General Electric and Honda might be two of the most diversified transportation companies in the world, but their product lines hardly overlap. Until now, that is.
After 10 years in the making, GE and Honda conducted a maiden flight of their first jointly developed sleek new business jet on Tuesday. It's called the HondaJet, and it represents the Japanese company's first foray into the aircraft business. For GE, it's another example of how the company's taking the long view to co-create what Honda refers to as "the world's most advanced light jet" to date.
An early picture of the GE Honda AeroJet, a joint venture between GE Aviation and Japan's Honda. Source: General Electric.
GE takes the business jet to a higher level
Back in 2004, GE and Honda joined forces in a 50-50 split venture known as GE Honda Aero Engines to bring light, low-cost business jets to market. They setup shop right next to GE's Aviation headquarters in Cincinnati to be close to crucial research taking place in advanced materials.
Their aim was to co-develop a new-generation engine that would be situated above the wings of a small aircraft to reduce drag and cabin noise, and improve performance and fuel efficiency. That engine became known as the HF120, the smallest in GE's portfolio. The picture above shows the unique mounting of the engine on top of the wings. Below is a tighter view of the HF120 engine placed next to GE's largest engine currently in production, the GE9X.
For perspective, the HF120 measures a mere 18.5 inches in diameter and produces 2,095 pounds of thrusts, whereas the GE9X has a fan diameter of 132 inches and a projected thrust of more than 100,000 pounds.
Despite its relatively small build, the HF120 packs a punch. The twin engines are designed to push the HondaJet to a top speed of 420 knots, the equivalent of 483 mph. At the same time, the HondaJet was designed to cruise at a maximum altitude of 43,000 feet over a range of 1,357 miles.
These specs only tell part of the story, though, according to GE. As followers of GE Aviation are aware, the company is highly optimistic about the advancements in materials that offer tremendous benefits, be it reducing drag, noise, or maintenance costs or even increasing the temperatures at which parts can function properly.
For the HondaJet, key materials advancements include a fuselage made from a light carbon fiber composite, and next-generation all-glass electronic systems, also known as avionics. Beyond those, GE stated in a 2007 press release that advanced airfoil materials and coatings would give the plane "the ability to operate in service for an industry record-setting 5,000 hours before the first major overhaul," thereby decreasing the cost of ownership for end users. That's an attractive selling point, even for those willing to shell out millions for a private jet to begin with. What's even more impressive is that Honda's pricing the plane at $4.5 million, which presents a 68% discount relative to a comparable Gulfstream jet at roughly $14 million.
So, GE and Honda are producing a quieter, lighter, more reliable plane at less than half the price of the competition? I'm sold. In fact... I'll take two.
With the first production flight complete, Honda and GE can move forward with their plans to enter the highly anticipated HondaJet into service in 2015. Will the debut subsequently cause GE's stock to soar, as well? Probably not. But here are two interesting takeaways:
1. The HondaJet shows that GE is committed to long-term bets, even if they take years to payoff. I've referred to these investments as "moon shot" bets to steal a phrase from Google's Larry Page. And these are risks that investors like to see big companies taking, especially in an aircraft engine market that's expected to generate $500 billion in sales during the next decade.
2. The HondaJet's test flight took place in Greensboro, N.C., where Honda's production facility is located. That's conveniently close to two cutting-edge aviation facilities currently being constructed in Asheville, N.C., and Greenville, S.C. This is a prime example of what economists refer to as "geographic clustering." What's particularly exciting is that new advancements are more easily shared when they're -- surprise -- happening right down the road. In this case, collaborating with Honda adds a whole dimension. For GE, it looks like outsourcing might be a relic of the past.
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The article General Electric Company Helps Honda Take Flight originally appeared on Fool.com.Isaac Pino, CPA owns shares of General Electric Company. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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