Organizational Change

Maintain Strategic Capability Revise the Business Structure

Massachusetts Institute of Technology SDM Conference

October 19 2007

Jay Mullooly

PRATT & WHITNEY PATON

19 October 2007

Agenda Introduction
Global Service Partners (GSP) Kyiv, Ukraine Pratt & Whitney-Paton JV Products, State of the Business

The Challenge
Transition Refocus

Application of Enterprise Architecture

PRATT & WHITNEY PATON

19 October 2007

GSP Network
Lansing, MI
Composites Thrust Reversers Nacelles Exhaust Nozzles Inlets/Pylon Fairings

East Hartford, CT
Turbine Airfoils Combustors HPC Stators, Seals Drums, Disks, Shafts Cases (Military)

PW-Paton
North Berwick, ME
LPC Stators, Stators (Military), Seals, BOAS, Bearing Housings, Carbon Seals

Cheshire, CT
PW4000, PW2000, F117, JT9D

Norway
CFM56-3, -5B, -7

Japan
Turbine Airfoils, BOAS

San Diego, CA Taiwan

HPC Stators, Seals, Variable Vanes Composites Thrust Reversers Nacelles Bulkhead Doors Flight Control Surfaces

Indianapolis, IN
Tubes, Ducts and Manifolds

Ireland Columbus, GA
V2500-A5, -D5 Cases (All)

Dallas, TX Singapore
PW4000, CFM56-5C, JT9D Turbine Airfoils IGT Serviceable Material

Ukraine Coating (Airfoils) EB PVD Equipment Ingots R&D Airfoil Repair

Springdale, AR
Cases, Gear Boxes, Bearing Housings Engine Mounts

Singapore
Turbine Airfoils, HPC Blades Combustors, Fuel Nozzles HPC Stators, Seals, Variable Vanes Tubes, Ducts and Manifolds Fan Blades

San Antonio, TX
Combustors (Military) IGT

New Zealand
V2500 (2004), JT8D (All Models), Dart

Engine Overhaul Part Repair

PW-Paton - Member of PWs Worldwide Network

PRATT & WHITNEY PATON

19 October 2007

PRATT & WHITNEY PATON

19 October 2007

Ukraine

PRATT & WHITNEY PATON

19 October 2007

Introduction PW-Paton
PW-Paton Located Kyiv Ukraine
1992 Start of JV, 2004 renewed for 25 years

NAS Ukraine

Highly Skilled Work Force 130 Employees, Access to Larger Network 75 % of Workforce College Degreed 18 % Advanced Degreed, PhD

PW-Paton Paton Inst.

Two Facilities, 68K square feet

Science & Technology Center in Ukraine

PW-Paton, JV between United Technologies, Pratt & Whitney and Paton Welding Institute of the National Academy of Sciences of Ukraine

PRATT & WHITNEY PATON

19 October 2007

State of the Business, 2006 Transition

YTD EBIT 400 199 200 12 0 2004 2005 May Mar Nov (151) 2006 YTD -392 -600 Feb Jan Apr Jun Aug Sep Jul Oct Dec (96) (59) (120) (50) (48) Plan Plan (+Coater)

EBIT

-200

(264) (392)

-400

-800

(746)

Business was Operating in the Red Workforce Very Unsure about their Future Core Business had fallen away PW Leadership Considered Closing or Compressing the Business 2006 Business in Disarray Complete Revitalization Needed

PRATT & WHITNEY PATON

19 October 2007

State of the Business, 2006 New Business Plan

Re-focus the business on core competency
Three Key Elements
Sustained Business - Turbine Coating Services Equipment Manufacturing Research & Development

The Challenge:
Transition from Largely R&D focus to Production R&D with commercial application PW-Patons Role is an Enabler for PW Network Maintain Technical Excellence Establish: Trust, Hope, Focus, Change
New Business Plan Sustained Business to Support R&D

PRATT & WHITNEY PATON

19 October 2007

PW-Paton, People

PRATT & WHITNEY PATON

19 October 2007

4 Point Focused Business Strategy Equipment Coating Services Engineering and R&D Repair

PRATT & WHITNEY PATON

19 October 2007

Equipment Manufacturing EB PVD, electron beam physical

vapor deposition Vacuum technology, EB guns super heat ceramic or metallic compounds to form vapor Turbine blades are introduced to the vapor forming protective coating EB PVD coating process capable of generating desirable physical properties
Morphology Crystalline structure Metallic Bonding

