General Electric Company Oppenheimer 12th Annual Industrial Growth Conference May 9, 2017

Transcription

1 We will cover GE and a number of the other companies presenting here today and tomorrow. We re going to start things off today with Mohammad Ehteshami. He is Vice President and the leader, CEO role for GE Additive Integration. And anyone who has followed GE has noted that that s been in the top three or four topical bullets for presenting the direction of the strategy of the company for some time now. And Mohammad is sort of the point man and strategic engineering guide for that strategy for GE. And Gerrit Schneider, CFO of the platform is also in attendance with us, as well as Joanna Morris. So we re going to start things off with Mohammad here just now. Thanks, Mohammad. Good morning. Can you hear me? Great. As mentioned, I m Mohammad Ehteshami. I ve been with GE for 33 years, all but four of those years with GE Aviation, four years I was in Florence, Italy leading the engineering team for GE Oil and Gas. Today I m going to walk you through the journey of additive, how we started where we got, what was the moment that said, oh, we ve got to go beyond just making the parts, and then our strategy and the technologies and the companies we bought and where we re going to go with it. On the front table here I have a variety of parts that I will share with you throughout my presentation as I go forward. And each of them, there s a reason I m talking about it because it s a technological breakthrough. So I ll start with the first page. The first page is our journey. We started in GE Aviation in 2010 designing the LEAP engine to be very efficient in the narrow body for the A320neo,737 MAX and C919. And this engine, the requirement was efficiency beyond anything we ve ever done, somewhere north of 15 or 16% depending which platform you re looking at. The main part of the engine that gives you a lot of efficiency is the combustion chamber, which looks something like this and inside the combustion chamber you mix the fuel and air to give as much efficiency as humanly possible. There s a part that delivers the fuel to the combustion chamber and it s called fuel nozzle. This is what I ve got in my hand here. So when we designed the fuel nozzle we realized that making it was almost impossible and we tried several times to make it with conventional manufacturing and we couldn t achieve it. At that moment it was in 2011, early 2012, one of our young engineers said there s a company in town called Morris Technologies that they can actually print this tip of the fuel nozzle, which was very complicated. It has a lot of small passages. Some passages are as thin as two times the thickness of a human hair. So we said let s go and take a look at it. We went to Morris Technology and they were able to print that tip of the fuel nozzle for us. That was the moment we realized that this technology has a lot more to offer than just printing a little Page 1

2 part, so we acquired Morris Technologies in Then we started understanding the expansion of additive or 3D printing, as we call it. So we started looking at heat exchangers. Heat exchangers are components; that they are many of them on jet engines, on airplanes, even on your car. Your radiator is a heat exchanger. Anytime you have two fluids and air or liquid or fuel and air or fuel and oil come to each other s vicinity and they exert heat from one entity to another, it s called a heat exchanger. And traditional you made them out of several tubes. You braise them together, you weld them together. We came up with a very unique idea, and I m holding this in my hand. Later on after the presentation you re welcome to come and touch these things. We came up with a unique way to design that that took about 50% of the weight out and took hundreds of parts and reduced them to one. And that became the foundation for us to exert and say, what else can we do. Later in 2015, we actually certified with FAA our first part, which is a GE90 T25 sensor. It measures the entrance temperature of a compressor on the GE90 and there are hundreds of those parts flying around the world since Meanwhile our power friends at GE Power created the F-class flex tip and to date they have shipped somewhere between 9 to 10,000 of those parts all around the world and they ve been working. We certified the fuel nozzle in Oil and Gas. They created a Swirler and they have shipped about 1,000 of those around the world. Then we took a small group of people and said, how much of the jet engine can you print? We gave them a commercial helicopter engine that was about years old called CT7. And they looked at it and said we probably could do 40 to 50% of the whole engine. We said, okay, go at it. They took 18 months and they printed about 40% of the engine. They took 900 parts down to 16. Of those 900 parts they took about 60% of the cost out and 40% of the weight out. That enabled us to start thinking maybe we can change the game by printing a lot of structural component of an engine, which is the advanced turboprop that I will go to details. I ll go to the details of fuel nozzle and advanced turboprop in a moment. And then from organization point of view, we created the GE Aviation Additive Center. We opened CATA in Pittsburgh. And then towards the end of 2016 we acquired Arcam and we acquired Concept Laser. For 2017, the goal is to create machines that make bigger parts, rotating parts, bigger systems, and multimodalities. And then GE Additive expansion, which we Page 2

