jet engine manufacturing in new england - · PDF fileHISTORICAL ROOTS OF JET ENGINE MANUFACTURING IN NEW ENGLAND . . . .6 ... GE began building jet engines in the late 1940s in Lynn,

JET ENGINE MANUFACTURING IN NEW ENGLAND

Beth Almeida

University ofMassachusetts Amherst

U N I V E R S I T Y O F M A S S A C H U S E T T S

Amherst Boston Dartmouth Lowell Worcester

Beth Almeida is a research economist for

the Strategic Resources Department,

International Association of Machinists and

Aerospace Workers. When this paper was

written, she was a doctoral student in

the University of Massachusetts Department

of Economics and a Fellow at the

Center for European Integration Studies

in Bonn, Germany.

© 2001 by the University of Massachusetts Donahue Institute

The contents of this publication may be reproduced only with

permission of the author.

Project manager: Steven LandauManaging editor: Carolyn Dash Mailler

Copy editor: Kathleen LaffertyData analysts: Rebecca Loveland and Ruth Malkin

Jet Engine Manufacturingin New England

Beth Almeida

Contents

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

HISTORICAL ROOTS OF JET ENGINE MANUFACTURING IN NEW ENGLAND . . . .6

The Early Days: The Precision Production Skill Base . . . . . . . . . . . . . . . . . . .7

The Leap to Jet Propulsion: Turbine Technology and the Scientific Skill Base . . . . . . . . . . . . . . . . . . . . . .8

New England’s Science and Technology Infrastructure and Regional Agglomeration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

DOWNSIZING OF THE INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

DIVERGENCE OF FORTUNES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

LOOKING TO THE FUTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

GE’s Response to Downsizing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Trends in Use of Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Retaining the Skill Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

1Jet Engine Manufacturing in New England

New England is the birthplace of the American jet engine industry. Employing 33,675people, 128 firms in the industry build the complex parts, components, sub-

assemblies, and control systems that make up a gas turbine engine. Massachusetts industryemployment accounts for about 9 percent of total U.S. jet engine and engine parts manu-facturing employment, and the state is second only to Connecticut in its concentration ofaircraft engine manufacturing employment. Some twenty firms in Massachusetts employed11,056 people in this industry in the first quarter of 1999. Building jet engines has tradi-tionally been a successful, but often overlooked, example of Massachusetts firms’ strengthsin high-tech manufacturing.

The aircraft gas turbine is a technology truly indigenous to New England. The world-wide leaders in the industry, General Electric Aircraft Engines and Pratt & Whitney,whose combined market share totals 80 percent, both trace their roots to the region.The successes of these firms were historically based as much on the wealth of precisionproduction skill in the area as on the engineering and scientific talent that was so abun-dant in the region, thanks to the technical strengths of New England’s universities.

Throughout the post–World War II era, innovations in propulsion were the “pacingtechnology” that led the improvements in aircraft performance, which in turn grew themarket for air travel. With each new generation of aircraft engines, air travel becamefaster, cheaper, safer, and less damaging to the environment. In many ways, the story ofthe jet engine industry epitomized the golden age of U.S. capitalism in which techno-logical progress helped to grow new markets, providing more and better employmentopportunities over time. New England was, for much of the postwar era, at the centerof this industrial success story.

Recent trends, however, have been less than positive for workers in New England’s air-craft engine industry. Though layoffs and industry consolidation have slowed somewhatsince the dark days of the early 1990s, when a downturn in both the military and com-

Executive Summary

2 UMass Donahue Institute

mercial segments of the aircraft market led to devastating job losses, they stillcontinue. And though the mass job losses and wage stagnation experienced byworkers in the industry during the early 1990s could be attributed to a drop-offin demand, the recovery of the demand for aircraft has by and large failed to re-store employment levels or lead to real wage growth, either regionally or nation-ally. Between the fourth quarter of 1993 and the fourth quarter of 1997, at atime when manufacturing employment as a whole remained essentially flat, Mass-achusetts employment in the industry declined 7.5 percent. Nationally, jet engineemployment fell 19 percent between these years, even though new orders in1997 were 24 percent higher than they were in 1993.

These trends are troubling because they suggest a “divergence of fortunes” be-tween firms’ well being and that of workers in the industry. It appears that cor-porate strategies rather than market forces alone are shaping these employmenttrends. An increasing reliance of engine manufacturers on overseas suppliers, adesire on their part to exit manufacturing activities in favor of more profitableservicing activities, and increased pressures on the part of managers to deliver“value” to shareholders all seem to be playing a role. These conclusions present aparticular challenge to state-level policy makers who might seek to stem the tideof job losses in the industry.


The aerospace industry, the “crown jewel” ofU.S. manufacturing, was for decades after

World War II the source of the many good thingsadvanced industrial economies are expected to pro-vide: good jobs with growing wages, technologicaladvances that allowed for both increased productivi-ty and qualitatively better products, and the exportof U.S. value-added to other countries. All thesedevelopments helped to ensure the health of firmsin the industry while simultaneously contributing toimproved U.S. standards of living.

This state of affairs was especially present in theengine-manufacturing sector of the aerospace in-dustry. Since the introduction of the jet engine inthe 1940s, U.S. firms have come to dominate theglobal market for aircraft gas turbine powerplants. The design innovations engine makersbuilt into each new generation of products al-lowed for air travel that was ever safer, faster,cheaper, and less environmentally damaging thanearlier products; technological advances inpropulsion improved aircraft performance andthus helped to grow the market for air travel.Alongside the growth of the market, employmentopportunities expanded, and as productivity grew,better wages followed.

For much of the postwar period, New England

was at the center of this industrial success story.The combination of production skill, technical ex-pertise, and scientific talent embodied in the re-gion’s workforce contributed greatly to the pros-perity of the leading firms in the industry and, inturn, the region’s workers shared in the fruits ofthese firms’ competitive success.

The industry has seen hard times of late, however.The end of the Cold War has, it seems, perma-nently reduced demand from the aircraft indus-try’s single most important customer, the U.S.Department of Defense. The decline in U.S. gov-ernment orders has meant fewer sales but at thesame time has entailed a redefinition of “value” inthe industry. As fuel prices dropped1 and theproduct has matured over time, airlines haveturned away from state-of-the-art engine designs,preferring simpler products with fewer parts thatare easier to maintain. Producers of aircraft andengines are under more pressure than ever tooffer equipment that is cost-competitive at thetime of purchase and in operational service.2

Despite these challenges to firms in the industry, itshould be remembered that air transportation, farfrom a saturated market, still enjoys healthy growthrates. Since 1975, annual growth in world passen-ger traffic has averaged a robust 6 percent per year,

Introduction


whereas world freight traffic has increased about7.5 percent per year in the same period.3 More-over, the end of the Cold War has brought oppor-tunities as well as challenges, opening new com-mercial aircraft markets in the former Soviet Unionand Eastern Europe. In addition, NATO expan-sion will likely bring forth additional sales of mili-tary models, and economic growth in China has re-sulted in hundreds of millions of dollars worth oforders from that country in recent years.

Indeed, there is ample reason to believe that themajor U.S. engine makers have been quite suc-cessful in responding to recent market challengesand taking advantage of new opportunities. Build-ing on the competitive lead they established dur-ing the 1950s and 1960s, General Electric AircraftEngines (GE) and Pratt & Whitney, the twolargest firms in the industry, have come to domi-nate the market. These firms trace their roots to—and maintain significant manufacturing operationsin—New England. GE began building jet enginesin the late 1940s in Lynn, Massachusetts, for theU.S. Air Force. Pratt & Whitney, headquartered inHartford, Connecticut, is an air-craft engine builder with a histo-ry in the industry going back tothe 1920s. In 1997, the twofirms together received 80 per-cent of all new orders for largecommercial jet engines world-wide.4 GE’s Aircraft Engine di-vision’s 1998 profits weighed inat $1.7 billion, on $10 billion insales, translating into an impres-sive 17 percent operating mar-gin for the division. For its part,Pratt & Whitney registered op-erating profits of $1.024 billionon $7.876 billion in sales in1998, a 13 percent margin.

