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2016 UTC Supplier Forum
2016 UTC Supplier Conference May 11, 2016 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY Note: All results and expectations in this presentation reflect continuing operations unless otherwise noted. Cautionary Statement: This presentation includes statements that constitute “forward-looking statements” under the securities laws. Forward-looking statements often contain words such as “believe,” “expect,” “expectations,” “plans,” “strategy,” “project,” “prospects,” “estimate,” “target,” “anticipate,” “will,” “should,” “see,” “guidance,” “confident” and similar terms. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases and other measures of financial performance or potential future plans, strategies or transactions. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Such risks, uncertainties and other factors include, without limitation: the effect of economic conditions in the industries and markets in which we operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction and in both the commercial and defense segments of the aerospace industry, levels of air travel, financial condition of commercial airlines, changes in government procurement priorities and funding, the impact of weather conditions and natural disasters and the financial condition of our customers and suppliers; challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; future levels of indebtedness and capital spending and research and development spending; future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure; delays and disruption in delivery of materials and services from suppliers; customer- and company-directed cost reduction efforts and restructuring costs and savings and other consequences thereof; the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses into our existing businesses and realization of synergies and opportunities for growth and innovation; new business opportunities; our ability to realize the intended benefits of organizational changes; the anticipated benefits of diversification and balance of operations across product lines, regions and industries; the timing and scope of future repurchases of our common stock; the outcome of legal proceedings, investigations and other contingencies; pension plan assumptions and future contributions; the impact of the negotiation of collective bargaining agreements and labor disputes; the effect of changes in political conditions in the U.S. and other countries in which we operate; and the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we operate. The forward-looking statements speak only as of the date of this presentation and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our reports on Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC from time to time, including, but not limited to, the information included in UTC's Forms 10-K and 10-Q under the headings “Business,” “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Legal Proceedings” and in the notes to the financial statements included in UTC's Forms 10-K and 10-Q. UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY WELCOME Peter F. Longo, UTC Senior Vice President Operations UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY POSITIONED FOR GROWTH Powerful mega-trends provide significant growth opportunities for UTC core business segments UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY 2015 ANNUAL REPORT Consolidated Statement of Operations Net Sales $56 Billion Costs & Expenses $48 Billion UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY AGENDA Voice of the Customer Industry Update State of the Business Don Mitacek Jeffrey Sprague Dave Gitlin & Bob Leduc Sustainability Supply Chain Barry Eccleston John Mandyck UTC │ UTC AEROSPACE SYSTEMS Sarfraz Nawaz & Sam Abdelmalek │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS OVERVIEW David Gitlin, President UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Industry-leading portfolio Well-positioned on new platforms Deep customer relationships Strategies in place position us for long-term growth UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Military Driver Comm OEM Sales drivers Large commercial Bizjet / rotorcraft Driver RPMsRPMs Comm AM OEM Mid single digit New program EIS New program EIS Surplus availability Surplus availability Military UTC AEROSPACE SYSTEMS Trend Driver Military OEM platforms ISR Defense spending *Adjusted for restructuring and other significant items. See appendix for reconciliation. │ Trend Fuel prices / airline profitability Fuel prices / airline profitability 2015 sales: $14.3B* UTC Mid to Trend high single digit Regional Commercial Military Commercial aftermarket Trend CAGR 2016E – 2020E │ PRATT & WHITNEY │ OTIS │ Low single digit UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS New program introduction UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS PROGRAM EXECUTION Program execution A350-1000 B777X 737MAX MRJ UTC │ C919 G500/600 UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY A330neo 787-10 MC-21 CSeries KC-390 │ OTIS │ KC-46A UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Growth UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Growth Continued focus on expanding aerospace systems offerings UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS 2020 financial outlook (sales, $ billions) 2016E – 20E CAGR 5-7% T // UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS How customers measure us NEW WINS CUSTOMER FOCUS OPERATOR SUPPORT RELIABILITY TECHNOLOGY INNOVATION LOWEST COST DELIVERY BEST QUALITY We must be flawless or we’re “red.” UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Performance matters Supplier On-Time Delivery Supplier Escapes T UTC │ UTC AEROSPACE SYSTEMS T │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Supplier gold progress 9 20 9 Underperforming suppliers lose 10% of UTAS’s business/year. 884 8 941 728 565 T Gold suppliers win 14% 508 250 434 incremental UTAS business/year. 264 2014 UNDERPERFORMING UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY 464 167 247 2015 2016 YTD PROGRESSING │ OTIS │ PERFORMING 110 2016 P GOLD UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Key takeaways 1. We’re industry leading. 