Rockwell Establishes Chinese JV


Rockwell Collins Inc. (COL) announced that it established a joint venture AVIC Leihua Rockwell Collins Avionics Company. The JV was formed with China Leihua Electronic Technology Research Institute, or LETRI, a unit of Aviation Industry Corp. of China, or AVIC.

The joint venture will focus on bringing the latest surveillance products to the Commercial Aircraft Corporation of China Ltd. for its C919 aircraft. The C919 is a planned family of 168–190 seat narrow-body airliners to be built by the Commercial Aircraft Corporation of China. Commercial Aircraft Corporation of China Ltd. is a state-owned limited liability company founded by the State Council of the People's Republic of China.

Once the agreement conditions have been satisfied and approval by the People's Republic of China is obtained, the JV will develop, manufacture and deliver integrated surveillance system products for the C919 program. By introducing Rockwell Collins' advanced avionics technology and international avionics technical services, the joint venture will seek to boost the development and prosperity of the country's commercial aviation sector.

Rockwell Collins has been working with the Chinese aviation industry and its suppliers for more than a quarter of a century. The company’s equipment is installed in many airplanes manufactured in China, including the ARJ21, MA60/600, Y8, Y12, K8, and H425, and is on nearly every western airliner operated by China’s airlines.

AVIC is a Chinese state-owned company of the aviation industry, both military and civilian. It was founded in 1951 as the Aviation Industry Administration Commission. AVIC’s business units cover avionics, transport aircraft, engine, general aviation, helicopter, mechanical electronics and defense.

AVIC Avionics Systems provides whole integrated avionics solution for customers, and relevant products and services for aerospace, ship building, weaponry, electronics and information industries. The main civil products are information and sensor system, IT-based network, communication, micro-electronics, as well as intellectual system and industry control, new energy and equipment manufacturing. 

China Leihua Electronic Technology Research Institute or LETRI was established in 1970. Located in Wuxi, Jiangsu Province, the company researches and produces civil aviation electronic equipment. LETRI is a research division of AVIC.

Rockwell Collins is a leading global provider of communication and aviation electronic solutions for commercial and government customers. Its aircraft electronics are installed in business as well as commercial aircraft cockpits and cabins of nearly every airline in the world.

Rockwell Collins expects that the balance and diversity of its business to enable continued revenue growth in fiscal-year 2012, driven by the strength of commercial markets. Performance by the Government Systems segment is however projected to weaken in the first half but pick up in the second. The downcast view comes on the heels of the cancellation of three programs in 2011 and lower sales of the Defense Advanced GPS Receiver program.

Rockwell Collins currently retains its Zacks #4 Rank, which translates into a short-term Sell (1 to 3 months) rating. Considering the fundamentals, we are maintaining our long-term Neutral recommendation on the stock. This is in line with its peers like AAR Corp. (AIR) and LMI Aerospace Inc. (LMIA).

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