GE Aerospace to Acquire Castings Supplier CPP for $12 Billion to Secure Engine Supply Chain

GE Aerospace announced it will acquire Consolidated Precision Products (CPP) for $12 billion, a major move to secure its supply chain for critical jet engine components. The acquisition brings one of the world's largest manufacturers of precision castings in-house, addressing a key production chokepoint that has hampered the aerospace industry.

A Move to Control a Critical Chokepoint

The deal for CPP, the world's third-largest maker of metallic components like engine turbine blades, is what GE Aerospace CEO Larry Culp described as a "mission-critical" step. The aerospace sector has struggled to meet a massive backlog of orders, with the complex and hard-to-produce parts known as castings and forgings being one of the most significant bottlenecks since the COVID-19 pandemic.

These components, particularly the turbine blades that must withstand extreme temperatures, are notoriously difficult to manufacture at scale. The process is often called the "black art of manufacturing" due to its complexity and high scrap rates, according to AeroDynamic Advisory Managing Director Kevin Michaels. According to analysis from Jefferies, Ohio-based CPP currently supplies 25% of GE's casting needs.

Industry Trend Toward Vertical Integration

GE's acquisition reflects a broader industry shift toward securing supply chains through vertical integration. Competitors have made similar moves to address the same production constraints:

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• Pratt & Whitney announced last year it was adding an in-house casting foundry.
• Rolls-Royce is expanding an existing casting and forging plant in the UK.

By acquiring CPP, GE not only gains control over a vital supplier but also valuable technology and expertise in a field with high barriers to entry. The company also plans to apply its own LEAN production system to improve efficiency at CPP's facilities.

Potential Risks and Regulatory Hurdles

The acquisition is not without challenges and will face significant antitrust scrutiny. Analysts expect regulators to examine the deal's impact on market competition. "I would expect GE to be required to divest certain facilities, making the integration process and any related carve-outs quite complex," said Matteo Peraldo, a partner at AlixPartners, in a comment to Reuters.

Commercially, the deal also carries risks. It could alienate rival engine makers who are also customers of CPP, or strain GE's relationships with its other large suppliers, such as Howmet or Precision Castparts Corp.