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.

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Will the piston engines of tomorrow incorporate new technologyof will they just be more of the same? Do piston aircraft engineseven have a future? To answer these questions, we’ve been touringthe country talking to as many engine experts as we could find.This is the second article in a periodic series on the currentstate and future of the engine business. Thefirst article in this seriesrecounts our visit to Teledyne-Continental Motors. A companion piecepresents our long and revealing one-on-one interview with Lycoming’s CEO.

 


When we embarked upon our grand tour of engine plants and shopslast fall, a mechanic we know advised us to brace for a shockwhen our travels took us to Textron Lycoming’s plant in Williamsport,Pennsylvania.

"You won’t believe that place," he said. "It’slike a ghost town."

While that admonition proved to be an exaggeration, there’s truthto it, too. Lycoming’s aviation engine business is a fractionof what it was in the late 1970s, during the heyday of generalaviation manufacturing in the U.S. The plant is a working monumentto the term "sunset industry," but it also shows thateven in the midst of a declining market, a determined companycan prosper at a volume of business that would have seemed preposterouslylow by 1970s standards.

As has Continental, Lycoming has survived by brutally downsizingitself during the late 1980s and by ruthlessly cutting costs.But unlike Continental, which plans to capitalize on what maybe a modest recovery by investing in new plant, Lycoming willcontinue to shrink its Williamsport workforce and to outsourcemost of its primary manufacturing. In effect, the plant is evolvinginto 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 isinvesting substantial money into clean-sheet engine designs whileLycoming intends only incremental improvements, with no revolutionaryproducts in the works. (At least none that they would tell usabout.)

What limited R & D money it has goes into improved and moreefficient manufacturing processes and—an industry buzzword thesedays—"enhanced customer service."

Shortly after our third visit to Lycoming, Cessna announced thatall of its new production will use Lycoming engines, thus Lycomingwill 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. Cessnahasn’t ordered production-run engines yet and in general, we sensedthat at Lycoming, any euphoria over a glorious recovery is temperedby 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 whenfactories ran on steam-driven lineshafts. Lycoming’s "modern"history—meaning the manufacture of airplane engines—dates toearly 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 Duesenbergand before that, it made a successful line of sewing machines.(The company files still contain spec sheets and price lists forthe sewing machines; evidently, before turning to engines, Lycoming(then called Demorest Fashion and Sewing) achieved no small successin 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, yetanother old-line industrial conglomerate that evolved from theNew England textile industry (hence the name). Cessna wound upin the Textron fold in 1992, having been bought from General Dynamics.

Like Continental, Lycoming had been going great guns through the1970s. The industry seemed to accept periodic downturns but everyoneassumed the inevitable rebound would yield yet ever higher demandfor engines. The crash of 1980-81 changed all that. In littlemore than three years, piston production sagged from a high of17,000 to barely 3500 in 1982. The engine industry practicallywent 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 botherwith remans or overhauls in those days. Now the output hoversbetween 300 and 400 engines a month, most of them remans and factory overhauls. The workforce stands at just less than 600, down froma peak of about 1800 during the heyday. Two years from now, itwill decline to 300 or so, according toPhil Boob,Lycoming’s CEO, with production at or above the 300-engines-a-monthlevel and plenty of additional capacity.

On the Factory Floor

The downsizing is obvious to even a casual observer touring theWilliamsport plant. The factory is a complex of classic, old-styleindustrial buildings, with high ceilings dimly lighted with fluorescenttubes and populated by rows of old machine tools, some datingto the 1940s and 1950s. Large areas of the plant floor are givenover to…nothing. As production plummeted, Lycoming laid offworkers and did away with defunct and unused machinery. Untilrecently, the Williamsport plant made parts for the turbine divisionin Bridgeport, but that business was sold to Allied-Signal andnow all that remains are a few pieces of advanced CNC machinery.