The competitive strength of theU.S. jet engine manufacturingindustry would seem to be reflected in the highvalue of exports per production worker in the in-dustry as a whole, which amounted to $178,085in 1997. Similarly, value added per productionworker in 1997 was $240,500, more than 50 per-

cent greater than the level for U.S. manufacturingas a whole.5 This productivity premium translatedinto substantially higher average hourly earningsfor production workers in the aircraft engine in-dustry than for other workers: $18.93 per hour in1998 versus $13.49 per hour for overall U.S.manufacturing.6

Such observations might lead one to believe thatworkers in U.S. aircraft engine manufacturing es-caped the effects of globalization and deindustri-alization that traumatized workers in other manu-facturing industries and their communities duringthe 1980s and 1990s. By virtue of competing in aproduct market in which price, however impor-tant, is less so than high quality standards, firmsin this industry are less easily tempted by the lureof “cheap” labor markets and less stringent regu-latory environments than their counterparts inother industries, such as consumer goods. Thisfact would appear to bode well for U.S. aircraftengine manufacturing workers and the cities andtowns that host these manufacturing operations,but below this calm surface lies a paradox.

Despite the apparent competitive strength of U.S.aircraft engine manufacturers, employment in theindustry fell by nearly half in less than a decade.Employment on a national level, as measured bythe Census of Manufactures, peaked in 1988 at

1972 198819841974 1978 198619821976 1980 1990 1992 1994 1996

160

140

0

20

40

60

80

120

100

U.S. Aircraft Engine Manufacturing Employment, 1972–1996Employment in jet engine manufacturing slipped 19 percentbetween 1993 and 1997.

Tho

usan

ds o

f Job

s

TotalProduction workersNon-production workers

141,400 people. By 1996, the industry reportedjust 75,100 employees. Employment saw a slightrebound in 1997, reaching 82,900, but recent an-nouncements of layoffs make it appear that em-ployment is once again headed downward. It isinteresting that in this industry, the effects of in-dustry downsizing have not been confined only tothe blue-collar workforce.

Production and nonproduction workers alike ex-perienced the downsizing of the industry, seeingtheir ranks drop 37 percent and 46 percent, re-spectively, over the 1988 to 1997 period. A trou-bling stagnation of wages during this time com-pounded problems for the industry’s workers. Ac-cording to data from the Bureau of Labor Statis-tics’ Employment and Earnings, average real earn-ings for production workers in aircraft enginemanufacturing were just 0.5 percent higher in1998 than they were in 1989.7

Economic recovery seems not to have turned thetide of employment declines, either regionally ornationally. Massachusetts industry employment inthe fourth quarter of 1997 was 7.5 percent belowthe level registered in the fourth quarter of 1993,as measured by the Massachusetts Division ofEmployment and Training’s ES-202 data. This isa period in which employment in manufacturingoverall was essentially flat. The situation in Massa-chusetts mirrored a national trend; between 1993and 1997, employment in jet engine manufactur-

ing on a national level slid 19 percent, from102,900 to 82,900 workers. What makes thesepatterns even more interesting is that they oc-curred even though this period (1993 to 1997)was one of strong recovery for the industry fromthe dark days of the early 1990s. New orders forengines and engine parts in 1997 were about 24percent higher than they were in 1993.8

What happened? Are these developments a reflec-tion of the post–Cold War status quo in the in-dustry? Has the industry entered a new era inwhich the fortunes of firms’ shareholders andworkers, bound together in former times, havenow become divergent? What have been the ef-fects of these developments for the New Englandeconomy and the region’s workers? What mightthey mean for the future viability of the region’sengine manufacturing skill base? Do recent devel-opments suggest that New England, the tradi-tional cradle of jet engine manufacturing, is nolonger a “competitive” location for this industry,or are regional job losses simply reflective of a re-orientation in corporate strategy?

It is important to understand why the industrygrew up in the region before concluding that itscompetitive advantage has shifted. Starting with ahistorical perspective that sheds light on thestrengths of the New England location helps tounderstand policy proposals aimed at stemmingthe tide of job loss regionally.



According to iMarket Inc.’s MarketPlace data, the aircraft engine and engine parts industry

employed more than 11,000 people in twentyMassachusetts firms in the first quarter of 1999.Massachusetts industry employment representedabout 9 percent of total U.S. jet engine and engineparts employment, and the state is currently secondonly to Connecticut in its concentration of aircraftengine manufacturing employment. In early 1999,Connecticut had close to 16,000 jobs across 95 es-tablishments in this sector. The New England re-gion as a whole was home to 128 firms employing33,675 people, representing 27.8 percent of totalU.S. aircraft engine manufacturing employment.How did New England become home to this con-centration of firms?

When examining high-tech manufacturing indus-tries like building jet engines, observers often havea tendency to highlight the centrality of a scientificskill base to regional competitive advantage. Cer-tainly, the science-based disciplines an organiza-tion must master to manufacture aircraft gas tur-bine engines is impressive: thermodynamics, aero-dynamics, heat transfer, combustion, structures,materials, and instrumentation and controls.9 Astrong scientific infrastructure is indeed crucial to

regional strength in this industry. Equally critical,however, is the ability to develop and continuallyimprove upon manufacturing processes, compe-tencies often taken for granted by economists butwhose existence requires significant technologicaland organizational investments.

What makes an aircraft engine a “complex prod-uct” is that it is made up of thousands of closelyfitted parts that are subject to extreme operatingconditions, the interactions of which may be un-predictable or difficult to model. As a result, thelink between prototyping capabilities and designwork is a close one. This link ties the ability to ar-rive at workable innovations in design to theavailability of precision production skill. More-over, manufacturing processes in the industry in-volve fabricating parts from specialty materials toextremely precise tolerances. The very same prop-erties of these materials (e.g., strength, hardness)that make them desirable for the application athand also make them difficult to work with. Inmany ways, then, the ability of scientists and de-sign engineers in the aircraft engine industry tocome up with ways to improve product perfor-mance has been constrained by the practical solu-tion of manufacturing challenges.

Historical Roots of Jet EngineManufacturing in New England

The area of materials is a perfect example. Im-provements in the development of high-tempera-ture, high-strength, lightweight materials, includ-ing superalloys and metal matrix composites, andthe development of methods to fabricate theseinto precision parts have to a large degree enabledadvanced designs to move from the drawingboard to the production line. These innovationshave allowed the fuel efficiency of jet engines tokeep climbing.10

The importance of local production capacity andskill to prototyping, design work, and even basicinnovation activity was recognized as long ago as1877 by Thomas Edison, who boasted that his fa-mous Menlo Park research lab possessed capabili-ties for “castings, forgings, and can build any-thing from a lady’s watch to a locomotive. Inven-tions that formerly took months and cost largesums can now be done in two or three days withvery small expense.”11 A brief look at the historyof aircraft engine manufacturing in New Englandsupports the idea of a strong interdependenceamong science, engineering, and production ca-pability in contributing to competitive success.The unique combination of both a precision pro-duction skill base and a scientific skill base con-tributed greatly to the locational advantage ofNew England to engine manufacturers.

