UPDATE 1-United Tech's Pratt issues will drag on cash flow -CEO

Fri Sep 16, 2016 3:48pm EDT
 
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(Adds details about deliveries, cash flow, share price)

By Alwyn Scott

NEW YORK, Sept 16 (Reuters) - United Technologies Corp's chief executive officer said on Friday the company would deliver 150 Pratt & Whitney engines this year, missing its target of 200 and putting "pressure on cash flow."

United Technologies shares fell about 1.8 percent after CEO Greg Hayes spoke about the issue at an investor conference hosted by Morgan Stanley. They were down 2.3 percent at $100.33 in afternoon trading, the biggest decliner in the Dow Jones Industrial Average.

Hayes said front fan blades are among about five engine parts "that are causing us pain" by slowing deliveries. The company is continuing to build the engines, since fan blades go on at the end of assembly.

Hayes' remarks, his first since Canadian planemaker Bombardier Inc flagged the problem this month, provided details about the severity and potential impact of the issue.

Production problems are not unusual with a new product. Pratt's engines are a new design available on single-aisle planes such as the Airbus A320neo and the Bombardier CSeries. Last year, the company found an unrelated problem with the engine shaft that slowed the startup process.

The fan blade, developed with Alcoa Inc, is made of aluminum-lithium alloy and tipped with titanium on the leading edge. Efforts to speed up blade manufacturing have taken longer than expected, leaving Pratt with fewer units than it expected by now, according to people familiar with the process.

This year, we talked about delivering about 200 engines," Hayes told investors. "As I stand here today, I think that number is probably plus or minus 100 - more like 150 engines for the full year."   Continued...