Interview Synopsis

GE Aviation – Supply Chain & Production Ramp Outlook

  • Public Equity
  • Industrials
  • North America

In this Third Bridge Forum Interview, we delved into GE Aviation’s supply chain and the key industry issues and current constraints investors need to be aware of. Overall, we heard that obstacles remain, but GE is showing resilience.

Material lead times beginning to normalise – but labour still strained

The former VP at GE Aviation said suppliers are most constrained by raw materials, with the industry currently “building back” after Covid-19 and geopolitical disruption – particularly in off-shift capabilities in the melting space, and complex structural casting, such as turbine centre frames. There are also challenges in small-diameter bars “because of the labour intensity that we get into when we have to refine and build it into smaller and smaller diameters”. Mill lead times are exceeding 80-100 weeks – “a pretty significant change in the industry”, our expert said.

Although material lead times are elevated, they are beginning to normalise across some products. However, as the picture improves the expert believes labour constraints, particularly when it comes to specialised skill sets, could surface.

As for the forging and casting houses, the specialist said the aerofoil space appears to be healthy. “Some suppliers excel in core capability, some suppliers rely on buying cores and focus on their cast capabilities, but a bigger challenge is in the melt space for billet, specifically product lines that get into powder billet.” The expert said Covid-19 heavily impacted volumes “so… getting the labour in place has been something that GE has been very focused on”.

When thinking about production ramp-up, the expert said investors should be “poking at billet buffer… at lead times, and… at first pass yields. Those three indicators will tell you what you need to know about the commodity groups that are well-positioned to support the ramp.” 

Suppliers that embrace the “zero-defect mindset” and focus on quality will be the industry winners, according to our expert. “When you’ve got the ability to count on your process capability and demonstrate a defect-capable process, you can flex unforecasted demand… Everything’s better when cycle is better, and cycle only gets better when you have broad-based capabilities in-house with a high first-pass yield.”

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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