THE EARLY DAYS: THE PRECISIONPRODUCTION SKILL BASEThe ready availability of skilled craftspeople andthe existence of a network of precision machineand toolmakers—not a supply of scientific tal-ent—laid the foundations for the aircraft engineand parts firms that grew up in New England inthe early days of the industry.12 Indeed, onlymuch later, at the dawn of the jet age, did the re-gion’s science skill base grow in importance. Thestory of Pratt & Whitney, whose base of installedengines represents an amazing 48 percent of allengines powering civil aircraft built outside theformer Soviet Union currently in service world-wide, is instructive.

Pratt & Whitney was originally established as amachine tool builder just before the Civil War.Founders Francis Pratt and Amos Whitney hadbeen employees of the Samuel Colt armory inHartford before leaving to establish their own firmin 1860. The Colt armory and others like it werethe birthplaces of the “American system of manu-factures,” where specialist machines and precisiongauges were employed to produce interchangeableparts that needed no hand fitting.13 This systemrepresented a significant departure from manufac-turing practices of the time, in which fabricatedparts were hand-finished to fit with others as theywere incorporated into the final product. Thegreat leap forward in interchangeability was madepossible by the use of dedicated machinery set toprecise tolerances. The company Pratt and Whit-ney built was one of a number of firms in theConnecticut River valley that produced the spe-cialized machines, fixtures, and gauges that sup-ported the development and spread of this revolu-tionary American system, diffusing the manufac-turing practices that would lay the industrialgroundwork for the next big innovation in the or-ganization of making things, mass production.

Pratt & Whitney’s entry into the aircraft enginebusiness occurred in 1926, when FrederickRentschler, former president of Wright Aero,sought to set up a new business to develop newair-cooled, radial engines for the U.S. Navy. Hebelieved such a design to be superior to the heav-ier liquid-cooled designs of the time, but his finan-cial backers at Wright Aero were unconvinced.The Pratt & Whitney machine tool company hadvacant, excess space in Hartford, and toRentschler, the location was ideal. The combina-tion of the engineering and precision productionskill embodied in the region’s “Yankee mechanics”and the ability to license the rights to use the Pratt& Whitney company name would allowRentschler to translate his design concepts into anactual functioning engine with a brand namewidely associated with quality and reliability. Theproduct of that effort, the Wasp engine, was anenormous success. Within three years of its found-ing, the Pratt & Whitney Aircraft Company wasthe world leader in the industry, and with the



onset of World War II, Pratt’s dominance was ce-mented.14 Pratt & Whitney, along with its li-censees, built engines whose aggregate horsepow-er amounted to 468,222 between 1940 and 1944.The figure represents close to half the total horse-power delivered by the industry during wartime.15

Despite the strength of the production skill basein the area, the development of jet propulsionduring the 1940s presented a fundamental com-petitive challenge to Pratt & Whitney and its re-gional suppliers. During these early years, thecompany was kept out of government-initiatedaircraft gas turbine research and development ef-forts and was ordered to concentrate on produc-ing existing piston engine designs in volume tosustain the war effort. As a result, “By war’s end,Pratt was the clear leader in a technology with nofuture. What was worse, it was nowhere with thetechnology that did have a future—the jet tur-bine.”16 Unfortunately for Pratt & Whitney, thescience underlying jet propulsion was based onfundamentally different principles than that of pis-ton engine designs.

History is replete with examples of technologicalrevolution in an industry leading to the demise ofa region’s competitive advantage in that industry.It is interesting that New England remained atthe center of aircraft engine manufacturing evenin the face of this technological revolution. Theimportance of the region’s scientific skill base en-ters the story at this juncture. Once again,though, technological events can be traced backto the nineteenth century.

THE LEAP TO JETPROPULSION: TURBINETECHNOLOGY AND THESCIENTIFIC SKILL BASEThe aircraft gas turbine is a technology truly in-digenous to New England. The application of theprinciple of using a turbine to generate power bycapturing the energy from a flow was what madepossible America’s earliest manufacturing indus-try, the Lowell textile mills. The pioneering workof James B. Francis, whose system of locks andcanals provided power to Lowell’s factories in the

middle of the nineteenth century, is an importanttechnological ancestor of the propulsion systemsthat shuttle millions of air travelers across theworld today.

Over the course of the nineteenth century, as thewater turbine gave way to the steam turbine withthe evolution of electrical power, New England re-mained at the center of developments in turbinetechnology. Thomson-Houston, main rival to Edi-son General Electric in the early days of electricity,was based in Lynn, Massachusetts. When those twocompanies merged in 1892, the Lynn “RiverWorks” came under the General Electric umbrellaand became the site of a corporate industrial re-search laboratory that was not only a key resourcein contributing to the success of the company inelectrical power generation equipment, but onethat would lay the foundations of the company’seventual entry into the jet engine business.17

During the early decades of the twentieth centu-ry, GE’s steam turbine division in Lynn was head-ed by a man named Sanford Moss. An engineerwho had been active in gas turbine research sincehis graduate school days, Moss continued withthis research after joining the company. He exper-imented with various compressor and turbine de-signs in an attempt to perfect functional compo-nents that would eventually allow efficient gasturbines to become a reality. That work finallybore commercial fruit as a small but successfulbusiness building aircraft turbo superchargers forpiston engines for the U.S. military during the1920s and 1930s.18 The relationship between thecompany and the U.S. government developedfurther when the Air Force selected GE’s gas tur-bine division to build the power plant for Ameri-ca’s first jet aircraft in the early years of WorldWar II. The engine would be based on theBritish-designed Whittle engine, which had al-ready been demonstrated and proven airworthy.GE’s selection by the Air Force to do this workwas partly based on GE’s corporate connectionswith British Thomson-Houston, which had beeninvolved with the Whittle engine project duringits development phase. In fact, during the late1930s, Moss himself visited Britain to learn aboutthe engine. Without the experience GE had


gained in designing and building two of the es-sential parts of a gas turbine engine: the compres-sor and turbine, the contract may have gone toanother firm and GE may never have entered thejet engine business.19 The company did get thebusiness, though, and the fledgling aircraft gasturbine division got its start in Lynn building en-gines for the new U.S.–designed military jets dur-ing the late 1940s. The division’s unexpectedlyrapid growth during the early Korean War yearsforced the company to move many of its opera-tions to Evandale, Ohio, taking advantage of anempty plant that had turned out Wright Aeronau-tical engines during World War II. The division’sheadquarters remain in Ohio today. The RiverWorks in Lynn, however, has continued as thesite of GE’s small gas turbine business, buildingengines that power a range of smaller aircraft andhelicopters.

GE’s story says something about the often-unpre-dictable nature of technological trajectories.Technological competencies developed as the re-sult of one product line (electrical power genera-tion equipment) may lead to the opportunity toenter an entirely new business (aircraft engines).Recognizing the importance of this type of phe-nomenon to competitive strategy, a number ofmanagement scholars have developed a “re-source-based” view of the firm. This view sees thefirm not as a mere aggregation of product linesbut as a bundle of competencies, the most impor-tant of which are the technological knowledgeand skill bases that form the basis of competitiveadvantage.20 Pratt & Whitney’s ability to reestab-lish its prewar level of dominance in engine man-ufacturing in the jet age, however, also shows thattechnological “first-movers” do not always havethe advantage. Being first to the post in usheringin a new technology is not everything in competi-tion; organizational strengths are important, too.

