DAN HAAR

UTC breakup won’t hurt the state

Several years ago, I asked a ranking scientist at the United Technologies Research Center in East Hartford what holds the company together.

It was fine for a corporation to have businesses that made jet engines, airplane and space systems, helicopters, elevators, air conditioning and building security. Tougher to pull off if you’re the central research arm of that conglomerate.

But he had a ready answer: “We make things that go up and down and spin.”

Around the same time, Gregory Hayes, then chief financial officer at United Technologies Corp., told Wall Street analysts in March, 2010, that the company was looking to move work to lower-cost locations. Asked what he meant, Hayes said, “Anyplace outside of Connecticut is lowcost,” The Hartford Courant reported — sending the state into a dither.

At the time, UTC had 26,000 employees in Connecticut,including 9,300 at Sikorsky in Stratford.

Cut to November, 2018 and Hayes has now been the CEO for four years after the previous chief exited abruptly. What has that meant for jobs in the home state? The answer is surprising.

On Monday, Hayes announced the breakup of UTC into three separate, free-standing, publicly traded corporations: Aerospace, including Pratt & Whitney jet engines, with a total of $39.5 billion in annual sales; Carrier, the air conditioning and building systems business, with $18 billion in sales; and Otis, the elevator and escalator company, with $12 billion in sales.

UTC, with its world headquarters in Farmington, sold Sikorsky to Lockheed Martin in 2015.

The streamlining continues even though a lot of old-timers think UTC held together just fine as a corporation that made things that go up and down and spin — along with things that heated and compressed air and made noise in the event of fires and break-ins. The idea behind diversity was that one industry rises as another one falls, evening out the inevitable swings.

That’s what Harry J. Gray, the legendary chairman and CEO was thinking when he pioneered the hostile takeover in the 1970s and commandeered Otis, then Carrier — transforming the company from United Aircraft to United Technologies, a member of the Dow Jones Industrial Average of 30 giant, bellwether U.S. corporations.

But the guide words nowadays are “simple and clear,” as Wall Street demands in the 21st Century. We’re seeing it at General Electric and many of the big financial companies, not just UTC. And Wall Street gets what it wants especially when a finance guy like Hayes, not an engineer,

sits in the corner office.

You’d think UTC in Connecticut would be smaller now, nearly nine years later, under the very man who trashed the headquarters state. Wrong. UTC today has more than 18,000 people, compared with 16,700 (not including Sikorsky) on the day Hayes dropped that bombshell.

More dramatically still, Hayes has pushed the headcount up by at least 3,000, probably more, since he took over after Louis Chênevert’s departure in November, 2014.

And the near-term prospects for more growth in Connecticut are bright, even if a spinoff in 2020 means some offices depart.

“Everything is trending up as far as employment and contracts,” said John J. Thomas, spokesman for Pratt & Whitney.

How’s that possible? Haven’t we heard nonstop bad news about the state’s economic prospects?

The answer is that Pratt has been the heart of UTC’s Connecticut operations since the company formed as United Aircraft & Transport Corp. in 1929, and Pratt remains the heart today. As it happens, business is strong at Pratt — which has increased its headcount by 1,500 in the last year alone.

Pratt has somewhere between 11,500 and 13,000 employees in Connecticut, including more than 3,000 hourly production workers. United Technologies, through a spokesman, declined to give any specifics about personnel at its operating businesses — numbers the company did provide in past years.

Whatever the breakdown, the 18,000 figure matters greatly to the entire state, for two reasons. First, it makes UTC — before the breakup and most likely long after it — the largest private employer in the state.

Second, each aerospace job generates at least four jobs in the state’s economy because the money comes from outside the state, and because the jobs are highpaying — in contrast to many of the jobs at the second-largest private employer, Stop & Shop. That includes vendor positions, many of which work right at the Pratt plants as “yellow badge” contractors.

Even if people in Fairfield

County don’t have neighbors at Pratt and other United Technologies companies, “You want and you root for companies elsewhere in the state to be the big dogs like these guys because the perception in the state that Fairfield County is supposed to tow the rest of the state behind it ... it’s not correct,” said David Lewis, founder and CEO of OperationsInc, a human resources consultancy in Norwalk.

