Triumph Group’s Restructuring Produces Early Results, and Cause for Optimism

by Richard Pettibone, Aerospace & Defense Companies Analyst, Forecast International.

Having expanded too fast in the recent past, Triumph Group is in the midst of rationalizing its operations in order to get back on track. Under CEO Dan Crowley, Triumph is following its “One Triumph” initiative that aims to transform the company into a more nimble and responsive supplier.

Following years of acquisitions, Triumph was recently hit with disputes with aircraft manufacturers such as Boeing and Bombardier, mounting losses, and a declining share price. Most of the issues stemmed from the company’s 2010 $1.4 billion purchase of the troubled Vought Aircraft Industries.  The situation reached its nadir in early 2018 when SEC filings revealed that Triumph might let the operations go into bankruptcy.   The company cited charges incurred on the Bombardier Global 7000/8000 as well as reduced production in the Boeing 747 and Gulfstream G450/550 programs. These issues led to a stunning $1.0 billion loss in FY16.

The crisis was averted thanks to a settlement with Bombardier over the supply of wing components for the Global 7000.  The agreement in effect resets the relationship between the two manufacturers, allowing work to continue.

Another aspect of the restructuring has been to consolidate operations through merger and divestiture. To date, the company said it has reorganized its operations by moving from 47 individual companies to 22 operating companies. The facility count has dropped from 74 to fewer than 60, with some 1,000 job cuts. In 2018, the company combined Aerospace Structures and Precision Components into one business unit, “Aerospace Structures.”

According to Crowley, “The business units’ abilities to achieve key performance objectives are closely linked – they share many of the same customers and suppliers, and have substantial inter-company work on common programs. As a single business unit, we are confident that we will leverage their combined resources to make them more cost competitive and enhance performance.”

Looking ahead, the company sees growth in military aircraft programs. Most recently, it was selected to produce components for the Boeing/Saab T-X program should that aircraft win the USAF competition.  Increasing content on military programs would help shift the company’s dependence away from large commercial programs such as the 747, which is winding down.

Triumph may have to endure a little more financial pain before it is out of the woods. Nevertheless, management is steering a steady course that should see the firm reach its potential shortly thereafter.

The Defense & Aerospace Companies series focuses on worldwide aerospace and defense prime contractors and subcontractors. Concise reports provide data on individual corporations regarding recent mergers, restructurings, and joint ventures, along with a Strategic Outlook that examines the company’s strengths, weaknesses, and opportunities. Also included in each report are financial and industrial segment data, snapshot coverage of major aerospace and defense programs, and recent U.S. Department of Defense contract awards.

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