For Pratt & Whitney, the jump back into the jetrace was aided by successfully leapfrogging thecompetition technologically. First, though, itneeded to get a foothold in the newly redefinedindustry. During the immediate postwar years,the company produced Rolls-Royce designsunder license. Soon, though, Pratt scored a coup

when its J57 engine, which featured a novel dual-rotor, axial-flow compressor, was chosen to powerthe B-52 bomber. A commercial spin-off version,the JT3, went on to power the first U.S.–built jet-liners, the Boeing 707 and Douglas DC-8, in the1950s and 1960s. The JT3 was just the first in along series of commercial engine successes. How,despite GE’s head start, did Pratt surge aheadduring the postwar years? Though the science ofjet propulsion was based on fundamentally differ-ent principles than piston engine designs, thetechnical skills involved in actually producing jetengines were not all that different and were inample supply within the Pratt & Whitney organi-zation. Moreover, the final customers—airlinesand the U.S. military—remained the same. Thecompany knew what it took to make sales andkeep customers happy: producing a reliable prod-uct and responding quickly if and when problemsarose. As the 1960s drew to a close, Pratt &Whitney enjoyed a remarkable 95 percent share of“free world” engine orders and half of all militaryengine orders.21 Successive design innovationsover the years have ensured the firm’s continuedcompetitive position.

NEW ENGLAND’S SCIENCEAND TECHNOLOGYINFRASTRUCTURE ANDREGIONALAGGLOMERATIONAs noted earlier, the jet age ushered in an erawhere the engine building business became basedmore in science. In this respect, the technicalstrengths of local universities supported the devel-opment of the technology. University researchlaboratories such as MIT’s gas turbine lab, estab-lished in the early 1950s, contributed to an ex-panded understanding of the principles underlyingjet propulsion and addressed practical questions ofthermodynamics, gas flow, high-temperature ma-terials, and so forth that improved the design andconstruction of engines. New England’s institu-tions of higher education also supplied a steadystream of graduates, filling the needs of Pratt &Whitney and GE for mechanical engineers, materi-


als scientists, electrical engineers, and other orga-nizational personnel. The industry, of course, benefited from the millions in research and development funds that poured into the region’suniversity and industrial laboratories from the Department of Defense. Such research was not re-stricted to (or even primarily directed toward)propulsion technology. Rather, advances in com-puters and microelectronics led to advances in sys-tems controls and instrumentation. Illustratingthe gains to be reaped from regional agglomera-tion, a number of New England firms contributedto the still-evolving technologies related to elec-tronic engine sensors and control systems.22

The materials sector also benefited from govern-ment-supported research efforts. During the 1950sand 1960s, the central Massachusetts firm Wyman-Gordon, for example, was the recipient of $397million in Air Force research funds to develop ma-chinery for large light-alloy forgings. To this day,Wyman-Gordon remains a leader in this area.23

The competitive strength of New England–basedfirms, General Electric Aircraft Engines, Pratt &Whitney, and their many local suppliers, providedmore than employment opportunities for thou-sands of engineers, technical personnel, andskilled production workers across Connecticut,Massachusetts, Rhode Island, and southern NewHampshire, Vermont, and Maine. It also servedas the foundation for the economic prosperity ofentire cities across the region. This dependencewas especially true for Lynn, Massachusetts, andHartford, Connecticut. The importance of air-craft engine manufacturing as a source of jobsand as a foundation for economic activity was notrestricted to the cities that were home to themajor plants. In Worcester, Springfield, and ascore of smaller communities along the Connecti-cut River, establishments of all sizes carried outthe range of precision metalworking activities,forging, casting, and precision machining in-volved in the fabrication of the thousands of jet-engine components. Subcontractors working forGE and Pratt & Whitney thus aided the diffusionof technological advances in materials (e.g., tita-nium and nickel-based superalloys, powder metal-lurgy) as well as precision machining techniques,

spinning off to nonaircraft markets such as autocomponents, medical devices, and implants.

Beyond the regional benefits of agglomeration,other positive dynamics characterized the indus-try during the golden years. Innovations inpropulsion were the “pacing technologies” thatled the improvements in aircraft performancethrough the postwar era, contributing to thegrowth of the market for air travel. With eachnew generation of aircraft engine, air travel be-came faster, cheaper, safer, and less damaging tothe environment. In many ways, the story of theaircraft engine industry epitomized the virtuouscycle of U.S. capitalism during these years wheretechnological progress helped to grow new mar-kets, providing more jobs, while also improvingproductivity, allowing for growth in wages. Thatbusiness success would lead to more and betteremployment opportunities over time could besummed up in the idea “what was good for Gen-eral Motors was good for America.” Gains fromeconomic growth were widely shared. The for-tunes of U.S. workers were tied to the well beingof U.S. corporations. And business cyclesnotwithstanding, if the latter did well, the formercould expect to do well also.

As has been documented by a number of re-searchers, however, this era drew to a close some-time during the early 1970s.24 The financialhealth of U.S. corporations, which formerly hadsupported the expansion of the quantity andquality of employment opportunities, increasinglyseemed at odds with it. There is some evidence ofsimilar tendencies in aircraft engine manufactur-ing, where employment is approaching historiclows and wages appear to have stagnated, despitehealthy profit levels and growing productivity. Ofcourse, the dramatic culmination of this “diver-gence of fortunes” was the massive downsizing ofthe industry that occurred in the early 1990s.


In New England, downsizing of the jet enginesindustry was dramatic and drawn out. Though

it abated somewhat during the mid-1990s, jobcuts continue. Total employment at GE in Lynn,for example, was projected to fall to an all-timelow of 4,800 by the year 2000.25 The plant hademployed close to 9,000 hourly workers in themid-1980s. Pratt & Whitney’s production work-force, 14,000 strong as recently as 1988, had fall-en to 6,600 by 1998.26

By the middle of 2000,Pratt & Whitney’s union-represented productionworkforce in Connecticutnumbered just 4,700.27 Aformer Textron-Lycomingplant in Stratford, Con-necticut, that had onceemployed over 5,000 pro-duction workers buildingsmall gas turbines wasclosed following its 1994acquisition by AlliedSig-nal, which sought to con-solidate those operationswith its other facilities inPhoenix, Arizona. Theconsequences of contrac-tions at plants where final

engines were built rippled through local suppliers.During the 1990s, one of the largest plants,Wyman-Gordon, a maker of specialty forgingswith a half dozen plants in New England, reducedits workforce 43 percent, and it was certainly notthe only regional aerospace supplier to do so. Asthese layoffs occurred, a negative multiplier effectcontributed to the contraction of the entire re-gional economy.

Downsizing of the Industry

16

14

12

10

1972

8

6

4

2

0

U.S. Aircraft Engine Manufacturing, Real Value of Sales, 1972–1997,(1987=100)Between 1988 and 1997, the end of the Cold War contributedto a 57 percent decline in sales to the U.S. government.

Mill

ions

of d

olla

rs

199619901975 1981 199319871978 1984

TrendGovernment SalesOther SalesTotal Sales


There is a temptation to attribute the hardshipsborne by laid-off aircraft engine workers in NewEngland to the end of the Cold War. Indeed, theevents of the late 1980s and early 1990s con-tributed to a decline in sales to the U.S. govern-ment of 57 percent between 1988 and 1997, asmeasured in real terms. This decline in itself,however, is not sufficient to explain the magni-tude of job cuts experienced during the 1990s. Ifcommercial sales had continued at the pace ofgrowth witnessed during the 1980s, changes indemand in the two market segments would havelargely offset one another and stabilized totalsales. That situation was actually the case for thefirst two years of the military sales downturn.Commercial sales climbed to levels that morethan offset the loss in military business, reaching apeak at $9.8 billion in 1990.