The linchpin deal for all of this was cut by Gov. Dannel P. Malloy in 2014: The state unlocked $400 million in previously unusable UTC tax breaks in exchange for the company building an engineering center and headquarters in East Hartford, a customer service center in Windsor Locks, maintaining the headquarters of Pratt for 15 years and Sikorsky for five years in Connecticut, an expansion of the central research labs and a bunch of other projects.

Impressive collection

Let’s look at the parts of United Technologies to understand the effect of the breakup in Connecticut.

Pratt will be joined with Collins Aerospace, still under the name United Technologies, still with Hayes as CEO. Collins comprises Rockwell Collins, a maker of avionics, airplane structures and a bunch of other aviation stuff, which UTC acquired on Monday for a cool $30 billion; and United Technologies Aerospace Systems, or UTAS, which makes airplane control systems, brakes, and, like its new companymate, a vast amount of other stuff including space suits, developed in Connecticut.

Besides Pratt, Collins in Connecticut includes the old Hamilton plant in Windsor Locks, with at least 3,000 people — again, UTC refuses to say because if and when there are layoffs, it wants to be able to do them secretly. Collins also includes a plant in Danbury with several hundred employees, part of the old Goodrich Corp., and a smaller plant in Cheshire.

Collins has no headquarters currently. It’s unlikely that will end up in Connecticut, as the division home office before Monday was in Charlotte and Rockwell Collins was based in Iowa.

Now we come to Carrier and Otis. Carrier was based in Farmington, but now is based in Palm Beach Gardens,

Fla. As best as I can tell, it has at most a few hundred office-dwellers left, perhaps under 200, and there’s no reason to believe they’ll stay after the spinoff.

Otis is still based in Farmington but its Americas headquarters is in Palm Beach Gardens. In recent years there’s been a steady migration of people from Connecticut to Florida and although Otis has had operations here, where its headquarters lands after the spinoff is anyone’s guess.

Both companies are spread all over the world with operations; 180 countries for Carrier, for example.

The research center, with a few hundred people, many of then holding Ph.D.s, will remain in East Hartford under United Technologies, the aerospace company.

The point: UTC was vast in Connecticut before Carrier and Otis and it will remain so if they exit. And the non-Pratt aerospace business has grown here under Hayes, not shrunk.

Powerful history

Back in 1929, Pratt founder Frederick Rentschler and William E. Boeing — yes, that Boeing — brought their young companies together under United Aircraft, with Rentschler and president (CEO was a goofy title that came later) and Boeing as chairman.

Rentschler’s brother, president of the bank that became Citigroup, was on the board. The company included Sikorsky, 10 years before Igor Sikorsky made the first practical helicopter in Bridgeport; Chance Vought Corp. and Northrup Aircraft, both airplanemakers, like Boeing; an airport company; Hamilton Standard, the propeller maker that became the core of today’s sprawling aerospace components business; and the three transporters that later became United Airlines.

Total sales were $31.4 million, or $465 million in today’s dollars and the profit that first year was $9 million.

Connecticut was the center of that universe, though Boeing was in Seattle. Five years later the federal government broke it up, leaving Pratt, Sikorsky, Hamilton and other businesses under United Aircraft — the heart of Connecticut’s manufacturing

economy then and now.

Gray’s idea — which he talked about in a series of interviews with me in 1996 — was to have United Technologies as the central brand for all of it. He lost that battle. As one former UTC executive put it this past week, “In China, nobody knew what the hell UTC was. They knew Pratt & Whitney, they knew Otis Elevator.”

Whatever the brand, the

hometown secret was engineering. We all talk about production jobs, but they’ve waned since a combined peak of perhaps 60,000 during World War II.

“The strength of United’s position is due in substantial measure to the unmatched engineering staffs of its subsidiary companies,” the company’s first annual report told stockholders.

That’s still true today, as engineering for the two major Pratt programs — the geared turbofan commercial engines and the F135 engine for the Joint Strike Fighter — has powered the company’s hometown growth, making things that go up and down and spin.

The engineering golden era may end, but the breakup will not affect it.