TransDigm Group

TransDigm Group Incorporated develops, distributes and manufactures commercial and military aerospace components, such as mechanical actuators and ignition systems.[3] It is a Fortune 1000 company, and ranked as 650 in 2019 by Forbes.[4] In 2019, following United States congressional hearings reported as "contentious", Transdigm agreed to return $16.1 million in overcharges to The Pentagon, without any admission of wrongdoing.

TransDigm Group Incorporated
Public
Traded asNYSE: TDG
S&P 500 Component
ISINUS8936411003 
IndustryManufacturing, Aerospace
PredecessorTransDigm Incorporated
Founded1993
FounderDouglas W. Peacock, former chairman
Headquarters
Cleveland, Ohio
,
United States
Key people
W. Nicholas "Nick" Howley, chairman
Kevin M. Stein, CEO
Raymond F. Laubenthal, president and COO
Gregory Rufus, CFO
James Riley, EVP
Robert S. Henderson, EVP
ProductsAerospace components
Revenue US$ 5.50 billion (2018)
US$ 699.8 million (2012)
US$ 324.9 million (2012)
Total assets US$ 5.46 billion (2012)
Total equity US$ 1.22 billion (2012)
Number of employees
22,709 (2019)
DivisionsAcme Aerospace
ADS/Transicoil
Adams Rite Aerospace
AdelWiggins Group
Aero Fluid Products
AeroControlex Group
Arkwin Industries
Avionic Instruments LLC
Avtech Corporation
CDA Intercorp LLC
CEF Industries LLC
Champion Aerospace LLC
Dukes Aerospace
MarathonNorco Aerospace
Semco Instruments
Skurka Aerospace
Telair International GmbH
Subsidiaries15
Websitewww.transdigm.com
Footnotes / references
[1][2]

History

Origins

Transdigm Incorporated was established in 1993, by W. Nicholas Howley and Douglas W. Peacock,[5] after acquiring Adel Fasteners, Aero Products Component Services, Controlex Corporation and Wiggins Connectors from IMO Industries.[6]

Four years later, in 1997, the company purchased Marathon Power Technologies. [7] In 2019, TransDigm Group was named the third best stock of the 2010s, with a total return of 2,015%.[8]

Acquisition of Transdigm Incorporated by Odyssey Investment Partners

In 2003, Transdigm Incorporated was acquired by Odyssey Investment Partners.[9] Near the end of the century, the company acquired Adams Rite Aerospace and Christie Electric.[7]

In May 2001, Transdigm Incorporated procured Champion Aviation Products, a supplier of igniters, spark plugs and oil filters from Federal-Mogul Corporation for approximately $160 million.[10] It was at this time that Nicholas Howley took over the position of Chief Executive Officer from Douglas Peacock as Peacock transferred into his role as Chairman of the Board.[5]

In March 2019, Transdigm Inc. purchased Esterline Technologies (formerly NYSE:ESL) for $4 billion.[11]

Formation of Transdigm Group Incorporated

In 2003, Transdigm Group Incorporated was formed by Warburg Pincus Private Equity VIII to acquire Transdigm Incorporated.[12] This transaction materialized shortly after TransTechnology Corporation sold Norco, Inc. to Marathon Power Technologies.[13]

Then, in 2004, Transdigm Group procured Avionic Instruments of Avenel, New Jersey, a supplier of specialized power conversion devices for aerospace products.[14]

The following year, Transdigm Group purchased Skurka Engineering of Camarillo, California, a manufacturer and distributor of electromagnetic equipment[15] as well as the Fluid Regulators division of Esterline Technologies, who manufactures flight control valves and pressure valves.[16]

In June 2006, the company then procured both Sweeney Engineering and Electra-Motion Industries for a grand total of $27 million, along with CDA InterCorp in October of that year for an additional $45 million.[17][18] Three months later, Aviation Technologies, a producer of avionics and instruments, became a part of the TransDigm family followed by Bruce Industries, a producer of fluorescent aircraft lighting, in August 2007.[19][20] [21]

Controversies

Inaccurate filings with Department of Defense and "hidden monopoly"

On January 20, 2017, Citron Research (CR) published a report on TransDigm highlighting its debt-financed acquisitions followed by deep cost cuts and "price gouging".[22] CR published another report on March 9, 2017, accusing TransDigm of illegal activity, noting that twelve of its subsidiaries failed to report their common ownership on federal forms under penalty of perjury. CR pointed out that this omission could be used to defeat federal procurement cost controls.[23]

On March 20, 2017, U.S. Representative Ro Khanna sent a letter to the Department of Defense Inspector General describing reports of "waste, fraud, and abuse" by TransDigm Group and calling for an investigation.[24] He wrote that TransDigm was able to operate as a "hidden monopoly" because its subsidiaries failed to report their common corporate ownership on filings with the Department of Defense (DoD). This omission allowed TransDigm to avoid the requirement that monopoly suppliers to DoD report their costs. The letter also cited several large price increases that occurred after the suppliers had been acquired by TransDigm. For example, a cable assembly increased in price from $1737 to $7863. Rep. Khanna's letter asked the DoD Inspector General to investigate (1) TransDigm price increases borne by DoD and whether performance improvements were behind the increases, (2) how procurement officers would have treated TransDigm differently had their filings been accurate, (3) how to lower short-term costs to DoD of procurement from TransDigm subsidiaries.