During our tours, we were shown some machine tools upgraded withnumerical controls, but generally, the factory runs on the toolsit had 20 or 30 years ago. During the early 1970s, Lycoming builta high-output line for connecting rods and a fully automated crankcasemachining line that trundles cases from one machining operationto the next on a little trolley. It was state of the art for itsday and still holds its own. But it has far more capacity thanLycoming has orders.

We were told that incremental improvements are made on machiningand tooling processes, but no capital-intensive upgrades of thesort we saw at Continental are planned. Instead, the Holy Grailat Lycoming is outsourcing. Lycoming insists that it’s more thanprofitable enough to invest in new plant, but it chooses notto.

"We are in the position to invest," says Phil Boob,"but that would be the wrong answer for us. The reason isthat other people have already made that investment in modernequipment that’s being under utilized. There’s just tremendousexcess quality machining all over the world and in the U.S. Aslong the quality is there in the finished product, the customerdoesn’t care who makes it."

Continental, of course, also outsources but it has aggressivelyinvested in modern machinery, a strategy that Boob says Lycomingconsidered but rejected.

"I’m wondering what the financials are going to look likewhen they start getting hit with the depreciation on that equipmentin a skinny market. Five years from now, are they going to wakeup and find that the company can’t be profitable because of thedepreciation? One of us is gonna be right and one of us is gonnabe 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 hadoriginally been produced by another manufacturer. About 75 percentof its manufacturing is "value added," meaning that25 percent of what goes into a Lycoming engine arrives at thefactory in finished condition, with no need for the factory todo 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 nowoccupies and the workforce is expected to stabilize at about 300workers.

The Quality Issue

For all its benefits, outsourcing has its problems. If the vendorsaren’t competent the quality will suffer and if they aren’t reliable,the parts won’t arrive on time. Lycoming admits that this hasbeen a problem in the past, if only in terms of the sheer volumeof vendors.

Engineer Rick Moffett told us that as recently as a year ago,the company was dealing with some 300 vendors; 80 companies alonesupplied fasteners and hardware. By this summer, the vendor listhad been winnowed to 130 and eventually, most of Lycoming’s outsidework and parts will be supplied by fewer than 100 companies.

Quality control is one reason for this. At Continental, we sawa QC program built on periodic inspections of each processand part and Lycoming does the same, at least for now. They hopeto rapidly move toward a system of certified vendors, wherebycompanies supplying the parts demonstrate they can produce qualitywork 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 pointwhere we wouldn’t catch any problems unless we inspected everypart."

On the engine assembly line itself, Lycoming operates two distinctlines, one for new engines and one for remans and overhauls. Exchangeoverhauls are done in the factory while customer overhauls arecompleted in a small shop at the Williamsport Airport. This isin contrast to Continental, where all the engines move down thesame line, differentiated only by the color of the serial numberplate. (Continental doesn’t offer factory overhauls, just remans.)At various points in the Lycoming assembly process, each engineis inspected for critical items such as cylinder-bolt or rod-bolttorque, for example.

As does Continental, Lycoming performs an instrumented test-cellrun on every engine and documents the results. It also disassemblesevery 20th engine of each type after the test cell run to inspectfor damage or unusual wear. (Continental strips every 25th engine.There’s no particular magic in either number; it’s just the inspectionprocedure the FAA happened to have approved for each factory.)

At Continental, we were shown detailed manuals that list standardizedassembly procedures for each engine as it moves down the line.Slowly, these assembly manuals are being tied into computer trackingsystems. By comparison, Lycoming is just beginning to developthis sort of computerized documentation, although each engine is accompanied down the line by inspection sheets that ultimatelyform a paper trail of its history.

Curiously, although we have to say Continental’s QC systems appearto be more state-of-the-art, we receive far fewer complaints ofpoor quality slipping through the cracks at Lycoming. In our informalsurveys of engine shops and from letters we receive from ownersand operators, Lycoming seems to earn acceptable although notperfect 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 tocompete with the factory’s economics. Indeed, at one engine shopwe visited, almost the entire stockroom was filled with boxesfrom Superior Air Parts, the leading supplier of aftermarket enginecomponents and Lycoming’s chief competition. Without Superiorand other PMA houses, say many field shops, Lycoming would havelittle incentive to price its engines and parts competitively.