PRATT & WHITNEY PATON

19 October 2007

Production - Equipment
Metallic Alloy Coater - UE193
Single Sting modern coater UE193 has innovative main chamber allowing for optimized layout of EB guns and crucibles Advanced high rate vacuum system High capacity ingot feeders have 670 mm capacity Advanced Control system and automated mechanical system

Example of PWP Product Offering

CTI

PRATT & WHITNEY PATON

19 October 2007

Production - Equipment
EB Melter for Metal ingot production UE194
Electron Beam Melting machine is used for MCrAlY, CoCrAlY and Ti ingots melting and refining UE194 is equipped with 4 EB-guns and an intermediate reservoir UE194 can produce 1 2 500 mm long ingots per shift

CTI

forward

PRATT & WHITNEY PATON

19 October 2007

Engineered Coatings
EBPVD Coatings: - High temperature corrosion resistant metal overlay EB Metallic overlay: CoCrAlY CoNiCrAlY
Leader free structure APU 131-9

Products: 1st stage turbine blades and nozzles of 131-9 APU in production 1st / 2nd stage turbine nozzles and SX 2nd blades of 331-500 in progress

PWP Capable of Engineering Coatings to Specific Applications

PRATT & WHITNEY PATON

19 October 2007

Engineered Coatings
OVERLAY MCrAlY
OVERLAY

EB PVD TBC
2 layer TBC MCrAlY+ YSZ (ZrO2-7Y2O3)

OVERALUMINIZED SUPERALLOY

TOP COAT

BONDCOAT

SUPERALLOY

Material Science PWP Core Competency

PRATT & WHITNEY PATON

19 October 2007

Engineering - Qualifications
Industrial Turbomachinery, Dual System Metallic and Thermal Barrier Coating
Coating system designed to meet customer requirements Metallic Base coat with tailored chemistry Thermal Barrier Ceramic Coating enhances part life and allows increase in engine efficiency PWP posses agency certifications enabling the business to offer solutions to customers

PWP Offers Customers Tailored Solutions

PRATT & WHITNEY PATON

19 October 2007

Engineering MCrAlY & TBC System

Overlay & 2-layer EB-PVD TBC for Russian customers
AVIADVIGATEL
PS 90 GP - IGT. 16 MW Gas Turbine PS-90 A2 - Aircraft Advanced Engine

Perm Motor
PS 90-A Aircraft Engines

PWP Supplies Advanced Coatings to Local Industry

PRATT & WHITNEY PATON

19 October 2007

Organizational Capability

Equipment

Coating Development

Engineering

Product

Production

PWP has the Full Range of Capability to Meet Customer Needs

PRATT & WHITNEY PATON

19 October 2007

Customers
Honeywell Meyer Tool TMC DARO JTT TOS Perm

PW-Paton
Local

Siemens

Equipment Coating Services Repair

Global Customer Base Necessary to Secure Coating Services and Equipment Business

PRATT & WHITNEY PATON

19 October 2007

Applications of Enterprise Architecture Best Practices

Alignment Organization

Wrap Up Discussion
Systems Engineering Principles Cultural Learnings

PRATT & WHITNEY PATON

19 October 2007

Best Practices: Alignment, Rigor and Discipline

Alignment Program/Project Management Rigor & Flexibility Integrated Workforce Strategy Consistent Organizational Structures

Actively Manage Systems Architecture Use Standard Processes Consistently Implement System Engineering as a Unique Discipline

LEADERSHIP

Common yet Flexible Toolsets

Manage Workforce by Common Competencies Manage Infrastructure Corporately

Applications of EA J.C. Duh, Russ Wertenberg

Adequate IR&D Investment

- 21 -

PRATT & WHITNEY PATON

19 October 2007
Alignment Program/Project Management Rigor & Flexibility Integrated Workforce Strategy Consistent Organizational Structures

Applications of EA: Alignment

4 Point Focused Business Strategy
Equipment Coating Services Engineering and R&D Repair

Actively Manage Systems Architecture Use Standard Processes Consistently

Implement System Engineering as a Unique Discipline

LEADERSHIP

Common yet Flexible Toolsets Manage Infrastructure Corporately

Manage Workforce by Common Competencies

Adequate IR&D Investment

Transition from Largely R&D focus to Production R&D with commercial application PW-Patons Role is an Enabler for PW Network