2. We will outgrow a growing market. 3. 70% of our cost is supply chain. 4. We can only perform if you perform. 5. Gold performance leads to new business. UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY PRATT & WHITNEY OVERVIEW Bob Leduc, President UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY PRATT & WHITNEY Segments Commercial Engines Photo: Airbus Overall Sales ~$14B (2015) Military Engines Photo: Lockheed Martin Total engine shipments ~3,200 P&W PROPRIETARY This document/page does not contain any export regulated technical data Pratt & Whitney Canada Photo: Gulfstream Aftermarket Revenue ~$9.8B 2 2016-05-11_UTC_Top_Supplier PRATT & WHITNEY Accomplishments in Last 15 Months Large Commercial Engines Photo: Airbus First A320neo deliveries to IndiGo and Lufthansa Pratt & Whitney Canada Photo: Bombardier Photo: Gulfstream CSeries certified Gulfstream G500 first flight MRJ first flight Dassault Falcon 8X first flight Photo: Dassault E-Jets E2 roll out ceremony Military Engines P&W PROPRIETARY This document/page does not contain any export regulated technical data KC-46A Tanker first refueling flight Photo: Lockheed Martin F-35B Initial Operational Capability 3 2016-05-11_UTC_Top_Supplier PRATT & WHITNEY Commercial Engines backlog GTF Engine Orders Recently Announced Customers >7,000 2008 2009 2010 2011 2012 2013 2014 2015 2016E YTD P&W PROPRIETARY This document/page does not contain any export regulated technical data 4 2016-05-11_UTC_Top_Supplier PRATT & WHITNEY Military Engines backlog F135 Production Contracts F-35 Customers / Partners (Number of engines per Low Rate Initial Production) 170 130 103 67 48 33 16 35 38 36 19 4 LRIP LRIP LRIP LRIP LRIP LRIP LRIP LRIP LRIP LRIP LRIP LRIP 1 2 3 4 5 6 7 8 9 10 11* 12* * estimates P&W PROPRIETARY This document/page does not contain any export regulated technical data 5 2016-05-11_UTC_Top_Supplier PRATT & WHITNEY 2016 - 2020 Engine Shipments Large Commercial / Military Engines Pratt & Whitney Canada (Number of engine deliveries) Legacy ME Legacy CE Tanker APU Helicopter Business jet V2500 F135 GTF Regional General aviation 4000 2000 3000 1500 2000 500 1000 0 0 2016 2017 2018 2019 2020 2016 Total 2020 shipments 5,300 2017 2018 2019 2020 Total 2020 Aftermarket Revenue $11B P&W PROPRIETARY This document/page does not contain any export regulated technical data 6 2016-05-11_UTC_Top_Supplier PRATT & WHITNEY The load is real How do we succeed? Together P&W PROPRIETARY This document/page does not contain any export regulated technical data 7 2016-05-11_UTC_Top_Supplier PRATT & WHITNEY Responsibilities Pratt & Whitney Supplier • Stabilize schedule • Invest in capacity • Communicate BOM changes well in advance • Load commitments into portal • Invest in capital • Achieve at least 98% OTD • Resources support • Eliminate quality escapes • Buffer stock • Be personally engaged at the senior level P&W PROPRIETARY This document/page does not contain any export regulated technical data 8 2016-05-11_UTC_Top_Supplier PRATT & WHITNEY Supplier Gold Progress Gold 25% 19% (% of spend in program) 20% 30% 50% Performing Progressing 25% 16% 28% 35% 45% 14% 15% 50% Underperforming 34% 39% 15% 30% 10% 2013 2014 2015 2016 Goal P&W PROPRIETARY This document/page does not contain any export regulated technical data 2020 Vision 9 2016-05-11_UTC_Top_Supplier PRATT & WHITNEY Supplier escapes – significant (Monthly average) 2.7 2.3 Process control 1.5 2014 Drivers FAI/ Inspections 2015 2016 Supplier SDO’s 13 10.4 Actions UPPAP 9.3 Process certification Contract and subtier management processes 2014 2015 2016 P&W PROPRIETARY This document/page does not contain any export regulated technical data 10 2016-05-11_UTC_Top_Supplier WORLD CLASS GLOBAL SUPPLY BASE QUALITY What does it look like? Delivery > 98% No Significant Escapes UPPAP Execution Process Certification Expertise Subtier supplier score trend 63% Subtier Management 69% 50% 2013 2014 2015 P&W PROPRIETARY This document/page does not contain any export regulated technical data 11 2016-05-11_UTC_Top_Supplier PRATT & WHITNEY Summary Once in a lifetime opportunity for us all… P&W PROPRIETARY This document/page does not contain any export regulated technical data 12 2016-05-11_UTC_Top_Supplier INDUSTRY OVERVIEW Jeffrey Sprague, Vertical Research Partners UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY Running a Reliable, Customer-Focused Airline Don Mitacek – SVP Delta Technical Operations Delta Private Jets Delta Global Services Another Record Breaking Year • Safety, Reliability, Customer Satisfaction, Financially • How did we improve? • How do we continue to improve? • How do we work with our key partners? Operations Top of Industry Operational Performance DOT Completion Factor* DOT On-Time* DOT Baggage** Delta 99.69% Alaska 86.8% JetBlue Alaska 99.59% Delta 86.4% Delta 1.81 2.08 Southwest 98.80% Southwest 80.8% United United 98.79% American 80.7% Southwest 3.27 Jetblue 98.75% United Alaska 3.31 American Jetblue 98.62% 97% 98% 99% Delta #1 10 of 12 months *Last twelve months through February 2016 **Last twelve months through January 2016 100% 79.6% 76.2% 65% 70% 75% 80% 85% 90% Delta #1 4 of 12 months 3.06 American 3.92 1.5 2.0 2.5 3.0 3.5 Delta #1 2 of 12 months 4.0 4.5 Operations System 100% CF Days Core Reliability Performance 161 151 days better System Performance • Strong