They Make Good Things for Flying

By Frederick Ungeheuer/ New York

For all its industrial might, General Electric was treated like a pip-squeak when it first entered the macho business of building commercial-jet engines. Two decades ago, when a GE representative tried to sell a new engine to Donald Nyrop, then president of Northwest Airlines, the executive pointed to a ceiling fixture and wisecracked, "Whenever I want a light bulb, I'll pick GE's. For jet engines, I'll stick with Pratt & Whitney!" Nearly all jet airliners built at that time, notably the long-range Boeing 707 and shorter- haul McDonnell Douglas DC-9, were powered by engines carrying Pratt & Whitney's eagle emblem. GE, despite success in developing high-thrusting jet engines for the military, ranked a distant third after Pratt & Whitney and Britain's Rolls-Royce in selling the more fuel-efficient engines needed for passenger planes. Admits Brian Rowe, 56, the burly head of GE's Ohio-based aircraft-engine group: "When we first dabbled in commercial engines, we got burnt badly."

GE persevered, and is now the world's dominant engine builder by a commanding margin. Last year GE captured an estimated 63% of the market, compared with 27% for Pratt & Whitney and 10% for Rolls-Royce. The company's success is a classic lesson in the value of patience and persistence, as the design of a new jet engine is a devilishly long-term process that can consume at least five years and more than $1 billion. GE took a more astute aim at the aircraft market of the future, while Pratt & Whitney failed to develop a full range of quieter and more fuel-efficient models. GE's strategy is paying off. Last year its aircraft-engine division earned profits of $940 million on revenues of $6.8 billion.

Basically, what GE did was to painstakingly refine its military designs into a line of passenger-jet engines. Its CF6, currently a popular engine for jumbo jets, was derived from a design initially developed in the late 1960s for the Air Force's giant C-5A cargo plane. The engine was the first to use a high- bypass technique in which a fan, working like a turbocharger in an automobile, pushes large quantities of air past the combustion core to produce much greater thrust. The CF6 turbofan (current cost: $6 million each) has broken the hold Pratt & Whitney had with its JT9D on the giant Boeing 747. GE has boosted production of its most powerful version, the CF6-80C2, from 110 engines in 1987 to 260 this year to meet a backlog of nearly 500 orders.

GE has also produced more than 2,000 of its smaller CFM56, the industry's current top seller. The compact engine is well suited to the new generation of shorter-range planes, like Boeing's 737-300, which airlines are using on their growing number of hub-and-spoke routes. The core of the CFM56, originally a top-secret design intended for the B-1 bomber, was the most advanced available.

Even more daring was the decision by GE to team up with a foreign rival, France's SNECMA, to design and produce the engine. Their partnership, the first of its kind, arose in 1971 from the friendship between two old soldiers: SNECMA's chairman Rene Ravaud, a crusty, one-armed hero of the French Resistance, and GE's chief enginemaker Gerhard Neumann, who had served as ground-crew chief for the Flying Tigers in China. Each company brought a key ingredient to the partnership: GE shared its high-tech engine core, while the French firm contributed financing from its government. Yet, says Jean Bilien, head of the partnership's marketing company, "for nearly five years we had an engine but no buyer." The partners won their first contract just when the French government was on the verge of withdrawing its support.

The CFM56 has no real rival, because Pratt & Whitney scuttled its plans to build a similar model. The engine builder, a division of Connecticut's United Technologies, cut development plans in the 1970s under the parent company's acquisitive chairman, Harry Gray. "Instead of building this engine, Gray * bought Otis Elevator. It was a monstrous mistake," says Wolfgang Demisch, who follows the industry for the Union Bank of Switzerland. The company later suffered "a market-share erosion as severe as any I can bring to mind," said Demisch.

Four years ago, Pratt & Whitney helped form a five-nation consortium to produce a competitor to the CFM56, but that effort has been plagued by setbacks. The partnership initially claimed that the new engine, called the V2500, would be 14% more fuel efficient than its GE counterpart, but that estimate has been scaled back to 9%. Moreover, the V2500 lost a major customer in February, when West Germany's Lufthansa, citing technical flaws, canceled an order for 40 engines and turned to the CFM56. Now Pratt & Whitney is staking its comeback on its new large engine, the PW4000, for which it has won orders from Singapore Airlines and Korean Air. Says Selwyn Berson, head of the firm's commercial-engine division: "Two-thirds of the $60 billion in new sales over the next ten years will be in that segment of the market."

GE is betting heavily on a radical-looking new engine called the UDF, for "unducted fan." With 16 curved fan blades that spin in the open air, the engine looks like a food processor but produces a fuel saving of 40%. McDonnell Douglas has flight-tested the UDF on the prototype for its next midrange plane. But perhaps GE's moment of poetic justice really came last May, when Northwest Airlines, the diehard Pratt buyer, decided to buy 120 of the CFM56 engines. That must have prompted a few smiles at the light-bulb company.