Then disaster struck the industry. A widespread,global recession that set in during 1991 forced

airlines across the world to cancel or postponepurchases until air traffic rebounded. As a resultof this dual downturn in orders, the industry ex-perienced a 39 percent drop in sales between1990 and 1994.28 The magnitude of the declinein employment (47 percent since 1988) appearsto be out of line with the scale of the contractionof demand experienced by the industry.

What of the longer run, however? At the time ofthe industry downsizing, many observers re-marked that along with the pain of downsizingwould come a “peace dividend.” Land, labor, andcapital would be freed up and the workings of adynamic U.S. market economy would ensure thatthose resources would be efficiently reemployedelsewhere in the economy. Indeed, this has takenplace. The U.S. and New England economieshave been robust: corporate earnings have beenup, and economic growth moved at a healthy clipthroughout the second half of the 1990s.


The future holds many questions. What will bethe fate of the jet engine industry in New Eng-

land? Are today’s job losses predictors of future lossof market share to enterprises abroad? Or will shed-ding employment in New England and the UnitedStates be the very source of U.S.–based producers’competitive advantage as they invest in their “corecompetencies” of high-value design, engineering,and marketing activities, spinning off productionactivities to firms elsewhere?

To answer these questions, we must examine thestrategies being pursued by enterprises in the in-dustry. At the macro level, economists have iden-tified two trends that seem to be behind the “di-vergence of fortunes”: developments in trade anddevelopments in technology. Proponents of thetrade theory attribute the divergence to globaliza-tion or the increased flows of trade and capitalacross borders. According to this theory, U.S.workers are subject to growing international com-petition with low-wage workers in other parts ofthe world, which has lowered wages and employ-ment prospects, especially for less-skilled workersin the United States. Adherents of the technologytheory maintain that the 1980s and 1990s weremarked by “skill-biased” technological change(especially computerization) that hurt prospectsfor blue-collar workers, while simultaneously im-

proving prospects for white-collar workers. Whichtheory holds for aircraft engine manufacturing?Developments on both fronts have made contri-butions, but not exactly in the way economistshave traditionally framed them.

Because of the systems integrators’ responsibilityfor ensuring compliance with regulatory produc-tion standards (and their liability if such standardsare not met), suppliers in the aircraft engine in-dustry must meet high quality standards, demon-strate proficiency with sophisticated productiontechniques, and have well-documented proce-dures. According to information provided by theFederal Aviation Administration, with the excep-tion of half a dozen firms, all Pratt & Whitneyand GE suppliers are currently located in nationsthat belong to the Organization for EconomicCooperation and Development. Most are locatedin countries that are generally characterized ashaving significantly less flexible working condi-tions (and often higher wages) than the UnitedStates.29 Thus, it is difficult to characterize the in-ternationalization of production as a “race to thebottom” search for low wages and poor workingconditions, but it is also more generally inconsis-tent with many characterizations of globalizationas affecting only blue-collar production workers.

Divergence of Fortunes


Both production activities as well as design activi-ties are being outsourced by GE and Pratt &Whitney. This has taken place within a number ofcooperative production arrangements with suppli-er firms referred to as “risk- and revenue-sharingpartnerships” (RRSPs).

RRSPs typically involve the commitment by asupplier firm to fund some share of the product’sdevelopment costs in exchange for a defined workshare for the length of the product’s productionrun (which usually extends over two to threedecades).30 Originally used on the military side ofthe business as a way of securing market access,RRSPs have become increasingly popular overtime on the commercial side of the business as ameans of tapping into inexpensive capital forproduct development purposes.31

For the systems integrator, the logic behind offer-ing an offset or RRSP participation to a potentialsupplier is clear. If a foreign airline (which may begovernment owned or subsidized) knows that aportion of the work for building engine A is beingdone locally, it may be swayed to purchase engineA over another engine. Both GE and Pratt &Whitney, each looking to get an edge on the com-petition, end up doing exactly the same thing, andneither is better off at the end of the day.

Of course, U.S. workers who see increasing sharesof work going overseas see themselves as unequiv-

ocally worse off. For this reason, labor unionsrepresenting workers in the industry in the Unit-ed States have voiced vigorous opposition toRRSPs and to offsets. They note that early RRSPsand offsets agreements essentially amounted tolong-term, “build-to-spec” subcontract arrange-ments, but have evolved to the point that supplierfirms are taking on more and more design activi-ties over time as well.32

How significant are these RRSPs in dollar terms?No exact figures exist, but one way to gauge theirimpact is to adjust the dollar value of orders forthe stake of the program that the systems integra-tor actually retains. For example, in a sample ofrecent Pratt & Whitney orders totaling $6.1 bil-lion, $3.4 billion is committed up front to foreignsupplier firms, because of RRSPs. Of course, theseforeign supplier-partners may in turn subcontractwork to U.S. suppliers and, by symmetry, a fairshare of the work “retained” by Pratt & Whitneywill go out to other suppliers, both foreign anddomestic. Therefore, assessing the impact ofRRSPs is far from straightforward, but the in-creasing reliance on international sources of sup-ply is difficult to refute.

So who is the competition? The top five produc-ers of turbine engine parts—France, the UnitedKingdom, Germany, Canada, and Japan—account for close to 80 percent of U.S. imports of

Recent Orders for Commercial Engines at Pratt & Whitney3.4 billion in recent orders is committed, up front, to foreign supplier firms.

Engine RRSP-AdjustedDate Customer Order Model Pratt & Whitney Share

($ million) ($ million)

February ‘03 UPS 1,500 PW4184 945 December ‘02 TWA 400 PW6000 400

November ‘02 International Lease Finance Corp. 250 PW6000 250October ‘02 U.S. Airways 800 PW4168 504April ‘02 United Airlines 550 PW4000 346

April ‘02 LanChile, Tam, TACA, etc. 2300 V2500 759April ‘02 FedEx 112 PW4000 71April ‘02 TWA 200 JT8D-200 152

TOTAL 6,112 3,427


these components. Thus, it isdifficult to make the case thatup to this point the globaliza-tion of aircraft engine manu-facture has been based on low-wage, foreign competition.Still, a contingent of newcom-ers is making rapid inroads injoining the supplier ranks. Im-ports of turbine engine partsfrom Israel, for example, in-creased from $41 million in1989 to $217 million in 1998.Imports from South Korea,valued at $54 million in 1998,are close to triple their 1989level of $19 million, whereasimports from Turkey saw asimilar growth pattern, from$12 million in 1989 to $46million in 1998.

Far and away the fastest risingstar is Singapore, whose exportsof engine parts to the UnitedStates have increased tenfoldsince 1989 (from $20 millionto $206 million).33 For most ofthese emerging sources of en-gine parts, military offset pro-grams and coproduction agree-ments appear to have been animportant source of learningopportunities. Based on these

data, the fears of U.S. labor unions about the em-ployment, trade, and competitive effects of offsetsand RRSPs do seem to be founded. The issue isone worthy of further investigation. In the finalanalysis, it appears that factors other than wage dif-ferentials or comparative advantage are fueling dis-investment from U.S.–based production activities.

Turning now to the question of technology, isthere reason to think that technological changehad something to do with the “divergence of for-tunes?” The answer is yes, but again, the econo-mists’ traditional characterization of the phenom-enon is somewhat off base. During the first half of

Ratio of Value Added to Value of Industry Shipments,U.S. Aircraft Engine ManufacturingThe ratio of value-added by domestic manufacture to the value of theindustry’s final shipments has been on the decline for nearly 30 years.

1972 19901974 1982 199219861978 19841976 1980 1988 1994 1996

RatioTrend

63%

61%

59%

57%

55%

53%

51%

49%

45%

47%

Ratio of Import Value to Value of U.S. Industry ShipmentsTrends reflect the rise in cooperative production agreementswith foreign supplier firms.

