Gas Turbine Engine Manufacturing

Private equity firm needed a thorough operations assessment of the target company’s 2,000,000 square foot factory and manufacturing capability.


A maker of gas turbine jet engines for aircraft and helicopters was targeted for acquisition by a private equity firm, and needed a thorough analysis of the manufacturing plant’s operational capability, costs, and areas needing improvement. Factory operations consisted largely of gear hobbing and machining, assembly, and performance testing of the finished engines.

Due diligence assessment revealed significant operations issues and excessive operating costs.


Analyze cost data and operational performance data to determine overall operations effectiveness and potential for cost reduction after acquisition. Data analysis, interviews, and on-site production observation revealed that significant operations problems were drivers of excessive costs.

Cost driver analysis revealed the plant cost structure to be dominated by hourly labor costs and some extremely high-cost capital equipment.

Labor cost was shown to be much higher than necessary, due to ineffective plant scheduling, causing a monthly hockey stick effect at the end of the month. This was the least linear production schedule we had ever observed.

Labor cost was also excessive due to generally poor workforce discipline and an abundance of poorly maintained, out-of-date equipment. High capital cost was due to several recent investments in fully automated, but completely inefficient, pieces of equipment:

  • An automated gear hobbing line with an ASRS that had more than 40% downtime

  • An AGV-supported sub-assembly line, with high cost for its functionality

Workforce morale and work habits were very poor, and plant scheduling was causing large percentages of idle time and overtime.


Plant cost and performance analysis showed acquisition target price of $400 million was $100 million above actual firm value, so the prospective acquirer withdrew the offer.

Twelve months later, the same acquiring firm was able to consummate the purchase for $300 million, saving $100 million over the original offer amount.

Net, the acquiring private equity firm was able to save $100 million (25%) on its acquisition cost.

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