GEAE Evaluating Production Alliance in China

November 16, 1998

ZHUHAI, China - GE Aircraft Engines (GEAE) is evaluating the expansion of its manufacturing relationship with XAE Aero-Engine Corporation (XAE) and China National Aero-Technology Import/Export Corporation (CATIC) in the second phase of the growth program for the new Manufacturing Technology Center (MTC) in Xi'an, China, to help the center become a world-class rotating parts Center of Excellence.

This expanded effort, which is a continuation of the long-standing relationship GEAE has developed with XAE and CATIC, includes evaluating the need for additional equipment for increased production, technical support, and training. The Phase II investment in the MTC will enable XAE/CATIC to increase its annual part production output from $13 million in 1999 to approximately $30 million by 2001. GEAE currently has $18 million in existing purchase orders with XAE/CATIC.

"We have been purchasing engine parts from China's aerospace manufacturing industry since 1986," said W. S. Clapper, CFM56 Project General Manger for GEAE. "During that time, we have formed a solid working relationship with XAE and we're looking forward to the prospect of taking that relationship to the next level. The MTC is a world-class operation that supports the high quality standards that have made GE and CFM engines the world's best-selling."

The relationship between GEAE, XAE and CATIC dates back to 1982, when GEAE first visited China and entered into discussions with the PRC Government and XAE about manufacturing engine parts in China. Since then, XAE has become a key supplier to GEAE, with $6 million in XAE-manufactured parts delivered in 1998; the figure is expected to reach nearly $13 million in 1999. Because of XAE's quality and delivery performance, GEAE made it the sole supplier for its marine and industrial LM2500 engine's low pressure turbine disks; XAE has delivered more than 2,800 disks. In addition, GE received the first rotating part produced by XAE for a CFM56 engine earlier this year.

The concept for the MTC facility was developed by GEAE, Aviation Industries of China (AVIC), and XAE in January 1996. Phase I culminated in the official opening of the 95,000 square foot facility last August. The MTC is now the most advanced rotating parts manufacturing facility for aero engine parts in China. When all the equipment is installed, it will represent an investment of as much as US $30 million and will employ several hundred people capable of making US $30 million in parts per year, thus quadrupling the business between GEAE and XAE/CATIC. In addition to the LM2500 low pressure turbine disks, the MTC will also produce CFM56 engine seals, high pressure turbine shafts, compressor shafts, a compressor disk, and high pressure turbine blade retainers.

In addition to providing purchase orders, GEAE also provided technical assistance and quality training as part of Phase I. One quality engineer from XAE has completed Six Sigma quality training at GEAE facilities in the U.S. and is now working full time at MTC. There are currently 18 additional team members undergoing Six Sigma training.

This training is a key element to producing the highest quality parts. An aircraft engine core spins at more than ten thousand revolutions per minute, in addition to being subjected to temperature and pressure levels far greater than those experienced by most machined parts. In addition, they are subjected to rigorous inspections and testing before they can ever be installed in GE/CFM engines. The MTC was developed to ensure that all of the parts produced maintain GEAE's high reliability standards.