3 have created now two of our customers centers. We announced one taking CATA in Pittsburgh, turning it to a customer center and also in Munich we created the first customer center. This is where our customers come in and collaborate and learn how to do Additive. So moving beyond the parts, we thought that, you know, there are several opportunities and benefits into Additive. One is you take apart and print it as is and you get cost out of it. This is an implant for stem that goes with a hip replacement. And when you print it it s a lot faster and you take a lot of cost out of it. The one was supplier productivity. This is where we teach our suppliers how to use Additive to their advantage. They reduce their cost and we get part of that as well. The third is system simplification. Remember when I told we took 900 parts and we reduced them to 14 parts, that s where you take a lot of systems out. It simplifies your logistics, it reduces the number parts, and many benefits. And then finally a new product for performance entitlement where you use Additive to design a new engine or design a new car or design a new component that gives you a lot more better efficiency than you had before. To give you a little bit detail about this fuel nozzle, manufactured the traditional way there would be 20 parts here and you had to weld them together or braise them together. Now it s only one part. All the tolerances are gone away. All the logistics are gone away. This 20 parts used to travel about 5,000 miles to get to us. Now they travel about 10 feet. Secondly, we realized that the part actually was 25% less weight and the part was five times more durable. So to date we have shipped about 4,000 of these parts and a couple hundred engines are flying around and have these parts in them. And then when we get to full production next year and beyond, each year in Auburn, Alabama, 35 to 40,000 of these parts are being produced. Then I want to tell you also about our advanced turboprop. This was one we said, what can we do with this technology? First of all, this is the first engine in history that doesn t have structural casting in it. It s gone. We took 855 parts and reduced it to 12. It is replacing an engine, existing engine, but it s 20% more fuel efficient and it has a lot lower emissions, as well. Now when I talked about the combustors, this has 3,000 plus holes in it. You use a lot of lasers to create those holes and it has about 20 parts. Now we created in one part and we don t need the laser drilling anymore. These holes, actually they go in and then they go horizontal and they break out. So if you hold to a light you cannot see through it. This is gave us another 25% temperature advantage also. It s huge in aerospace industry, if you will. Page 3

4 So then at the same time our partners inside GE in Power and Oil & Gas they continued their journey to get performance, speed to market, and cost. On the left-hand side it s a shroud that is made additively for the HA and it enables us to bring $1.5 million value to each of this HA machines. And depending how many machines they sell, multiple that by one and a half. On the right-hand side it s a fuel burner. Originally our team on Oil & Gas they used the existing part and printed the existing parts, and there s six of them. A month later they realized that they can combine all of those parts together and they got 50% of the cost out. And again, as I mentioned, they have already shipped 1,000 of those parts to the field. So you say, then what? So we took 100 engineers and material scientists and we broke them up into what we call Tiger teams, teams of 10, and we sent them throughout GE to hunt for $3 to $5 billion of cost out. To date they have touched and educated 2000 engineers, 1000 application ideas have been generated, 110 prototypes made, $500 million of ideas toward the $5 billion outside of GE Aviation is generated. And then GE Aviation by itself has generated $3 billion worth of ideas for the cost out over the next 10 years. And then on the righthand side, it shows you all of the images of the parts that inside GE -- healthcare, aviation, renewables, oil and gas, and power -- that they are working on. So on this chart what I m trying to show you is comparing the conventional way of making a part versus Additive. In conventional way for a turbine frame you would have about 300 parts, 60 engineers, 40 data system, 50 manufacturing sources, and 5 repair sources. In Additive, we actually printed that part, and yesterday I was trying to bring it to show it to you, unfortunately I didn t succeed. That part is 300 parts, 305 parts to 1. Instead of 60 engineers, now you got 5 to 8. Instead of having all of those manufacturing sources you got one machine and then you got one repair source and then you have Predix digital thread going all the from A to Z connecting everything together. Where, remember, the Additive it s a computer aided design model that is bunches of ones and zero that goes from a human mind to machine that creates a physical thing. When you are printing those ones and zeros become a digital twin. That model can be analyzed by your data analytics to see how that model and how that part performs in the field. And then creating the ability to make a part this large, if it was traditional way, I could not lift it. I m a 61-year-old man. I m not that strong. This we took two-third of the weight out and we combined a lot of parts and we used the stiffness by creating these ribs to our advantage, to put them where we think it s needed to make a stronger part. And there are a variety of materials here. Titanium on this side. Aluminum here. Cobalt chrome here. Cobalt chrome here and HS here, which is Inconel. Page 4

