According to Greg Hayes, CEO of Raytheon, western manufacturers may be able to reduce risk in their operations in China, but completely severing ties with the country is impossible. Hayes stated that the company has thousands of suppliers in China, making decoupling unrealistic. He emphasized that this challenge applies to all manufacturers, as China is a major source of rare earth materials and metals, with no viable alternatives. Hayes also highlighted the time and effort it would take to rebuild capabilities domestically or in other friendly countries if they were to pull out of China.
Hayes’ statements shed light on the difficulties faced by western manufacturers amid increasing tension between China and the US and its allies. In February, Beijing imposed new sanctions on Raytheon and Lockheed Martin for supplying weapons to Taiwan, resulting in minimal commercial impact as these groups are not permitted to sell military equipment to China. However, Raytheon has a significant commercial aerospace presence in China through its subsidiary Pratt & Whitney and Collins Aerospace. The company is now exploring alternative sources for some components while maintaining a presence in China.
Raytheon’s recent decision to rebrand as RTX aims to establish a clearer distinction between its commercial aerospace businesses and its defense activities, which will continue under the Raytheon brand. Despite challenges faced in recent years such as inflation and a strained supply chain, Hayes assured investors that the company remains on track to achieve $9 billion of free cash flow by 2025. Pratt & Whitney, in particular, has faced difficulties in supplying enough new engines to Airbus while also meeting the demand for spare engines. The company is investing in additional capacity and launching an upgrade program for improved engine durability.
On the defense side, supply chain disruptions have impacted the production of rocket motors for missiles, including Stinger missiles and Javelins, for both Raytheon and Lockheed Martin. Capacity constraints at rocket motor producer Aerojet Rocketdyne have caused quality issues and labor and material shortages. Hayes described the production of rocket motors as “black magic” due to its complexity.
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