In 2012 when United Technologies Corporation (UTC) acquired Goodrich the casual observer might not have appreciated the strategy that was being employed by CEO Louis Chenevert. It was part of a much broader plan which adds up to a win for UTC shareholders. To understand why Mr. Chenevert, whose background is in production management, would want to acquire a company like Goodrich, you would need to understand a little bit about both businesses. UTC is a conglomerate which makes most of its money from sales to either aviation customers or builders. In the case of the former, we are talking about aircraft manufacturers. When a customer like Boeing approaches UTC for engines often, UTC could bundle the sale with other avionics. Thus a company like Goodrich, which in addition to selling tires has an avionics division, makes a good fit with UTC.
The design of his business plan was brilliantly simple. Only an executive who had spent the first twenty years of his career solving production line dilemmas might have come up with such an approach. Louis Chenevert spent two decades in production management first at General Motors and then in UTC’s Pratt & Whitney division. The net result of the synergies he put in place at UTC caused the value of UTC shares to vault from around $55 to $115 during his time as CEO.
Nowadays Louis Chenevert is semi-retired, spending much of his time designing and building yachts or out to sea. He also serves as an advisor to Goldman Sachs on issues regarding aviation and industrial production.