Mega-Merger Won't Quiet Rohr

TIMES STAFF WRITER

Now that the two remaining U.S. makers of jetliners plan to merge, what becomes of Rohr Inc.?

Rohr, which is headquartered in Chula Vista and also has a major plant in Riverside, is a leading supplier of structural aircraft parts to the two merger partners--Boeing Co. and McDonnell Douglas Corp.--and to the world's other major airplane maker, Airbus Industrie of Europe.

The company also sells its products to the major engine manufacturers, including General Electric Co., the Pratt & Whitney unit of United Technologies Corp. and Rolls-Royce.

Rohr makes the fan cowls, nozzles, thrust reversers and other pieces that surround a jet's engines and that collectively are known as the engines' nacelle systems. Rohr also makes the pylons that attach the engines to the plane's airframe.

When Boeing last month announced its blockbuster plan to buy McDonnell for $13.3 billion, it raised the prospect that Rohr might eventually lose McDonnell's Douglas Aircraft Co.--the company's jetliner group in Long Beach--as a customer.

Boeing said it would continue building Douglas planes as long as airlines order them. But Douglas' shrinking position--it now has less than 10% of the world market for large-scale jetliners--leads some analysts to believe it will eventually be absorbed into Boeing.

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That prospect does not pose a major threat to Rohr, because Boeing and Airbus are enjoying a boom in new orders that will benefit Rohr for years to come, analysts said.

"Everything points to continued improvement," said Paul Nisbet, president of the aerospace consulting firm JSA Research Inc. in Newport, R.I.

Rohr's executives declined to comment. But the jetliner industry's rebound is coming none too soon for the company, which was hammered when the industry slumped in the early 1990s. Rohr's problems were exacerbated by its onerous operating expenses and its heavy debt burden.

But the upswing in airliner orders, and cost-cutting efforts by Rohr's management, are pushing the company in the right direction. The improvement has been guided by Rohr President Robert Rau, who joined the company in 1993, and its chief financial officer, Laurence Chapman, who came aboard the following year.

But the rebound also has carried a human toll: To get its costs down, Rohr has slashed its employment by two-thirds since 1990, to about 3,800 people today.

For its fiscal year ended last July 31, Rohr's sales dropped to $771 million--their lowest level in nine years. But Rohr and Wall Street analysts believe that will mark the trough and that sales will climb for the next few years. Also, Rohr's pretax profit margin from operations was nearly 12 cents per dollar of sales in fiscal 1996, its highest level in a decade.

The improvement continued in Rohr's fiscal first quarter ended Nov. 3, when sales jumped 35% from a year earlier, to $202 million, and net income soared to $3.4 million from $482,000.

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Rohr also has been paring its debt, although it has a way to go. Its long-term debt, at $481 million as of Nov. 3, remained much higher than the company's stockholders' equity of $315 million.

Regardless, Wall Street likes what it sees. Rohr's stock--which stood at $8 a share in 1994--shot up 57% last year alone and now trades around $21 a share on the New York Stock Exchange.

Going forward, Rohr will also benefit from its new-product spending in recent years, Nisbet said.

"They've got most of their development effort behind them, and now with the huge upturn in the commercial [jetliner] business, they're reaping the fruit of all that investment," he said.

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Times staff writer James F. Peltz can be reached at james.peltz@latimes.com

Tuesday: Financial Services

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