maintenance reliability • 69% increase in number of mainline 100% CF days vs 2014 • 214 100% domestic mainline CF days 95 72 20 10 2011 2012 2013 2014 2015 Domestic 100% CF Days 214 197 • Delta significantly better than all other network carriers combined 13 Full Year 2014 DL 42 YTD November 2015 American/US + United + Southwest Operations Core Reliability Performance Maintenance Cancellations 3,134 92% better TechOps Initiatives 1,244 • Expanded maintenance footprint 792 414 249 2014 2015 • Growing internal maintenance capabilities • Serviceable levels • Reliability projects 2011 2012 2013 100% Maintenance CF Days • Leverage Cargo’s improved DASH performance 208 days better • Predictive maintenance 169 117 TechOps 2015 Performance • 40% reduction in cancellations vs 2014 • 7% improvement in maintenance delays vs 2014 236 28 2011 53 2012 2013 2014 2015 Customer Service Flight Attendant Interaction Customer Surveys • Driving record performance • Testing service concepts 2011 2012 2013 2014 2015 Domestic NPS 2011 2012 2013 2014 2015 It’s Not Luck Process Technology Infrastructure Execution • TechOps – TOC • Mobile • Airports • EIG • Baggage • Applications • Bag systems • MBOs / MPRs • ATL kitchen • RFID • De-icing • Data analytics • Aircraft turns • Wearables • Flight simulations • Reports / alerts • Predictive Maintenance • TOC capacity • Continuous improvement • Reliability • Security • Georgia Tech Innovation Center • Change management Most Importantly - Our People People How Do We Know • Servant Leadership Survey Scores: • Culture • I understand how my daily work impacts Delta’s overall goals – • Values • How likely are you to refer a family member, friend, etc.. to Delta - 4.50 • Incentives • I am proud to tell others I work for Delta 4.47 4.53 • I feel Delta creates the direction and sets the pace for the industry - 4.34 • Overall, I feel Delta is a great place to work 4.46 Partnering With Our Suppliers Partnership • Not all suppliers are created equally • Price is not value • Win/Win or go home… • Objectives, goals and measurement • Partnership is not an empty word Running a Reliable, Customer-Focused Airline Thanks! SUSTAINABILITY John Mandyck, UTC Chief Sustainability Officer UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY PRATT & WHITNEY GLOBAL SUPPLY CHAIN Sam Abdelmalek, Vice President, Global Supply Chain UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY EXCITING OPPORTUNITIES & CHALLENGES 2016F 2020P Sales $15B $22B Installed engines >70K >100K Annual product spend $4B >$8B Annual non-product spend >$1.5B >$2B Supplier Gold & Performing 56%* 100%V 2x* <1x NGPF target cost ratio *2016A UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY ACCOMPLISHMENTS – SUPPLY BASE Investments Production Readiness Hundreds of millions in supplier CAPEX 460 Production readiness assessments BOOST $23B in LTAs 100+ Suppliers Events >200 deals completed since Jan. 2014 500 parts on “Boost” validation Senior management meetings UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY SUPPLIER GOLD – THANK YOU! Belcan UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY P&W ACCOMPLISHMENTS Supply Chain evolution Global investments Strategic Sourcing Annual Review Boards P&W Logistics Center 15-20 reviews @ P&W, 40 reviews @ UTC Go Live – July ‘15 Exceeding Targets – April ‘16 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY OUR EXPECTATIONS Supplier Gold & UPPAP Production Rate Readiness & BOOST Cost LTAs PW1100G-JM UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY P&W SUPPLIER GOLD PERFORMANCE Pratt & Whitney Supplier Gold Progress NGPF & F135 Production Readiness Supplier Risks High 34 UTC │ UTC AEROSPACE SYSTEMS Medium 114 │ PRATT & WHITNEY Low 63 │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY BETTER ORGANIZED TO WORK WITH YOU Regional Offices Early Alert Risk Management Supplier Development Resources Professional Support Network America: 31 Canada Europe: 9 USA Asia: 4 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY SYSTEM INVESTMENTS - 2016 Supplier Portal UPPAP Management Software UTC │ UTC AEROSPACE SYSTEMS │ Supplier Network Collaboration Contract Lifecycle Management (CLM) Net Inspect QN Collaboration Hub PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY MATERIAL MANAGEMENT Executive Steering Committee Dedicated project lead and co-lead SI&OP PFEP & Buffering Engineering Changes System Evaluation Value Stream KPI Value Stream Organization Change management and communication teams SIOP/Capacity Planning Plan Demand UTC │ Replenishment Strategies Plan Supply UTC AEROSPACE SYSTEMS Supply Network Collaboration Assure Manage Inventory Delivery │ PRATT & WHITNEY │ OTIS │ Logistics Move Manage Material Freight UTC CLIMATE, CONTROLS & SECURITY MODULE CENTER EVOLUTION Strategy and Business Processes Supplier Quality Manager A Commodity management B Commodity management C Commodity management D Commodity management UTC │ Quality Manager Supply Chain Senior Manager Account management Value Stream Management Account management Value Stream Management Account management Value Stream Management Account management Value Stream Management UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ Material Planning Manager Manufacturing Engineering Engineering UTC CLIMATE, CONTROLS & SECURITY SUPPLIER HEALTH ASSESSMENT (SHA) A More Robust Program Business Continuity Process Certification Sustainability International Trade Compliance Sales & Operations Planning Sub-tier Management Enabling sustainable performance UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY WORKING PROACTIVELY Leading Performance Indicators PFMEA Dashboard Quality Built Ahead Tool Capacity XRM or Production Metrics Supplier Code: % on % UPPAP UPPAP completed Yield Sunday Saturday (YYYY-MM-DD) (YYYY-MM-DD) Finish Goods Work