15%

10%

5%

30%

1994199219901988198619841982198019781976 1996

35%

0%

20%

25%

Turbine Engine Parts: Sources of Imports

Country 1998 Imports Country 1998 Imports($ million) ($ million)

France 1,902 Switzerland 68 United Kingdom 1141 Belgium 56

Germany 755 South Korea 54Canada 517 Norway 51Japan 277 Turkey 46

Israel 217 Ireland 32Singapore 206 Netherlands 28Italy 158 Brazil 16

Sweden 108 China (PRC) 13Mexico 79 Taiwan 12

the 1980s, both GE and Pratt & Whitney pur-sued a “factory of the future” production tech-nology strategy, centered on skill-displacing capi-tal investment, much of it located in the southernUnited States. The concept behind this invest-ment was for a high degree of automation anddedicated machinery, including robots, thatwould eliminate direct production worker timeand effort.34 Eventually, however, these firms sawthat such a strategy was less than ideal for theshort production run, precision work that build-ing engines entailed. As Japanese “lean produc-tion” models have demonstrated, unless produc-tion runs of standardized components are long, itcan be difficult to synchronize cycle times andmaintain flow production that will result in costsavings. “Batch and queue” production often re-sults from a “factory of the future” type of strate-gy, translating into high inventory costs and ex-pensive rework. Thus, in many instances, multi-

purpose low-tech machines capable of quickchangeovers and tended by multiskilled workerscan be a superior production technology to high-tech, inflexible machines designed to decrease di-rect labor time.35

In the early 1990s, both GE and Pratt & Whitneyabandoned the "factory of the future" in favor of"lean" work organization. GE implemented a"kaisen" continuous improvement program andmore recently has adopted the six-sigma conceptmade famous by Motorola, which focuses on low-ering defects and improving efficiency.36 For itspart, Pratt & Whitney has focused heavily on re-organizing work along "lean" production princi-ples, relying on cellular manufacturing and im-proved flow lines. Industry-level productivity fig-ures suggest that such moves are paying off,which can mean good things for the industry inthe future. Firms have effectively figured out howto do more with less.



Will firms be able to do more with more? Thisquestion must be answered if we are con-

cerned with the sustainability of today’s profit levels,market share, and employment levels. According toStephen Roach, chief economist at Morgan Stanley,it is indisputable that the wave of downsizing wit-nessed in the 1980s and 1990s restored profit levelsand may have contributed to improved efficiency inU.S. firms. He wrote, “But if that’s all there is to thescript, you have to wonder what U.S. businesses cando for an encore.”37 Roach sums up a concern thatmany other researchers have voiced about the appar-ent preference of U.S. businesses to pursue short-term over long-term strategies. GE, for example, isoften singled out for such criticism. The response ofcorporate leaders to the downturn in aircraft indus-try demand in 1993 illustrates the point.

GE’S RESPONSE TODOWNSIZINGThe aircraft engine division, an odd one in GE’straditional business mix of appliances and electri-cal equipment, was historically left alone by topcorporate management. The aircraft engine busi-ness was spared the full brunt of GE’s corporatedownsizing and managerial housecleaning of theearly 1980s. In fact, Brian Rowe, aircraft engineschief, was the only business president who re-

tained his job after John Welch took over GE.This state of affairs changed, however, as the en-gine division’s profit stream slowed to a trickle inthe early 1990s.

The engineering ranks, which numbered 10,000in 1991, fell to just 4,000 by the mid-1990s.38

Rowe himself was a casualty. Employment in thedivision during the early and mid-1990s fell to lessthan 20,000 from 44,000 as recently as 1987,when it was GE’s largest business. These drasticcuts had some unintended effects. At the time, GEhad a major new engine program, the GE90, indevelopment. The engine, designed for Boeing’snew 777 wide-body airplane, was scheduled toenter service in 1995. The program, however, wasplagued by design flaws and production difficul-ties, perhaps not surprisingly, given the scale ofthe cuts the division experienced. The Federal Avi-ation Administration withheld certification of theGE90 until it was satisfied that the problems werecorrected, and the program turned out to be agreat embarrassment for the company.39 The pub-lic relations problems were only part of the coststo GE. By the time the GE90’s problems were re-solved, the financial costs associated with fixingthe problems totaled $275 million, which GEtook as a charge against earnings in 1997.40

Looking to the Future


Though this example seems like a textbook case ofthe effects of short-term horizons, there is evi-dence that longer-term, “high-road” strategies arealso being employed in the industry to boost prof-its in sustainable ways. Pratt & Whitney’s successeswith “lean” production principles, documented byWomack and Jones, has had the effect of freeingup cash flow by reducing inventories and work inprogress while improving quality and productivity.Yet the million-dollar question, as Roach pointsout, is “What happens to this cash flow?” The an-swer is critical for firms, for their shareholders, andfor other stakeholders, workers, and communitiesin the United States and in New England. Arethese resources being reinvested in the business,directed toward acquisitions, or distributed in theform of dividends and stock repurchases?

TRENDS IN USE OF CASH FLOW A glance at what GE and Pratt & Whitney havedone with their profits recently indicates two pri-mary trends—acquisitions and distributions tostockholders—neither of which appears to bodevery well for employment prospects for NewEngland’s aircraft engine workers. New capitalexpenditures are failing to keep pace with profitgrowth. Rather, acquisitions and distributions tostockholders seem to be the favored use of cashflow between the two leaders inthe industry. As part of an effortto pump up profit margins, GEand, more and more, Pratt &Whitney have sought to increasetheir presence in the aftermarketsegment of the business. After-market activities such as repair,maintenance, and leasing servicescontribute to the high margins ofthe engine manufacturers becauseof their particularly lucrative na-ture. Essentially, the manufactur-er makes money twice, first onthe sale of spare parts and then onthe servicing activities. GE’s ex-penditures on acquisitions and in-vestments in the overhaul andmaintenance business in recent

years have dwarfed those of its rivals, amountingto $9.5 billion since 1995. Such investments arepart of a broader corporation-wide strategy tobecome more involved in servicing all kinds ofequipment with the GE name, from medical di-agnostic imaging machinery to power generationequipment. GE engine services aftermarket activ-ities (which include leasing activities carried outunder the GE capital umbrella) are a $45 billionbusiness, with half of this representing repair andoverhaul operations.41 Likewise, at United Tech-nologies, Pratt & Whitney’s parent company,growth through acquisition reached $1.241 bil-lion in 1998. The company acquired two over-haul and repair businesses in 1997 and 1998 andset up a new overhaul and repair joint venture inSingapore. Such acquisitions are certainly growthstrategies, but unfortunately are not geographi-cally targeted investments that might spell a re-versal in the continuing downward employmenttrend for the industry in New England.