Production

New Equipment

R&D

Maintain Technical Excellence Establish: Trust, Hope, Focus, Change

Simple Focused Strategy Build on PWP Core Competency

PRATT & WHITNEY PATON

19 October 2007
Alignment Program/Project Management Rigor & Flexibility Integrated Workforce Strategy Consistent Organizational Structures

Applications of EA: Alignment

Equipment Links us to P&W
Applies our core competency Generates a need for PW-Paton PW-Paton Enabler for PW

Actively Manage Systems Architecture Use Standard Processes Consistently Implement System Engineering as a Unique Discipline

LEADERSHIP

Coating Services Sustained Business

Our steady income our survival
Support P&W network New money International Customers

Common yet Flexible Toolsets Manage Infrastructure Corporately

Manage Workforce by Common Competencies

Adequate IR&D Investment

Applies our core competency

Engineering and R&D Continued New Birth

Building blocks for our future Additional source of income for us P&W wants us to build local customer base

4 Point Strategy (FPS) Strategic Content Lays out Foundation for the Enterprise's Systems Architecture

Repair Potential Business, Local Customers Focused

Manages Systems Architecture

Strategic Content of the FPS Aligns to System Architecture of PW-Paton

PRATT & WHITNEY PATON

19 October 2007
Alignment Program/Project Management Rigor & Flexibility Integrated Workforce Strategy Consistent Organizational Structures

Applications of EA: Alignment

Master Plan
Product Lines
Equipment Coating Engineering & R&D Repair

Actively Manage Systems Architecture Use Standard Processes Consistently Implement System Engineering as a Unique Discipline

2007 Production Volumes

7000 6000 5000 4000 3000 2000 1000
90 75 155 140 182 140 275 182 275 182 275 275

LEADERSHIP

Daily demand Actual Daily PWP Capacity Actual Demand Monthly demand Actual Delivered

Common yet Flexible Toolsets Manage Infrastructure Corporately

Manage Workforce by Common Competencies

0 Aug Sep Oct Nov Dec Jan

Adequate IR&D Investment

Departments
Each Department Works to the Master Plan - Only Department is Responsible for:
Help Create MP Understand MP Resource to achieve MP Support MP

All Current Product lines on MP are Aligned to 4 Point Strategy (FPS) All New Product Aligned to MP and FPS DISCIPLINE Only items on MP get Worked

Actively Manage Systems Architecture Alignment, Rigor, Discipline

PRATT & WHITNEY PATON

19 October 2007
Alignment Program/Project Management Rigor & Flexibility Integrated Workforce Strategy Consistent Organizational Structures

Applications of EA: Organization

Restructured PWP to Drive Focus on Coating Services & Equipment Manufacture
New Operations Organization Production Technology Support Facilities Coating Services Sustained Business Highly skilled team

Actively Manage Systems Architecture Use Standard Processes Consistently Implement System Engineering as a Unique Discipline

LEADERSHIP

Common yet Flexible Toolsets Manage Infrastructure Corporately

Manage Workforce by Common Competencies

Adequate IR&D Investment

Engineering & R&D

EB Equipment Manufacture is PW Merged Technical Functions to better Patons Unique Core Competency Support Production New Equipment Keeps PWP current Equipment Design and Defines our Future Production Support Production Operations - Coating Process Improvement Coating Technology Services is PWPs Sustained Business

PWPs Operational Focus - Coating Services & Equipment Manufacture

PRATT & WHITNEY PATON

19 October 2007

Applications of EA: Organization

Boris Paton George Marinsky Michael Zhadkevich Valeriy Kutsak Daniel Godin Timothy Puglielli

Actively Manage Systems Architecture Use Standard Processes Consistently Implement System Engineering as a Unique Discipline

Alignment

Program/Project Management Rigor & Flexibility Integrated Workforce Strategy Consistent Organizational Structures

Chairman
Jerry Tarnacki

Dinesh Gupta

FUNCTIONAL COMMITTEE
TECHNICAL COMMITTEE I. Belousov M.Maloney A. Byelyavin A.Korzh G.Marinsky R.Melnick J.Mullooly J.Neal M.Kinsler