In Process/ Lead Time Raw Material Capacity Graphs trending X≥ 100% X≥ 100% X≥ 100% Demonstrated Capacity (12 months) > MRP Requirements 100% 95% ≤ X< 100% 95% ≤ X< 100% 95% >X 95% >X % of green (parts) % of yellow (parts) % of green (parts) % of yellow (parts) X≥ 95% >95% 85% <X< 95% >85%, < 95% 95% ≤ X< 85% ≥X <85% 95% >X % of green (parts) % of yellow (parts) % % of green (parts) % of yellow (parts) % of red (parts) % % of red (parts) % of red (parts) Andon Red Promise Dating # of parts # of parts % Demonstrated Capacity (12 months) = MRP Requirements Demonstrated Capacity (12 months) < MRP Requirements % of red (parts) Overall Rating WEEK 1 WEEK 2 WEEK 3 WEEK 4 WEEK 5 WEEK 6 WEEK 7 WEEK 8 PW1100 Buffer Status Capacity Planning Dec. 31, 2015 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ March 31, 2016 UTC CLIMATE, CONTROLS & SECURITY DEMAND/PROFILE GROWTH & CHANGES Commercial Engines NGPF Build Rate NGPF Spares Military Engines UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY PRODUCTION READINESS Risk Mitigation Critical actions: Demand reconciliation 34 High Risk Suppliers (PRR) Action item tracking Finalize capacity & resources Commitments/accountability BOOST program Drive EQNs Down QN reduction Sub-tier management UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY AFFORDABILITY AND VALUE NGPF engines VA/VE LTAs COPQ Tech Global Footprint PT6 F135 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY LONG TERM AGREEMENTS Supplier Gold Certification Benefits One Company Governance 90+ day payment terms Payment Terms OTD performance guarantees Quality Notification (QN) charges Minimum buffer stock UTC │ UTC AEROSPACE SYSTEMS │ 90 days 75 days No Performance Guarantees / QN Admin. Charges Supplier Gold commitment PRATT & WHITNEY Buffer Stock │ OTIS │ Supplier Selection Benefits / Business Opportunities UTC CLIMATE, CONTROLS & SECURITY TAKEAWAYS P&W Commitments Supplier Expectations Investing in our people, systems & processes Supplier Gold certification with UPPAP Invest in growth and production readiness Steady journey toward a world-class supply chain Improved schedule stability Continued collaboration with our supply base Promise date commits, buffer & leading indicator management Year-over-year productivity commitments (V2 & SmartChoice) One Company contract with UTC governance Continued collaboration to drive world-class performance UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS SUPPLY CHAIN Sarfraz Nawaz, Vice President UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Supply Chain profile Product $5.3B+ Non product $1.6B+ Distributed Products Other IT & Telecom Other Machining Electronics Energy Plant Consumables Travel Fabrications, Composites & Plastics Temp Labor Logistics Engineered Items Casting, Forging, Raw Material UTC │ UTC AEROSPACE SYSTEMS Facilities Management │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Supply Chain profile Organizational design New Program Introduction Affordability initiatives Input cost management Sourcing Procurement execution Quality & Development Delivery assurance Investment in technology Process innovation Strategic Tactical Leverage scale opportunity Optimizing resources to achieve performance Supplier Performance Input based scoring UTC │ Aircraft Systems PRECISION MACHINE WORKS NORANCO FACC NIKKISO JONACO MACHINE ALARD MACHINE CTRM NATIONAL MACHINE MOOG GUIZHOU LIYANG AERO Power Control and Sensing Supplier Name PHOENIX MFG ECE GROUP INTERTECHNIQUE CHRISTOPHER TOOL PARKER HANNIFIN EATON B/E AEROSPACE PALL AEROPOWER A M CASTLE BRAZONICS PRECISION MASTERS Compliance International Trade Compliance Supplier Volume / Quality: Quality: Quality: Sourcing Total Gold Spend PPM Escapes Delivery Strategy Score (1, 5, 10) (10, 8, 5, 1) (10,8,5,1) (10,8,5,1) (10,8,5,1) (10, 5,1) 8 10 0 8 10 10 46 10 10 10 0 5 10 45 5 10 0 10 10 10 45 5 10 0 10 10 10 45 10 8 10 0 5 10 43 8 8 10 0 5 10 41 5 10 0 5 10 10 40 8 10 10 0 5 5 38 0 10 0 10 8 10 38 5 8 0 5 10 10 38 10 10 10 10 10 10 10 10 10 10 10 10 10 10 8 10 8 10 8 5 10 0 5 0 10 5 5 5 0 8 0 8 0 8 0 0 0 0 5 0 5 10 8 8 8 5 10 8 8 8 10 5 10 5 5 10 5 5 5 5 REACh 45 43 43 41 41 40 38 38 36 36 Prioritized by score UTC AEROSPACE SYSTEMS Conflict minerals Targeting underperformers │ PRATT & WHITNEY CPSR / Audits Supplier sustainability │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Supply Chain performance Supplier Development Performance metrics Supplier Gold Playbook deployment OTD Gold / Performing spend 495 7% 726 608 6% 58% 33% 44% 2014 2015 2016 2014 Regions 2015 2016 # of Escapes UTC │ 2015 2016 // 2020 47% 31% NA-East 157 suppliers Europe 206 suppliers 2014 Underperforming spend NA-Midwest 126 suppliers NA-West 186 suppliers 2013 100% 76% Asia 51 Suppliers UTC AEROSPACE SYSTEMS 21% 12% 50% 2014 │ 2015 PRATT & WHITNEY 2016 │ OTIS │ 2013 2014 2015 6% 2016 // 0% 2020 UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Supply Chain key initiatives Material management Rate readiness PFEP compliance Forward stocking locations / 3PL Elements Criteria PRS 4 6 Surveillance 12 6 SHA 5 Gold Logistics design Supplier portal control Buffer stock Dual production Dedicated capacity Zero Defect Plan Assess and reduce supplier risk Low Risk Medium Risk High Risk UPPAP NPI Transitions Major changes 50% reduction in escapes and PPM Complexity/criticality Seamless transitions Limit production risks Zero significant escapes Process Certification Future planning Drive QIP on key suppliers Flawless EIS Top supplier escape reduction Systemic DIVE Application on key programs ongoing, and growing UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Supply Chain investments UTC Spend Analytics Contract Lifecycle Management (CLM) Demand & Material Management Facilities / Technology Supplier Portal / SAP People & Processes │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS Supply Chain takeaways Performance Commercial Plan to Gold LTA coverage Rate readiness Cost reduction UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC Customer Event Barry Eccleston President - Airbus Americas Creating better ways to fly © AIRBUS all rights reserved. Confidential and proprietary document. Use Tab 'Insert - Header & Footer' for Presentation Title - Siglum - Reference Month 20XX 2016 We are part of Airbus Group 138,000+ $932.1billion $66billion Total workforce Order book Annual revenue 2014 statistics © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2016 Airbus is a global aircraft manufacturer 55,000 $72billion 10yrs 400 Employees Annual revenue* Operators Backlog Data to end 2015 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2016 The most global aerospace player – close to our customers worldwide The numbers 11 Production sites 4 Assembly line locations 5 Training centres 4 Engineering centres 3 Customer support centres 10 Materials & logistics centres* *Satair Group © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2016 Airbus Commercial in the US • Catalyst for $15.8 billion in annual aircraft related expenditure in the USA • Supporting over 262,000 jobs • Suppliers in over 38 states • Airbus Commercial, 6 primary sites with over 2000 employees. Airbus Engineering Center Mobile, Alabama Airbus Training Center Miami, Florida Headquarters Herndon, Virginia Airbus Engineering Center Wichita, Kansas Airbus Spares Center Ashburn, Virginia A strong and growing physical and economic presence in the USA • April, 2016 – Airbus Mobile delivers first American assembled A320 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2016 Airbus expands in the US with an A320 family Final Assembly Line 2013 Start of construction © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2015 Start of aircraft assembly 2016 First delivery 2018 40 to 50 deliveries 2016 Our aircraft are a familiar sight around the world Presence - An Airbus takes off or lands every 2 seconds 16,300+ 60 9,600+ 25,000+ Aircraft sold Delivered Daily flights Produced monthly Data to end March 2016 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2016 Meet the Airbus family from 100 to 500+ seats The Airbus Family A320 Family A330 Family A350 XWB A380 The market leader The right aircraft, right now The Xtra that makes a difference Own the sky © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. Airbus corporate presentation 2016 The A320 Family is the world’s best selling aircraft A320 - Superior comfort, lowest cost and highest reliability A320neo - 20% lower fuel burn 12,400+ 6,900+ 310+ Orders Deliveries Operators Data to March 2016 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2016 Airbus sourcing principle: enhanced responsibilities A300/320 Airbus Platform (50% of an aircraft Assembly Large-scale cost) Integration Value-added Parts and Assemblies Make-to-print Parts and Assemblies Raw Materials Many direct partners No real role for “integrators” Build to print for parts and sub-assemblies Page 41 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. A380 Airbus (40% of an aircraft cost) Fewer, but still many direct partners Limited role for “integrators” A350 Airbus (20% of an aircraft cost) TIER 1 RSP Fewer large partners sharing the risk, strategy and opportunities Extensive integrator role Global extended enterprise Each tier has more opportunity Airbus corporate presentation 2016 Globalize & consolidate the supply chain • STIMULATE the competition within the supply base • FEWER and BIGGER suppliers with ENHANCED responsibility • L4L (Local for Local) will remain, key support for a Final Assembly Line • EARLY INVOLVEMENT of major suppliers in joint development teams including R&T • GLOBAL SOURCING* challenges for both Airbus and its suppliers *Global sourcing: international sourcing = Non-EU countries © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. Airbus corporate presentation What are we looking for in potential suppliers Quality accreditations, AS9100, NADCAP Already working for an Airbus Group Business Unit or other aerospace OEM’s Customer recognition, GOLD, 5 STAR, supplier of the year, etc. Strong in commercial work Financially stable and ability to invest, Experienced Management and functional structure Strong manufacturing engineering Innovative products and companies Vertical integration © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2016 Airbus corporate presentation 2016 Airbus/Supplier joint efforts to meet customer demand RAMP-UP Ensure sufficient capacity. A350 and Single Aisle ON-TIME DELIVERY Reach and sustain excellent performance QUALITY Make it right the first time COST © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. Be creative and propose solutions for cost optimisation Airbus corporate presentation Questions? © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2016 Airbus corporate presentation 2015 Year End Results © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. 