Few industries have benefited more from additive manufacturing (AM) than aerospace. A leading company in this field is GE, which has developed a complex engine component and a new turboprop engine using AM. While these products prove GE’s ability to succeed in AM, the question remains how they will compete as barriers to entry decrease and the company faces cash constraints.
The aerospace industry is a good candidate for AM due to the need for mass-produced, complex, customized parts and the opportunity to save fuel costs (35% of airlines’ revenues) and emissions through weight reduction . AM allows for weight reduction while maintaining the extremely high levels of precision required to avoid harmful accidents. For GE specifically, AM has differentiated them as a first mover in product development innovation. The facility where the LEAP fuel nozzle is produced was the first in the industry for mass production using AM .
As performance has declined recently (revenue decreased 1% in 2017), GE has divested peripheral businesses (oil; water; plans to spin off healthcare) to focus on its core, specifically aviation [3, 4, 5]. In the 2017 letter to shareholders, then-CEO John Flannery said AM could help “deliver outcomes for customers”, the number one 2018 goal – AM is clearly top of mind for GE .
To address AM in the short term, GE is focused on continuing the rollout of its LEAP engine with a 3D-printed fuel nozzle as well as developing a new Advanced Turboprop (ATP) engine. The LEAP fuel nozzle is printed in one piece rather than the twenty originally needed, making it 25% lighter and five times more durable than the typical nozzle . After three years of production, GE recently completed its 30,000th fuel nozzle . The company expects to continue meeting the planned ramp-up of LEAP production to reach 2,000 engines by 2020 .
The ATP engine for Textron Aviation’s Cessna Denali was announced in 2015 as the first clean-sheet design turboprop in 30 years . The AM process reduces the number of components from 855 to 12, improves fuel usage by 15%, allows for 20% more range, and achieves 10% more power. AM has resulted in a 60% cost reduction and 40% weight reduction (100 pounds) for the ATP engine . This was partly driven by the AM prototyping which cut the development time by a third .
In the medium term, GE is focused on cost reduction while continuing to lead in aerospace AM globally. Performance has suffered recently; the stock price is $8.61 versus a 5-year high of $32.88 in July 2016 . In response to investor pressure, GE is planning to cut $2B in overall costs in 2018 as part of its effort to “run the company for cash” . This contrasts with their investment in AM: $1.5B on ownership stakes in Arcam and ConceptLaser and $1.5B internally to develop AM capabilities . However, they expect revenue and cost improvements as AM ramps up, targeting $1B in annual revenues from AM and 3,000 machines by 2020 . Mohammed Ehteshami of GE Additive said, “additive allows you to get sophisticated and reduces costs at the same time” . GE aims to use AM to optimize the tradeoff between weight and cost, eliminating some parts of the supply chain in an effort to streamline . However, they have not yet achieved this cost savings; according to JP Morgan, AM requires additional investment and GE is focusing more on growth than cost targets . As AM matures, GE will need to be more diligent about cost control, not just innovation.
Looking forward, I suggest that GE bring the AM capabilities they have built in aerospace to their other businesses and to partner companies through their AM consulting work. Specifically, the power and transportation businesses use complex parts that are good candidates for AM. GE is already setting up AM adoption strategies and goals for each business unit, but can further these efforts by sharing facilities and engineering talent in order to make best use of their investment . They also have an additive consultancy, AddWorks, along with a software simulation company, GeonX (acquired in 2017), which they can use for cash while limiting additional costs and maintaining their leadership position in AM .
Considering the strong progress GE has made as a leading innovator in aerospace AM, as well as their weak financial performance, the most pressing question is how they will fare versus competitors. While GE is strapped for cash, their competitors are continuing to spend money (e.g., Siemens has built AM capabilities in-house and acquired Materials Solutions in 2016) . Small manufacturers are beginning to develop AM capabilities as barriers to entry decrease . How will GE be able to compete in this rapidly evolving space while going through a turnaround?
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