Getting the Business

But Lycoming does have the competition and having watched itsnew engine business dwindle, the company has filled the void bygoing after the bread and butter of the field overhaul shops.

"In 1976, we didn’t really sell engines," says PeterBates, who handles international marketing, "if you wantedan engine, you knew where to find us."

All that’s changed, of course. Until Cessna ramps up (and assumingit really meets its projected sales volumes), 70 percent of Lycoming’sdollar output is either parts or remanufactured/overhauled engines.Despite the Cessna orders, we expect Lycoming will continue togo after the replacement market.

"Right now," says Boob, "the competition is fierceand the margins tend not to be what we would like. But if we getour cost structure in line—and we have been doing that—thenthere’s no reason that we shouldn’t own a minimum of 60 to 75percent of that worldwide market."

When Lycoming first got into the overhaul business, its pricesdidn’t lure much business away from traditional overhaul shops.As both Lycoming and Continental have lowered their costs andlearned to live by thinner margins and with Lycoming offering factory overhauls, marginal field shops have been driven outof the business and those that remain are finding a tougher goof it.

On many engines, overhaul shops can still undersell the factory,but the price spread is less than it used to be and factory enginesalways include new cylinders, a significant incentive for somecustomers.

In 1992, Lycoming essentially cut the cost of its cylinder kitsby half on the most popular engines. This development didn’t killthe re-conditioned cylinder market overnight, but it surely easedthe pain of equipping an overhaul with new jugs instead of reconditioningthe old ones. It also made factory overhauls yet more competitive.

The factory had always been at a disadvantage in service and enginedelivery times. With five to eight week lead times common, fieldoverhaul shops are bad enough but until recently, Lycoming hadtrouble matching even those schedules. Now, the factory has putin place a four-tiered delivery schedule, such that engines forpopular airplanes—an IO-360 for a Mooney, for exampleùarekept "inflow" and can supposedly be shipped within twoweeks on an exchange basis. Few field shops can match that.

Although delivering an overhaul or reman in two weeks sounds likea trivial accomplishment, Moffett says it took a fundamental reshapingof factory culture that’s still ongoing. "Being good at buildingnew engines doesn’t mean you’re worth a damn at overhauls,"he says. In days of yore, when volumes were high, the plant wouldinventory parts for each engine. But because Lycoming builds somany variants of only five engine families (more than 600), theprocess was wasteful of time and money. Worse, if an engine assemblerran out of cranks or some other part, work would halt until anew run of parts could be made.

Now, Lycoming uses a variation of the "just-in-time"inventory method pioneered by Japanese auto plants. Inventoriesof major parts are tracked by demand and then advanced throughmanufacturing only to the point where commonality with other enginesin the family ends.

The O-320, for example, used to require six basic crankshaftsin 29 variations, the differentiation amounting to a hole boredhere instead of there. Now, says Moffett, there are three basiccranks and finish work on the part doesn’t happen until just beforeit’s due to go into the engine, thus the plant ties up less moneyin inventory but can still meet short delivery schedules.

More of the Same

Another stark contrast between Lycoming and Continental is thecorporate attitude toward innovation and risk. Continentaltouts itself as a high-technology engine company, with hopes thatits clean-sheet designs will lead the way to the future.

Lycoming, on the other hand, is obsessive about retaining whatworks, making tweaks in production processes and, above all, avoidingdisastrous service problems that alienate customers and strainthe warranty budget. Some complain that Lycoming is too conservativeand waits too long to correct design or production flaws. In recenthistory, one of Lycoming’s more painful forays into innovationwas the O-320-H2AD engine that powered the Cessna 172 from 1977to 1980. The engine was supposedly an improved variant of whathad been a virtually bulletproof powerplant for Cessna. More important,it gave Lycoming an opportunity to tailor the engine to its newautomated crankcase line.