Pentagon price-gouging congressional hearing

From 2013-2015, TransDigm charged The Pentagon a markup of 9,400% on a half-inch metal pin.[25] In February 2019, a DoD Inspector General review of 113 contracts showed that, of 112 contracts, "only one part purchased under one contract was awarded with a reasonable profit of 11 percent. The remaining 112 contracts had profit percentages ranging from 17 to 4,451 percent for 46 parts."[26] Subsequently, in May 2019, Congressional charges of price-gouging were levied against the company, and congressional hearings followed. TransDigm was accused of spare parts markups during 2015-2017[27] as high as 4,436 percent, according to then-Acting Inspector General Glenn Fine.[28]

During the hearings, Transdigm executive chairman Nick Howley, when questioned by U.S. Representative for New York's 14th congressional district Alexandria Ocasio-Cortez, stated that "the government always has the choice of what to buy and what not to buy from us."[28] While it was assessed that "Transdigm overcharged the U.S. by 16.1M out of $29.7M in contracts",[28] no fines were levied; Transdigm agreed to return the $16.1M in overcharges following the "contentious hearings", without admitting any wrongdoing.[29][30]

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References
  1. "TransDigm Group Incorporated (TDG)". Yahoo! Finance.
  2. "TransDigm Group". Fortune. Retrieved 2019-02-11.
  3. "Are you a robot?". Bloomberg. Retrieved 2020-05-09.
  4. "Fortune 500". Fortune.
  5. "Odyssey Investment Partners, LLC. -". August 23, 2011. Archived from the original on August 23, 2011.
  6. ""Adel Wiggins" AdelWiggins Group, Obtained February 13, 2011".
  7. ""TransDigm Announces the Acquisition of Aerospace Motor Product Line From Eaton Corporation" PR Newswire Association, Obtained February 18, 2011".
  8. Hough, Jack. "10 Stocks That Had Better Decades Than Amazon and Google". www.barrons.com. Retrieved 2019-12-19.
  9. ""Transdigm Acquired By Warburg Pincus In A Leveraged Buy-Out From Odyssey Investment Partners" Odyssey Investment Partners, Obtained February 13, 2011". Archived from the original on August 23, 2011.
  10. "Odyssey Investment Partners, LLC. -". August 23, 2011. Archived from the original on August 23, 2011.
  11. "TransDigm acquires Esterline Technologies". Shepard Press. March 20, 2019. Retrieved June 11, 2020.
  12. "Odyssey Investment Partners, LLC. -". August 23, 2011. Archived from the original on August 23, 2011.
  13. "Breeze-Eastern Corporation - Helicopter Rescue Hoists, Cargo Hooks & Winches | Press Release". Archived from the original on |archive-url= requires |archive-date= (help).
  14. ""TransDigm Completes Acquisition of Avionics Instruments" PR Newswire Association, Obtained February 19, 2011".
  15. "TransDigm Acquires Skurka Engineering" Defense Daily, Obtained February 23, 2011
  16. ""TransDigm Acquires Skurka Engineering" Defense Daily". FindArticles.com. Retrieved 2020-05-09.
  17. "TransDigm goes into the red". Crain's Cleveland Business. July 31, 2006.
  18. "TransDigm buys components maker in $45M deal". Crain's Cleveland Business. October 4, 2006.
  19. ""TransDigm Buys Aviation Technologies" Aviation Today, Obtained May 17, 2011".
  20. "Industry Scan". Avionics. February 1, 2009.
  21. ""TransDigm Group Inc Mergers and Acquisitions" Alacra, Inc., Obtained May 14, 2011".
  22. "Could TransDigm be the Valeant of the Aerospace Industry?" (PDF). Citron Research. January 20, 2017. Retrieved March 23, 2017.
  23. "Citron Exposes More Undisclosed Relationships at TransDigm" (PDF). Citron Research. March 9, 2017. Retrieved March 23, 2017.
  24. — (March 20, 2017). "TransDigm" (PDF). Letter to Glenn Fine, Acting Inspector General, U.S. Department of Defense. Retrieved March 23, 2017.
  25. Capaccio, Tony (2019-05-15). "A Pentagon Contractor's 9,400% Profit on a Half-Inch Metal Pin Is Challenged". Fortune. Retrieved 2019-06-05.
  26. "Review of Parts Purchased From TransDigm Group, Inc. DODIG-2019-060". Department of Defense Office of Inspector General. Retrieved 2019-06-05.
  27. "Pentagon Rips TransDigm for 'Gouging' Taxpayers With $4,361 Metal Pin". Fortune. Retrieved 2019-06-05.
  28. Oversight Committee (2019-05-15), Rep. Ocasio-Cortez examines whether TransDigm is appropriately earning excess profits., retrieved 2019-06-05
  29. Dayen, David (2019-05-28). "How Rep. Ro Khanna Got a Price-Gouging Defense Contractor to Return $16.1 Million to the Pentagon". The Intercept. Retrieved 2019-06-05.
  30. Whiteman, Lou (2019-05-21). "TransDigm's Capitol Hill Headaches Will Linger". finance.yahoo.com. Retrieved 2019-06-05.
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