhauls are
completed in a small shop at the Williamsport Airport. This is
in contrast to Continental, where all the engines move down the
same line, differentiated only by the color of the serial number
plate. (Continental doesn't offer factory overhauls, just remans.)
At various points in the Lycoming assembly process, each engine
is inspected for critical items such as cylinder-bolt or rod-bolt
torque, for example.
As does Continental, Lycoming performs an instrumented test-cell
run on every engine and documents the results. It also disassembles
every 20th engine of each type after the test cell run to inspect
for damage or unusual wear. (Continental strips every 25th engine.
There's no particular magic in either number; it's just the inspection
procedure the FAA happened to have approved for each factory.)
At Continental, we were shown detailed manuals that list standardized
assembly procedures for each engine as it moves down the line.
Slowly, these assembly manuals are being tied into computer tracking
systems. By comparison, Lycoming is just beginning to develop
this sort of computerized documentation, although each engine
is accompanied down the line by inspection sheets that ultimately
form a paper trail of its history.
Curiously, although we have to say Continental's QC systems appear
to be more state-of-the-art, we receive far fewer complaints of
poor quality slipping through the cracks at Lycoming. In our informal
surveys of engine shops and from letters we receive from owners
and operators, Lycoming seems to earn acceptable although not
perfect grades for quality. What complaints we do hear often
concern lagging parts shipments and, from field overhaul shops,
high prices on engine parts that make it difficult for them to
compete with the factory's economics. Indeed, at one engine shop
we visited, almost the entire stockroom was filled with boxes
from Superior Air Parts, the leading supplier of aftermarket engine
components and Lycoming's chief competition. Without Superior
and other PMA houses, say many field shops, Lycoming would have
little incentive to price its engines and parts competitively.
Getting the Business
But Lycoming does have the competition and having watched its
new engine business dwindle, the company has filled the void by
going after the bread and butter of the field overhaul shops.
"In 1976, we didn't really sell engines," says Peter
Bates, who handles international marketing, "if you wanted
an engine, you knew where to find us."
All that's changed, of course. Until Cessna ramps up (and assuming
it really meets its projected sales volumes), 70 percent of Lycoming's
dollar output is either parts or remanufactured/overhauled engines.
Despite the Cessna orders, we expect Lycoming will continue to
go after the replacement market.
"Right now," says Boob, "the competition is fierce
and the margins tend not to be what we would like. But if we get
our cost structure in line—and we have been doing that—then
there's no reason that we shouldn't own a minimum of 60 to 75
percent of that worldwide market."
When Lycoming first got into the overhaul business, its prices
didn't lure much business away from traditional overhaul shops.
As both Lycoming and Continental have lowered their costs and
learned to live by thinner margins and with Lycoming offering
factory overhauls, marginal field shops have been driven out
of the business and those that remain are finding a tougher go
On many engines, overhaul shops can still undersell the factory,
but the price spread is less than it used to be and factory engines
always include new cylinders, a significant incentive for some
In 1992, Lycoming essentially cut the cost of its cylinder kits
by half on the most popular engines. This development didn't kill
the re-conditioned cylinder market overnight, but it surely eased
the pain of equipping an overhaul with new jugs instead of reconditioning
the old ones. It also made factory overhauls yet more competitive.
The factory had always been at a disadvantage in service and engine
delivery times. With five to eight week lead times common, field
overhaul shops are bad enough but until recently, Lycoming had
trouble matching even those schedules. Now, the factory has put
in place a four-tiered delivery schedule, such that engines for
popular airplanes—an IO-360 for a Mooney, for exampleùare
kept "inflow" and can supposedly be shipped within two
weeks on an exchange basis. Few field shops can match that.
Although delivering an overhaul or reman in two weeks sounds like
a trivial accomplishment, Moffett says it took a fundamental reshaping
of factory culture that's still ongoing. "Being good at building
new engines doesn't mean you're worth a damn at overhauls,"
he says. In days of yore, when volumes were high, the plant would
inventory parts for each engine. But because Lycoming builds so
many variants of only five engine families (more than 600), the
process was wasteful of time and money. Worse, if an engine assembler
ran out of cranks or some other part, work would halt until a
new run of parts could be made.
Now, Lycoming uses a variation of the "just-in-time"
inventory method pioneered by Japanese auto plants. Inventories
of major parts are tracked by demand and then advanced through
manufacturing only to the point where commonality with other engines
in the family ends.
The O-320, for example, used to require six basic crankshafts
in 29 variations, the differentiation amounting to a hole bored
here instead of there. Now, says Moffett, there are three basic
cranks and finish work on the part doesn't happen until just before
it's due to go into the engine, thus the plant ties up less money
in inventory but can still meet short delivery schedules.
More of the Same
Another stark contrast between Lycoming and Continental is the
corporate attitude toward innovation and risk. Continental
touts itself as a high-technology engine company, with hopes that
its clean-sheet designs will lead the way to the future.