2016 Airbus corporate presentation 2016 The most modern, efficient & comprehensive range of widebody aircraft available today A330 - The world’s most popular mid-size aircraft 1,600+ 1,240+ 110+ Orders Operators In service A330neo - 14% lower fuel burn, more seats, more range Data to March 2016 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. Airbus corporate presentation 2016 A350 XWB – the Xtra that makes a difference 770+ 41 Orders Customers 25% Lower operating cost Xtra space for unrivalled passenger comfort Xtra innovative technologies for optimised airline efficiency Data to March 2016 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. Airbus corporate presentation 2016 A380 – a solution to increased demand for air transport A380 - Most profitable, most comfortable way to transport more people A take-off or landing every 3 minutes 315+ 180+ 18 Orders Deliveries Customers © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. Data to September 2015 Airbus corporate presentation 2016 Airbus Group North America + Airbus Group Mexico •Airbus Group ~ 50 •Airbus Americas ~ 1300 •Airbus Defense & Space ~ 900 ~50 Locations ~5450 Employees / Contractors ~3250 USA ~1800 Canada ~ 400 Mexico © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. •(Divestments in progress) ~ -600 •Airbus Helicopters ~ 1000 •Vector Aerospace ~ 1100 •STELIA Aerospace ~ 450 •Navtech ~ 250 •Airbus Group Mexico ~ 400 Airbus corporate presentation 2016 Procurement Organisation - worldwide coverage Sourcing Office Sourcing Office North America Central & Operational Teams Sourcing Office China and East Asia India and Middle East More than 2,700 Procurement employees representing 37 nationalities located worldwide, looking after more than 7,700 Suppliers (excluding Airbus Military). © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. Airbus corporate presentation 2016 Airbus Group North America Procurement Contact Information Process to follow: • • • You must obtain a Request For Information (RFI) document by sending an email to: NAsupplier@airbus.com Answer all the questions on the RFI document. Prepare your company presentation. • Title your email response: • “Goods & Services RFI response” for all nonflying goods and services. • “Flying Parts RFI response” for all products that will actually be installed or used on an aircraft. • Return the RFI document and company presentation via email to: NAsupplier@airbus.com Airbus North Americas Headquarter: 2550 Wasser Terrace, Suite 9100 ,Herndon, VA 20171 USA 02.2015 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document. © AIRBUS (Airbus S.A.S., Airbus Operations S.A.S., Airbus Operations GmbH, Airbus Operations LDT, Airbus Opeartions SL, Airbus China LTD, Airbus (Tianjin) Final Assembly Company LTD, Airbus (Tianjin) Delivery Centre LTD). All rights reserved. Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS. No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS S.A.S. This document and its content shall not be used for any purpose other than that for which it is supplied. The statements made herein do not constitute an offer. They are based on the mentioned assumptions and are expressed in good faith. Where the supporting grounds for these statements are not shown, AIRBUS S.A.S. will be pleased to explain the basis thereof. AIRBUS, its logo, A300, A310, A318, A319, A320, A321, A330, A340, A350, A380, A400M are registered trademarks. © AIRBUS all rights reserved. Confidential and proprietary document. Airbus corporate presentation 2016 CLOSING REMARKS Peter F. Longo, UTC Senior Vice President Operations UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY THANK YOU TO OUR GOLD SUPPLIERS Belvidere, IL Peterborough, Ontario Manchester, CT Kulim, Kedah, Malaysia Rzeszow, Poland Quebec & Ontario, Canada New York, NY Colmar, PA Ronkonkoma, NY Windsor, CT Tillsonburg, Canada Southgate, MI NJ, USA Lancashire, UK Cairo, Egypt Aurora, CO Goleta, CA Evansville, IN Independence, KS Macomb, MI Kalisz, Poland Belo Horizonte City, Brazil Manchester, CT Madison, AL Corinth, TX Chihuahua, Mexico Longueuil, QC Kent, WA Hoogerheide, Netherlands Hyderabad, India St. Hubert, Quebec Dunedin, FL Auburn, MA Framingham, MA Jeffersonville, IN UTC Huntsville & Berryville, AR Joplin, MO & Tulsa, OK Mississauga, ON Changzhou, China │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ Biłgoraj, Poland Santa Fe Springs, CA UTC CLIMATE, CONTROLS & SECURITY THANK YOU TO OUR GOLD SUPPLIERS Akashi, Japan North America Lincolnshire, IL Windsor, CT Kure, Japan Miramar, FL Quebec, Canada Guangzhou, China Atlanta, GA & St. Laurent, Quebec Mumbai, India New York, NY Verdi, NV Glastonbury, CT Hemmingford, Quebec, Canada Birmingham U.K. East Windsor, CT Rockwood, TN Munich, Germany Trumbull, CT Mankato, Minnesota Non Consulting Services Jiangsu, China Columbus, MS Belcan Windsor, CT Laval, Quebec East Hartford, CT & Palm Beach Gardens, FL Zamudio, Spain Randolph, NJ Boca Raton, FL East Hartford, CT Deer Park, NY Mumbai, India Cranbury, NJ Kozy, Poland UTC Farnborough, Hampshire │ UTC AEROSPACE SYSTEMS Quebec, Canada Stanley, UK │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY PREPARE FOR THE RAMP UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY SUPPLIER CODE OF CONDUCT UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY NON-PRODUCT BREAKOUT Non-Product Executive Team UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY NON PRODUCT Agenda Welcome / Opening Remarks Key takeaways from morning session State of the businesses Introduction to Non Product Supply chain at UTC Priorities Investments UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY NON PRODUCT Working together we are committed to… Our people. Operational excellence. Delivering on our value proposition. UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY NON PRODUCT Comments, questions and key take-aways from morning session… UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY SHAREHOLDER VALUE CREATION Focused portfolio of global franchises Structural cost reduction Innovation for growth Strong performance culture Disciplined capital allocation UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY OTIS 2020 OUTLOOK ($ billions) Key Strategies New equipment growth Accelerate innovation Service transformation Operations excellence See appendix for reported sales and operating profit (afx) *Adjusted for restructuring and other significant items. See appendix for reconciliation. UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY OTIS GROWTH Growth Strategy • Expand sales