5 And then what does this mean in the machine technology? So when you look at these machines they have software in them. They have scanners. They have lasers. So GE has spent last 10 years, about $1.5 billion internally developing a lot of technologies. We bring that technology and put it into these two companies and injected it in to make the machines better. We have learned over last 7, 8 years a lot on other machines that we have created parts with. And this year we are our revenues, we have committed to $300 million for this year, which is a 40% CAGR, and the dynamics are we need better designs, bigger size machines. By the end of this year we re going announce that we re going to have machines that they are 1 meter or bigger, 10 times more speed, multi-lasers. And then the areas that we are differentiating, it s the GRC and Digital where we bring products, material, software, and as I mentioned, the $1.5 billion of investment that we ve done over last 6 to 10 years that will bring into fruition. When it comes to material, again, the total material market in 2016 was $3 billion. About 12 to 13% of that metal. We re predicting that that portion will grow to about 25%. We ve got about 350 patents internally inside GE and we ve got thousands of people who are working in material science to make us a better technologically company, if you will. And our goal is to take 50% of the cost out of titanium production. As you know, when we acquired Arcam they have a material producing company called AP&C in Montreal. And then cobalt chrome, we increase the number of applications by five times aluminum. We will reduce the cost of the components by 50% and then steel we reduce the cost of components by 30%. So what is the opportunity? The opportunity, you know, at the first glance is about $250 billion of casting and forgings that a lot of it can be converted to Additive. And then when you look the predictions by Wohler, it says 30% of growth across all industries -- aerospace, medical, automotive -- and what is critical to success for us leading in technology. How do we differentiate? How do we go faster? What s the better quality? What s the multimodality? Material sophistication; how do we drive a standard material? How do we create take advantage of all application engineers that we have applied over last 10 years to create all the products that we have created. And then how do we enable financing and GRC to help our customers to succeed? So this is our offering. Best technology, which is our opportunity to cost and cycle out vertical integration, service value, new products. And then our domain expertise, which is the internal proof points that we ve done. We share a lot of that. Remember, when we make these machines we use them to print parts for us and if there s a deficiency in the machine we discover then we make the machine better. Nobody else can do that. We have that capability. And then Page 5

6 material science. That s a foundational competency. As mentioned, we have 350 patents and we ve got hundreds and hundreds of engineers working on them. Predix, it s a device that we have installed. Actually Predix Edge is a device that we have installed in one of our machines as a beta machine to see how it behaves. And last Friday actually demonstrated we can look at 40 different parameters in the machine to see what s going on as it prints. And now our data scientists are looking at it and saying what can we learn from that. We re going to offer that to all of our machines. And then finally, financing and GRC technologies. And then I will leave it with this. Our goal is to be $1 billion by 2020, sell 10,000 machines. 90 percent of these machine, 9000 of them, will be sold outside of GE. Originally when we assessed the need inside GE we thought it would be about 1000 machines. We re now realizing that probably we need a little bit more, but we are creating capacity and capability inside the two companies to produce a lot more machines than they have capability today. And then finally, $3 to $5 billion of product cost inside GE through the usage of the application of Additive that will get us to where we want to go. With that, I will turn to it back to Chris and entertain any questions. Thank you so much. Thanks, Mohammad. On one of the slides you highlighted a $255 billion casting and forging industry currently and then there was 30% growth rate. I don t think the 30% applied to the 255, but maybe for us you could connect those two figures. And second, is the 255 billion casting and forging the broad field that you see as opportunity for share gain by Additive? Yeah. So the $255 billion is casting and forging market today and we believe some of that will convert to Additive because if you look at a forging house or a casting house, these are large industrial components, compounds that you can easily convert to a small machine that gives you the same material with the same property in a smaller place and a lot faster. The 30% CAGR that I talked about, the growth I talked about is in all other industries, is opportunities beyond the forging and casting that say, if you take, for example, automotive, there is an opportunity to design systems and components and combine them that you can convert that mature into that kind of growth. Yes, sir? Q: What are competitors doing? Just wondering how much of an advantage you have either in time or in the percent cost savings versus competition. So the advantage that we have is we create the machines, we create the materials, and we create the application engineers. We also use those. So that s the advantage that I don t think any of our competitors have. Yes, sir? Page 6