The engine proved to be an embarrassment for both Lycoming andCessna. It suffered premature camshaft and valve train wear, notto mention failures due to sheared oil pump drives. Lycoming eventuallycured the H-engine’s ills, but the experience reinforced the company’sinstincts to stick with the tried and true.

Still, that didn’t stop Lycoming from teaming with John Deerein the mid-1980s to build a revolutionary new aircraft rotaryengine. After sinking millions into the project, neither Deerenor Lycoming found any takers. Well, actually, they found one.

"I was vice-president of sales at the time," recallsPhil Boob. "We found just one airframe manufacturer willingto sign a memorandum of understanding to go forward with thatengine. That was Cessna. They signed the memorandum on Monday and made the announcement on Friday that they were gettingout of the light airplane business."

In Boob’s mind, the current market—probably even a revitalizedmarket—isn’t demanding nor will it support revolutionary enginedesigns.

"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 couldincrease the market, or increase the total number of units youcould sell, or you could get more per engine, obviously, it startsto make some sense. But if I’m going to replace a 540 with a rotaryat the same numbers, why am I going to do it? Why would anyonedo it?"

That’s not to say Lycoming won’t improve its engines incrementally.It plans to make available the new Slick LASAR electronic ignitionsystem and doubtless numerous other minor improvements. But ifyou’re looking for a new-age powerplant with 400 horsepower and.30 fuel specifics, it won’t come from Williamsport.

Conclusion

Of all the companies we’ve visited recently, Lycoming seems thebest positioned to benefit from any GA recovery. With Cessna’srestart on the horizon, Lycoming won’t need much investment toservice what could be a huge inflow of business. Even if Cessnafizzles, Lycoming appears to be in a superb position to grab moreof the overhaul and reman market.

Although Lycoming’s customer service network is not yet as sophisticatedas Continental’s—its plans for computer on-line access to maintenancedata are a year or more away—the company has added service repsin the field and doubled the number of people available to helpcustomers over the phone. And despite complaints, Lycoming doesn’tsuffer the bad quality rep that seems to perpetually dog Continental.

We see this as generally positive news for aircraft owners andoperators, although we have some concerns that if predatory pricingdrives too many field shops out of business, lack of competitionwill cause engine prices to spiral upward again and service qualitymay decline.

Given the health of the PMA industry, however, that seems unlikelyto happen in the near term future.


Gearing Up For Cessna

In the old days, a major new order for powerplants meant the factorywould staff up, add shifts and go at the job hammer and tong.Not anymore. Although it has hired on some additional engineeringhelp, Lycoming will fill Cessna’s orders mostly with the workersit already has, with outside companies building the parts andpieces.

Despite the fact that the 172,182 and 206 will be getting enginesthey’ve never had before, Lycoming will stick to its corporatephilosophy of using only the tried and true, or at least as muchof 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, althoughit will have fuel injection instead of a carburetor, ostensiblyto reduce the likelihood of carburetor ice. At this point, itlooks like Slick’s LASAR electronic ignition system will be anoption on this engine, but not necessarily standard. (It hasn’tbeen certified yet.)

When we visited the plant last winter, no one at Lycoming

thought Cessna would drop the Continental IO-520 in favor of aLycoming engine but that’s exactly what happened. Cessna askedLycorning for a 300-plus HP bed-mounted engine for the 206 andLycoming proposed a new model called the IO-580. But even thisengine is new only by degree.

The power section (crankcase, crankshaft, rods, cam) will be essentiallythe same as that used in the 540-series engines, with the additionaldisplacement coming from boring of standard 540 cylinders. Theheads will be retreads, too, having been used on the TIO-540-V2BDused in the Piper Mojave 15 years ago. That engine had less thana stellar service history but its problems weren’t related toheads and cylinders. The IO-580 will have 310 HP and a turbochargedversion-using a new model Garrett turbocharger-is in the works.

The biggest difference may be in external appearance. The IO-580will have top-mounted induction and a bottom-mounted exhaust,whereas Lycoming has generally located the intake plumbing onthe bottom of the engine.