The second trend is perhaps even less encourag-ing. In the name of maximizing shareholdervalue, both GE and Pratt & Whitney, like manylarge U.S. corporations, have made setting highdividends and repurchasing shares high corporatepriorities. Such an emphasis appears to be part ofwhat is driving the push into high-margin after-

Cash Flows at General Electric and United Technologies: Trends in Cash Flows and Their Uses

Company/Year

(millions of dollars)

General Electric

1994 6,100 1,700 n/a 2,500 1,1001995 6,100 1,800 n/a 2,800 3,1001996 9,100 2,400 1,100 3,100 3,3001997 9,300 2,200 1,400 2,200 3,500

United Technologies

1994 1,357 759 125 238 2701995 2,044 780 204 252 2211996 2,079 770 317 265 4591997 2,090 819 584 291 8491998 2,509 866 1,241 316 650

Net

Cas

h Fl

ows

from

Op

erat

ing

Activ

ities

Capi

tal

Expe

nditu

res

Shar

eAc

quis

tions

Divi

dend

s

Repu

rcha

ses


market segments. GE’s stellar profitability hasmade it a pacesetter of sorts, putting pressure onits product market competitors to deliver similarlevels of shareholder value. Karl Krapek, Pratt &Whitney’s president, told Forbes magazine, “I amtrying to get our margins to match GE’s 17 per-cent. We have made it to 13 percent and our aimis to achieve 16 percent by 2003.”42 As any busi-nessperson knows, margins are important. With-out a healthy cash flow, there is little or no moneyfor new investment, new product development,or strategic acquisitions. Ironically, when achiev-ing high profitability becomes the aim to be pur-sued beyond all others—when the goal is simplyto make money for the sake of disbursing it toshareholders—the long-term prospects of the en-terprise itself may be endangered. When the ob-session with delivering returns to shareholdersleads to an overemphasis on short-term results,corporate policies can seriously undercut the verysources of enterprise competitive advantage, asthe example of the GE90 shows.

RETAINING THE SKILL BASE In the end, the patterns of investment and disin-vestment by the major players in the aircraft en-gine industry suggest that attributing continuingjob losses in New England to slack demand con-ditions or to a lack of regional competitive advan-tage would miss the mark. Recent declines in em-ployment seem more reflective of a reorientationof corporate strategy in a new, post–Cold Warera. Factors such as industry consolidation, theeagerness of firms elsewhere to break into theranks of world-class supplier tier, and risk aversionon the part of large manufacturers have all con-tributed in some way to the flight of jobs fromNew England. Such a conclusion is, from a statepolicy maker’s perspective, a tough nut to crack;affecting any of these conditions is impossiblegiven a state-level policy makers’ economic devel-opment tool kit.

Still, policy makers can do more than just sit onthe sidelines and watch the continued flight ofgood jobs from the state. One should be wary ofthe “if you build it, they will come” approach toregional economic development, however. It iseasy to be lulled into thinking that it is sufficientto beef up university engineering programs to re-tain the employment and skill base that is so cru-cial to economic vitality in the region. As illustrat-ed here, scientific talent is just one half of thehigh-tech manufacturing equation.

Equally critical to competitive advantage are theability and the willingness of enterprises to makethe significant technological and organizationalinvestments in skill development, investments thatwill pay off in the form of manufacturing process-es that turn out qualitatively better products atlower economic costs. If enterprises are unwillingto make these investments, then such a situationis especially problematic from a policy perspective;the high-tech policy cure-all—“invest in educa-tion and R&D”—may not hurt, but it may not bethe ultimate solution. Still, devoting resources tomaintaining and upgrading the region’s scientificinfrastructure as well as its precision metalworkingskill base is one proactive policy that, although itmay do nothing to reverse industry trends in air-craft engine manufacturing, will at least serve toensure that the conditions necessary for growingand attracting other high-tech manufacturing op-erations are in place. To the extent that thereexist strong links between design, prototyping,and precision production activities, the scientificand skilled production skill bases are the two in-gredients without which a high-tech manufactur-ing infrastructure has no chance of being sus-tained. The example of the jet engine manufac-turing industry illustrates these links. To abandonthe development of these skill bases would beequivalent to abandoning the goal of an economycentered on high-tech, high-wage manufacturingthat offers the promise of good-paying jobs toboth white-collar and blue-collar workers.


Endnotes1 Fuel costs represented 11.6 percent of cash oper-ating expenses for U.S. airlines in 1997, down from30 percent in 1980 (Aerospace Industries Associationof America 1999, 90).

2 At the same time, however, there is an importantfundamental difference between engine manufactur-ers and the rest of the aircraft industry. Profits forengine manufacturers have as much to do with howmany existing aircraft are flying as with how manynew aircraft are ordered. Because of the need tomaintain engines in service continually, sales of spareparts represent a significant source of revenue forengine manufacturers. (For United Technologies, forexample, sales of spare parts represent 40 percent oftotal corporate pretax earnings.) As a result, overallsales and employment for engine makers have tradi-tionally been more stable than those of other aero-space firms.

3 Author’s calculations are based on International CivilAviation Organization data as reported in AerospaceIndustries Association of America (1999, 75). Passen-ger traffic is measured as passenger miles performed,and freight is measured as ton-miles performed.

4 “Flight International Engine Directory 1997—OrderBacklog” 1997, 31.

5 Author’s calculations are based on figures from theU.S. Department of Commerce, International TradeAdministration, provided by Aerospace IndustriesAssociation (1999) and the U.S. Department of Com-merce, Bureau of the Census (1997), Census of Man-ufactures. Manufacturers of aircraft engines andengine parts are designated SIC 3724 by the StandardIndustrial Classification system.

6 Author’s calculations are based on figures fromU.S. Department of Labor, Bureau of Labor Statistics(1998) Employment and Earnings.

7 Author’s calculations are based on figures fromU.S. Department of Labor, Bureau of Labor Statistics(1998 and 1989) Employment and Earnings.

8 Author’s calculations are based on figures fromCurrent Industrial Reports, U.S. Department of Com-merce, as reported by Aerospace Industries Associa-tion of America (1999).

9 Prencipe 1997, 1269.

10 U.S. Department of the Interior, Bureau of Mines1990, 5.24.

11 From a letter authored by Edison on 14 Novem-ber 1887, as quoted in O’Boyle (1998, 22).

12 The importance of such agglomeration effectshas been documented by a number of scholars bothhistorically (Bluestone et al. 1981, chapter 2) andmore recently (Forrant and Flynn 1998).

13 Womack and Jones 1996, 153–54. See also Best(1990, chapter 1) for a detailed history of the role ofConnecticut River valley firms in the evolution of theAmerican system of manufactures.

14 Womack and Jones 1996, 155–59.

15 Lilley et al. 1968, 124.

16 Womack and Jones 1996, 159.

17 O’Sullivan 1996, 108.

18 Constant (1980) presents a comprehensive dis-cussion of the technological path of GE’s entry intothe jet engine business.

19 General Electric Company 1990, 45.

20 See, for example, Tecce et al. (1997).

21 Womack and Jones 1996, 160.

22 One of today’s industry leaders in the field of fullauthority digital engine control for small engines isChandler-Evans, a West Hartford–based company,whereas Ametek, of Wilmington, Massachusetts, aGE spinoff, is a leader in engine sensors and instru-ments. See Markusen and Yudken (1992) on the linksbetween and among the U.S. military and the aero-space, computers, and electronics industries.

23 Bilstein 1996, 95.

24 See, for example, Harrison and Bluestone (1988).

25 “GE to Lay Off 200 Engine Workers at LynnPlant” 1999, C3.

26 “Cooperation in Contrast to Past Acrimony atPratt” 1998, D1; “New Look for Pratt to Erase 1,000Jobs in State: Restructuring to Move Engineers fromFlorida” 1998, B1.

27 Data supplied by Strategic Resources Depart-ment, International Association of Machinists andAerospace Workers, AFL-CIO.

28 U.S. Department of Commerce, Bureau of theCensus various years, “Aerospace Industry: MA-37D.”

29 In particular, firms in Western Europe are gener-ally seen as being “burdened” with a much morestringent regulatory framework with respect to laborrelations than their U.S. counterparts. The con-tentious assertion by many in Europe and the UnitedStates as to the need for more labor market flexibilityis predicated on the assumption that European-stylelabor regulations stifle growth and innovation on theContinent, the aircraft engine industry would seem tobe an exception to this “rule.”