coverage • Enhance product offering Continued urbanization • Align incentives for profitable growth China Transformation • Strengthen core brands • Leverage scale Source: Internal estimates • Customer segment focus Infrastructure development UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY CLIMATE, CONTROLS & SECURITY 2020 OUTLOOK ($ billions) Key Strategies Organic growth Innovation Cash generation Cost leadership M&A actions *Adjusted for restructuring and other significant items. See appendix for reconciliation. See appendix for sales and operating profit at actual FX (afx) UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY CLIMATE, CONTROLS & SECURITY GROWTH Consultative selling Strategic accounts Integrated solutions UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY PRATT & WHITNEY 2020 OUTLOOK ($ billions) Key Strategies Successful service entries Industrial plan execution Manufacturing cost reduction E&D stabilization Aftermarket growth *Adjusted for restructuring and other significant items. UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY PRATT & WHITNEY GROWTH Large Commercial Engines Photo: Airbus Pratt & Whitney Canada Photo: Bombardier First A320neo deliveries to IndiGo and Lufthansa C Series certified E-Jets E2 roll out ceremony MRJ first flight Photo: Gulfstream Gulfstream G500 first flight Photo: Dassault UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY Military Engines Dassault Falcon 8X first flight │ OTIS │ KC-46A Tanker first refueling flight Photo: Lockheed Martin F-35B Initial Operational Capability UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS 2020 OUTLOOK ($ billions) Key Strategies Industry-leading portfolio Positioning on new platforms Deep customer relationships Drive continued cost reduction *Adjusted for restructuring and other significant items. See appendix for reconciliation. UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC AEROSPACE SYSTEMS GROWTH UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC SUPPLY CHAIN ELEVATORS & ESCALATORS HEATING, COOLING, REFRIGERATION FIRE SAFETY & SECURITY AIRCRAFT ENGINES AUXILLARY POWER UNITS AEROSPACE SYSTEMS 64K+ employees 53K+ employees 33K+ employees 42K+ employees 20+ Manufacturing sites 45+ manufacturing sites 50+ manufacturing sites 90+ manufacturing sites 9 ERP systems 25 ERP systems 1 ERP system 2 ERP systems ~21K suppliers ~45K suppliers ~5K suppliers ~20K suppliers UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY NON PRODUCT Scope Total Non Product Spend UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY Total SMARTChoice Spend │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY NON PRODUCT One Company Global Engagement Develop Strategy Review & Align Implement Assess & Improve Commodity councils Review Board Project execution Executive reviews Regional councils Supply Management Council Supply base optimization Performance reviews Initiatives pipeline Policy deployment Supplier relationship sponsors Compliance & policy Annual KPIs Strategic supplier account executives One Company strategy UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY NON PRODUCT Priorities Supply Chain Performance SMARTChoice Spend Working together beyond quality & delivery Spend as a % of sales Cost control targets for each category and budget Refreshed Supplier Gold Program for non product One Company Coverage Compliance Stop Light Performance Chart - Division Level UTC Division Level October 2014 SMARTChoice Spend SMARTChoice spend under one-company contract Program expansion into new commodities UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY BU Level Domestic 7 Day Advanced Purchase Division CCS Corporate Otis Pratt & Whitney Sikorsky UTAS UTRC Total Sep 74% 79% 73% 52% 65% 71% 67% 68% Oct 76% 81% 75% 55% 62% 71% 67% 69% PYTD 76% 81% 66% 59% 60% 69% 69% 67% YTD 76% 81% 73% 56% 66% 69% 66% 68% Sep 64% 74% 60% 46% 45% 45% 48% 50% Goals 85% 85% 85% 85% 85% Below Avg Performance Avg Performance w/in 5% of Goal │ OTIS │ Dept Level Sorting options: International 14 Day Advanced Purchase Lowest Logical Airfare Compliance (w/in $100) Oct 66% 73% 47% 47% 49% 46% 65% 50% PYTD 60% 72% 56% 42% 43% 45% 61% 47% YTD 62% 72% 51% 44% 56% 45% 58% 50% Sep 83% 86% 98% 97% 91% 80% 80% 87% Oct 84% 88% 95% 92% 90% 80% 87% 86% PYTD 86% 87% 97% 99% 89% 83% 84% 88% YTD 85% 87% 97% 97% 91% 81% 85% 87% 85% 85% 85% 88% 88% 88% 88% Above Avg Performance N/A - No Travel in Current Month Best in class compliance metrics in all SMARTChoice spend categories New visibility focusing on compliance and consumption UTC CLIMATE, CONTROLS & SECURITY NON PRODUCT Investment P2P for commercial CLM implementation Spend data visibility project VMS/MSP implementation SAP go live at UTAS UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY NON PRODUCT Summary & closing comments Ready, set… grow! Thank you for attending Logistics for remainder of the day UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY Innovation Creating the New World Dr. J. Michael McQuade Senior Vice President, Science & Technology Moving the world forward Transporting the world’s population every 4 days Providing priceless assets with humidity control solutions Equipping 80% of world’s aircraft with critical components & systems Powering freedom around the world Our Legacy of Innovation Legacy Willis Carrier Elisha Graves Otis Fred Rentschler Thomas Hamilton Fred Rohr UTC Innovation PurePower PW 1000G Engine 16% fuel reduction 50% emission reductions / 75% noise reduction $1.5 million saved per aircraft per year UTC Innovation Airbus A400M Largest all-composite propeller in production UTC Innovation NaturaLINE™ Container Refrigeration First in the world to use CO2 as a refrigerant Reduces carbon dioxide emissions by 35% UTC Innovation Gen 2 Elevator 57 Otis Elevators