Future of the Piston Aircraft Engine, Part 2: A Visit to Lycoming
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.
|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, Pennsylvania.
"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 about.)
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 Phil Boob, 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 to.
"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 workers.
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 of vendors.
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 part."
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 of it.
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 customers.
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 designs.
"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 do it?"
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 may decline.
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 pieces.
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.