30 Prencipe 1998, 9.

31 On military projects, RRSPs are referred to as“offset agreements” or “offsets,” insofar as they


allow a purchasing nation to offset the negative bal-ance of payments effects of importing big-ticket aero-space items with the export of domestically producedcomponents.

32 See, for example, Richard Samuels’ (1994) com-prehensive study of how Japan effectively used off-sets to leverage aerospace purchases to provideaccess to advanced technology and opportunities forlearning for domestic aerospace producers.

33 Author’s analysis of figures is from the U.S.Department of Commerce, Bureau of the Census,Foreign Trade Division.

34 “Pratt and Whitney’s ‘Factory of the Future’Draws Praise” 1987, D1.

35 See Womack and Jones (1996, chapter 8).

36 Carley, p.E1.

37 Roach 1996, 82.

38 “Just Imagine if Times Were Good” 1995, 78–80.

39 O’Boyle 1998, 225–26.

40 O’Boyle 1998, 230.

41 “OEM’s: Partners or Competitors?” 1998, 38.

42 ”No More Yo-Yo” 1999, 131.


BibliographyAerospace Industries Association of America. 1999.

Aerospace Facts and Figures 1998/99. WashingtonD.C.: AIAA.

“AlliedSignal Has Little Hope for Stratford Site.”1995. Hartford Courant, 16 September, pp. 00–00.

Best, Michael. 1990. The New Competition:Institutions of Industrial Restructuring. Cambridge:Harvard University Press.

Bilstein, R. 1996. The American Aerospace Industry:From Workshop to Global Enterprise. New York:Twayne Publishers.

Bluestone, B., P. Jordan, and M. Sullivan. 1981. AircraftIndustry Dynamics: An Analysis of Competition,Capital, and Labor. Boston: Auburn House.

Carley, William. 1997. “GE Chairman Pushes for QualityControl Plan.” The Times Union. 14 January, p. E1

Constant, Edward W. 1980. The Origins of theTurbojet Revolution. Baltimore and London: JohnsHopkins University Press.

“Cooperation in Contrast to Past Acrimony at Pratt.”1998. Hartford Courant, 17 September, p. D1.

“Flight International Engine Directory 1997—OrderBacklog.” 1997. Flight International, 24 September,p. 31.

Forrant, R., and E. Flynn. 1998. “Seizing Agglomer-ation’s Potential: The Greater Springfield Massa-chusetts Metalworking Sector in Transition.”Regional Studies 32 (3): 209–22.

“GE to Lay Off 200 Engine Workers at Lynn Plant.”1999. Boston Globe, 3 March, p. C3.

General Electric Company. 1990. Eight Decades ofProgress. Cincinnati: Hennigan Company.

Gunston, Bill, ed. 1998. Jane’s Aero Engines.Alexandria, Va.: Jane’s Information Group.

Harrison, B., and B. Bluestone. 1988. The Great U-Turn: Corporate Restructuring and the Polarizingof America. New York: Basic Books.

“Just Imagine If Times Were Good.” 1995. BusinessWeek, 17 April, pp. 78–80.

Kodrzycki, Y. 1995. “The Costs of Defense RelatedLayoffs in New England.” New England EconomicReview, March/April, pp. 3–23.

Lawrence, R. Z. 1994. “Trade, Multinationals, andLabor.” NBER Working Paper No. 4836, August.

Lilley, T., et al. 1968. “Conversion to WartimeProduction Techniques.” Pp. 000–000 in G. R.Simonson, ed., The History of the AmericanAircraft Industry. Cambridge: MIT Press.

Markusen, A., and J. Yudken. 1992. Dismantling theCold War Economy. New York: Basic Books.

Mishel, L., J. Bernstein, and J. Schmitt. 1999. TheState of Working America 1998–99. Ithaca, N.Y.:Cornell University Press.

“New Look for Pratt to Erase 1,000 Jobs in State:Restructuring to Move Engineers from Florida.”1998. Hartford Courant, 10 September, p. B1.

“No More Yo-Yo.” 1999. Forbes, 11 January, pp. 130-31.

O’Boyle, T. F. 1998. At Any Cost: Jack Welch,General Electric, and the Pursuit of Profit. NewYork: Knopf.

“OEMs: Partners or Competitors?” 1998. InteraviaBusiness and Technology, November, p. 38.

O’Sullivan, M. 1996. Innovation, IndustrialDevelopment, and Corporate Governance. Ph.D.diss., Harvard University.

“Pratt and Whitney’s ‘Factory of the Future’ DrawsPraise.” 1987. Hartford Courant, 3 May, p. D1.

Prencipe, A. 1997. “Technological Competencies andProduct’s Evolutionary Dynamics: A Case Studyfrom the Aero-Engine Industry.” Research Policy25: 1261–76.

———. 1998. “Modular Design and Complex ProductSystems: Facts, Promises, and Questions.” CoPSWorking Paper, Science Policy Research Unit,University of Sussex, May.

Roach, S. 1996. “The Hollow Ring of the ProductivityRevival.” Harvard Business Review,November–December, pp. 82–89.

Samuels, R. 1994. “Rich Nation, Strong Army”:National Security and the TechnologicalTransformation of Japan. Ithaca, NY: CornellUniversity Press.

Singer, B. 1998. “Engineering Success: Pratt &Whitney Aircraft, 1925–1940.” Business andEconomic History 27 (1): 162–72.

Tecce, D., G. Pisano, and A. Shuen. 1997. “DynamicCapabilities and Strategic Management.” StrategicManagement Journal 18 (7): 524–26.

U.S. Department of Commerce, Bureau of the Census.Various years. “Aerospace Industry, MA-37D.”Current Industrial Reports. Washington, D.C.: GPO.

———. Various years. “Industry Series; AerospaceEquipment, Including Parts.” Census ofManufactures. Washington, D.C.: GPO.

U.S. Department of Commerce, Bureau of theCensus, Foreign Trade Division. Various years.“U.S. Imports for Consumption and GeneralImports.” Washington, D.C.: GPO.

U.S. Department of the Interior, Bureau of Mines.1990. The New Materials Society: Challenges andOpportunities. Washington, D.C.: GPO.

U.S. Department of Labor, Bureau of Labor Statistics.Various years. Employment and Earnings.Washington, D.C.: GPO.

Womack, J. P., and D. T. Jones. 1996. Lean Thinking.New York: Simon and Schuster.

Special ThanksThe author gratefully acknowledges funding provided by the

University of Massachusetts Office of the President via the UMassDonahue Institute’s Massachusetts Benchmarks Project. Additionalsupport was provided by the Center for Industrial Competitiveness

at the University of Massachusetts Lowell, the Center for GlobalPartnership, and INSEAD’s Association pour la Recherché. I

appreciate the comments of Steven Landau, Yolanda Kodrzycki,Peter Doeringer, and Andre Mayer, as well as the contributions ofRobert Forrant, William Lazonick, and Mary O’Sullivan to the

form and substance of this paper.

The views expressed in this paper are those of the author and do notnecessarily reflect those of the International Association of

Machinists and Aerospace Workers.


Creative Services provided by Plouffe Inc., Amherst, MA

Cover illustration by Naomi Shea

UNIVERSITY OF MASSACHUSETTS DONAHUE INSTITUTEAPRIL 2001

Documents

jet engine manufacturing in new england - · PDF fileHISTORICAL ROOTS OF JET ENGINE MANUFACTURING IN NEW ENGLAND . . . .6 ... GE began building jet engines in the late 1940s in Lynn,