7 Q: How does this technology scale in size? For example, can you do fan blades and the large vestment castings that are used in jet engines that go up to 60 inches? Yes, eventually we will. As I mentioned, today we own the largest machine available that makes components today and it s owned actually by Concept Laser. It s about 800 millimeter by 500 millimeter by 400 millimeter. We do have plan to go way beyond that. And the scale up requires different technologies that are complementary to what we got today. With working with Concept Laser, working with GRC, we are developing that technology and we will share that with you when it becomes available. Just wanted to go over the consolidation strategy a little bit. You ve done a number of deals and I just want to review from a high level the deals you ve done to date. Where might the gaps be in the future and sort of your buy versus build, where that decision tree is maybe particularly key? Yeah. So look, as I mentioned to you, we develop a lot of technologies internally. We thought very hard and studied very hard before we decided to acquire these two modalities, these two technologies. And once we acquired them, we re very pleased with what we ve seen, their capabilities. As we go forward we are developing other modalities and we always keep an open mind for opportunities of whether we do something organic or inorganic. Yes, sir? Q: How much will you have invested to achieve these goals that are pretty far out? 5 and 10 years out, how much will you have invested to achieve these savings? Over next 10 years we plan to invest about $1 billion. And it goes beyond these goals, as well, because the $1 billion business by 2020, but our investment plans are way beyond that. What s the risk and reward associated with maybe disruptions to some of your supply chain partners? Is that just all smooth, all upside economics or? No. So a lot of suppliers also are getting into this segment as well. If you noticed PCC acquired a company called API, which is a printing outfit in Florida. A lot of suppliers are also seeing the capability of this technology, so when we re talking about 30% growth, there will be that type of game changers that people will get in there and they will require machines and we ll sell machines to everybody. What kind of market share do you target downstream into your supply chain as you sell your Additive manufacturing machines externally? Page 7

8 I can t tell you about market share, but we re pretty comfortable with where we are today and we continue to build on it. We re very happy as the growth of the market allows us to go where we want to go. Do you feel like you re creating the market, creating market demand? Yes. Not only us creating it, but also a lot of players. If you read the papers, Airbus is going that way, Boeing is going that way. A lot of industries see the capability of Additive and they are making it part of their solution. Yes, sir? Q: [inaudible] Yes. Q: [inaudible] The CFMI. Q: [inaudible] Yes. Not in the Additive. They have their own technology development, but the Additive part of the fuel nozzle was developed by GE. And we have also applied the Additive technology to GE9X. We have rotating parts, which is a LPT blade developed in Avio for the 9X; that we ve produced hundreds of them already. Okay. I think last one because you mentioned leave a little time for people to see some of the components there. Just to come and touch and ask questions. But just to clear, I think now you are a distinct P&L within GE Aviation within GE, is that correct? Right. Okay. And you re targets are internal and external with the majority of the P&L targets being external, is that right? Right. And it all gets consolidated at Aviation, but the 9000 machine external and $1 billion external. Page 8

9 Great. Thank you, Mohammad. Thanks so much. I appreciate it. END Page 9