John Mullooly

Old
Engineering

e ctur Stru
Quality
Anatoliy Tsepkalov

LEADERSHIP

Finance
Vadim Gnedkov

HR/ Administration

Equipment
Viktor Timashov

R&D
Igor Belousov

Operations
Yuriy Yemelyanov

EH & S

Nelia Kolomiyets

Alexander Byelyavin

Common yet Flexible Toolsets Manage Infrastructure Corporately

Manage Workforce by Common Competencies

Boris Paton George Marinsky Michael Zhadkevich Valeriy Kutsak

Daniel Godin Timothy Puglielli

Chairman
Jerry Tarnacki

Adequate IR&D Investment

Dinesh Gupta

FUNCTIONAL COMMITTEE
TECHNICAL COMMITTEE I. Belousov M.Maloney A. Byelyavin A.Korzh G.Marinsky R.Melnick J.Mullooly J.Neal M.Kinsler

John Mullooly

New
Operations
Igor Belousov Technology Support Yuriy Kononenko

re uctu Str
Quality EH & S

Resource Alignment to 4 Point Strategy Heavy Focus on Operations New Cooperative Approach

Finance
Vadim Gnedkov

HR/ Administration

Equipment
Viktor Timashov

Nelia Kolomiyets

Engineering/ R&D Alexander Byelyavin

Anatoliy Tsepkalov

Production
Oleg Pankov

Facilities
Leonid Artemenko

Coating

Repair

Revised Traditional Functional Organization Aligned Resources& Competencies to 4 Point Strategy

PRATT & WHITNEY PATON

19 October 2007
Alignment Program/Project Management Rigor & Flexibility Integrated Workforce Strategy Consistent Organizational Structures

Applications of EA: Organization

Actively Manage Systems Architecture Use Standard Processes Consistently Implement System Engineering as a Unique Discipline

LEADERSHIP

Common yet Flexible Toolsets Manage Infrastructure Corporately

Manage Workforce by Common Competencies

Adequate IR&D Investment

Engineering
Production Support Process Improvement Coating Technology R&D

Operations
Production
Coating Services Repair Shop Ingot Production

Facilities Technology Support

Equipment Maintenance Equipment Manufacture Tooling Care & Manufacture

45 Full Time Employees 30 Contract Employees 2 Shift Operation

P&W Lessoned Learned;

Strong Engr. & Opps. Teams are Keys to Sustained Success

PRATT & WHITNEY PATON

19 October 2007

Applications of EA: R&D Investment, Infrastructure

Applied R&D
Funding Available Commercial Applications
Actively Manage Systems Architecture Use Standard Processes Consistently Implement System Engineering as a Unique Discipline Alignment Program/Project Management Rigor & Flexibility Integrated Workforce Strategy Consistent Organizational Structures

Material Science
Proceeds Based on Success of Applied Research

LEADERSHIP

Common yet Flexible Toolsets Manage Infrastructure Corporately

Manage Workforce by Common Competencies

Infrastructure
Ownership Clearly Defined Structured Tasking - Master Plan

Adequate IR&D Investment

Material Research Proceeds based on the Success of Applied R&D

PRATT & WHITNEY PATON

19 October 2007

Applications of EA: Systems Architecture, Systems Engineering

Actively Manage Systems Architecture Use Standard Processes Consistently Implement System Engineering as a Unique Discipline Alignment Program/Project Management Rigor & Flexibility Integrated Workforce Strategy Consistent Organizational Structures

Current State: Business Operating with Positive EBIT Currently Manufacturing 2 New Advanced EB coaters Coating Services Business Restored 2008 Technology R&D plan

LEADERSHIP

Common yet Flexible Toolsets Manage Infrastructure Corporately

Manage Workforce by Common Competencies

Adequate IR&D Investment

Systems Architecture & Systems Engineering, New Disciplines for PW-Paton

PRATT & WHITNEY PATON

19 October 2007

Wrap Up Discussion
Systems Architecture Principles
Alignment Organization

Cultural Learnings
Trust not to be underestimated Easy Things are not Easy Western Time Schedule, Something Foreign
Understood but Considered not a Best Practice

Western Approach Be Careful Eastern Education

Philosophy Important Increasing State of Knowledge is Accomplishment

Singularity - Survival