installed in the Burj Khalifa Urbanization Urban Population Growth Urban Population: 5B by 2030 (millions of people) 5,000 Rest of World 4,000 22% 3,000 2,000 India 1,000 0 5 12% billion 12% 2000 2005 2010 2015E 2020E 2025E 2030E Latin America China 20% 19% 15% Africa Rest of Asia Commercial Aerospace Growth Revenue Passenger Miles Aircraft Deliveries: 37K by 2030 (trillions) Rest of World Latin America 10 8 Middle East 6 8% 8% 7% 37 37% Asia thousand 4 North America 2 0 1980 1990 2000 2010 2020E 2030E 20% 20% Europe Future of Food World Population Growth CO2 Emissions Due to Food Wastage (millions of people) 3.5 Gt CO2 equivalent 8 000 6 000 4 000 If food waste were a country, it would be the 3rd top emitter 2 000 30% food wasted 0 2000 2005 2010 2015E 2020E 2025E 2030E Innovation …Our innovation is mission critical Innovative consumer economy Critical infrastructure UTC Innovation Advanced manufacturing Big data Define new frontiers... Co-develop new technologies... Next Gen centrifugal Solve tough problems... Serve as hub for technical interchange... Leverage global network of innovation... GTF lubrication UTC Innovation Additive Manufacturing Examples Cold spray Selection of AM process Selection of materials Laser powder melting Electron beam wire melting Modification of design CAD/CAM part discretization AM of customized design WAAM Wire Arc Additive Mfg. UTC Innovation Our Future Willis Carrier Elisha Graves Otis Thomas Hamilton Fred Rentschler Fred Rohr Future Innovator Future Innovator PRODUCT SUSTAINABILITY AND INNOVATION William Sisson, Sr. Director, Sustainability UTRC UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY SUSTAINABILITY AT UTC Sustainability at UTC means we can do good for the planet while doing good for our customers, shareholders, employees, and communities. UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY SUSTAINABLE PRODUCTS UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY HOW UTC INNOVATES AND DEVELOPS ACE* is our Operating System *Achieving Competitive Excellence UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY PRODUCT SUSTAINABILITY GOALS 2020 Rigorous Implementation Engineering Methods and “Standard Work” Integrated into ACE Passport Tailored to Business Needs 100% Implemented by 2020 (DfS and LCA) UTC │ UTC AEROSPACE SYSTEMS Change the Culture │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY KEY DfS ATTRIBUTES Adapt to UTC’s Product Diversity Design for Sustainability (DfS) UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY LIFE CYCLE ANALYSIS “Cradle to cradle” assessments Identifies DfS Attribute Priorities Customer/Market Requirements (e.g. EPD certifications) Tailored to BU/Customer Requirements UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY SUPPLIER IMPACT Maps into Supply Chain Goals UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY UTC 2020 SUSTAINABILITY GOALS UTC Supplier Gold Timeline Supplier commitment over time UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY MOC’S AND REACH Chemical Regs Evolving Simultaneously UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY EU REACh Registration, Evaluation, Authorization, and Restriction of Chemicals EU law banning use of certain substances inside the EU on sunset dates “Safe use documents” required for shipping articles into EU over 0.1% SVHC content Affects all commercial / military / industrial programs Substances of Very High Concern 168 substances requiring “safe use” docs* UTC designed hardware 31 Supplier-designed hardware 137 In process manufacturing "Safe use" document only Will be banned from use in EU Overhaul and repair Tooling *Increased from 16 SVHCs in 2008; will continue to grow REACh Is Not Industry or Product Specific UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY HOW DOES IT WORK? 1. Any ARTICLE with >0.1% SVHC RECEIVED in EU from anywhere must include a SAFE USE DOCUMENT 168 substances 2. ANY SUBSTANCE PAST its SUNSET DATE cannot be used in EU sites (BANNED) The ONLY exception is the application for and granting of an AUTHORIZATION to extend the SUNSET DATE 31 substances SVHC: Substance of Very High Concern Hexavalent Chrome Banned Starting Sept 2017 UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY 90 BUSINESS IMPACTS Financial Penalties Supply Chain Disruptions Obsolescence of Substances High Implementation Costs Compliance Development and Validation of New Substances REACh Threatens Business Continuity UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY MITIGATION PLANS Across UTC BU’s Senior Executive Oversight Regulation Monitoring and Lobbying Map all SVHC uses and associated Manufacturing Landscape BOM/Spec/Repair Reviews Supplier Surveys Partner with Industry to submit Authorizations Develop and Validate Alternate Substances Implement IT Sustainability Tools REACh Requires Full Supply Chain Understanding UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY SUPPLIER HELP NEEDED Active Engagement and Responsiveness Understand the regulation and supply chain impacts Comply with regulation Respond to supplier surveys/information needs For Design Authority Suppliers: Ensure products have Authorization coverage Substantiate new formulations in your products We Must Work Together To Succeed UTC │ UTC AEROSPACE SYSTEMS │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY QUESTIONS? William Sisson – UTC/UTRC Sr. Director, Sustainability and REACH sissonwm@utrc.utc.com Catarina Rodrigues – UTC Supplier Dev. Mark Bittar – P&W US mark.bittar@pw.utc.com Reach.Compliance@pw.utc.com Michele Lewis – UTAS Catarina.Rodrigues@utc.com European Chemicals Agency (ECHA) Michele.lewis@hs.utc.com Helio Tinone – Otis/CCS http://echa.europa.eu/ UTC │ UTC AEROSPACE SYSTEMS Helio.Tinone@otis.com │ PRATT & WHITNEY │ OTIS │ UTC CLIMATE, CONTROLS & SECURITY