Lycoming, on the other hand, is obsessive about retaining what
works, making tweaks in production processes and, above all, avoiding
disastrous service problems that alienate customers and strain
the warranty budget. Some complain that Lycoming is too conservative
and waits too long to correct design or production flaws. In recent
history, one of Lycoming's more painful forays into innovation
was the O-320-H2AD engine that powered the Cessna 172 from 1977
to 1980. The engine was supposedly an improved variant of what
had been a virtually bulletproof powerplant for Cessna. More important,
it gave Lycoming an opportunity to tailor the engine to its new
automated crankcase line.
The engine proved to be an embarrassment for both Lycoming and
Cessna. It suffered premature camshaft and valve train wear, not
to mention failures due to sheared oil pump drives. Lycoming eventually
cured the H-engine's ills, but the experience reinforced the company's
instincts to stick with the tried and true.
Still, that didn't stop Lycoming from teaming with John Deere
in the mid-1980s to build a revolutionary new aircraft rotary
engine. After sinking millions into the project, neither Deere
nor Lycoming found any takers. Well, actually, they found one.
"I was vice-president of sales at the time," recalls
Phil Boob. "We found just one airframe manufacturer willing
to sign a memorandum of understanding to go forward with that
engine. That was Cessna. They signed the memorandum on Monday
and made the announcement on Friday that they were getting
out of the light airplane business."
In Boob's mind, the current market—probably even a revitalized
market—isn't demanding nor will it support revolutionary engine
"If all I'm doing is replacing engines that I'm selling anyway,
how does it make sense to develop new engines? Now if you could
increase the market, or increase the total number of units you
could sell, or you could get more per engine, obviously, it starts
to make some sense. But if I'm going to replace a 540 with a rotary
at the same numbers, why am I going to do it? Why would anyone
That's not to say Lycoming won't improve its engines incrementally.
It plans to make available the new Slick LASAR electronic ignition
system and doubtless numerous other minor improvements. But if
you're looking for a new-age powerplant with 400 horsepower and
.30 fuel specifics, it won't come from Williamsport.
Of all the companies we've visited recently, Lycoming seems the
best positioned to benefit from any GA recovery. With Cessna's
restart on the horizon, Lycoming won't need much investment to
service what could be a huge inflow of business. Even if Cessna
fizzles, Lycoming appears to be in a superb position to grab more
of the overhaul and reman market.
Although Lycoming's customer service network is not yet as sophisticated
as Continental's—its plans for computer on-line access to maintenance
data are a year or more away—the company has added service reps
in the field and doubled the number of people available to help
customers over the phone. And despite complaints, Lycoming doesn't
suffer the bad quality rep that seems to perpetually dog Continental.
We see this as generally positive news for aircraft owners and
operators, although we have some concerns that if predatory pricing
drives too many field shops out of business, lack of competition
will cause engine prices to spiral upward again and service quality
Given the health of the PMA industry, however, that seems unlikely
to happen in the near term future.
Gearing Up For Cessna
In the old days, a major new order for powerplants meant the factory
would staff up, add shifts and go at the job hammer and tong.
Not anymore. Although it has hired on some additional engineering
help, Lycoming will fill Cessna's orders mostly with the workers
it already has, with outside companies building the parts and
Despite the fact that the 172,182 and 206 will be getting engines
they've never had before, Lycoming will stick to its corporate
philosophy of using only the tried and true, or at least as much
of it as the customer will accept.
The parallel-valve IO-360 to be used in the Cessna 172, for example,
is virtually the same engine used in the Cutlass RG, although
it will have fuel injection instead of a carburetor, ostensibly
to reduce the likelihood of carburetor ice. At this point, it
looks like Slick's LASAR electronic ignition system will be an
option on this engine, but not necessarily standard. (It hasn't
been certified yet.)
When we visited the plant last winter, no one at Lycoming
thought Cessna would drop the Continental IO-520 in favor of a
Lycoming engine but that's exactly what happened. Cessna asked
Lycorning for a 300-plus HP bed-mounted engine for the 206 and
Lycoming proposed a new model called the IO-580. But even this
engine is new only by degree.
The power section (crankcase, crankshaft, rods, cam) will be essentially
the same as that used in the 540-series engines, with the additional
displacement coming from boring of standard 540 cylinders. The
heads will be retreads, too, having been used on the TIO-540-V2BD
used in the Piper Mojave 15 years ago. That engine had less than
a stellar service history but its problems weren't related to
heads and cylinders. The IO-580 will have 310 HP and a turbocharged
version-using a new model Garrett turbocharger-is in the works.
The biggest difference may be in external appearance. The IO-580
will have top-mounted induction and a bottom-mounted exhaust,
whereas Lycoming has generally located the intake plumbing on
the bottom of the engine.