How did Pratt & Whitney affect RTX's 2023 expenses?

Pratt & Whitney's powder metal manufacturing issue significantly impacted RTX's 2023 expenses, leading to both direct and indirect costs that affected the company's financial performance.

1. Direct Costs: RTX incurred a $3 billion pre-tax operating profit charge in the third quarter of 2023, which reflected the estimated losses to be incurred by Pratt & Whitney's 51% share of the joint venture that makes the PW 1100 GTF engine. This charge included estimates of potential compensation and other considerations for customer fleet disruption and the one-time impact of estimated incremental costs to long-term maintenance contracts.
2. Indirect Costs: The issue led to a decrease in reported sales, with the third quarter 2023 sales amounting to $13.5 billion, a 21 percent decrease versus the prior year. The company also estimated that it would have to pull a total of 600 to 700 engines off their Airbus A320neo jets for lengthy quality inspections between 2023 and 2026, which added to the indirect costs.
3. Additional Operational Costs: The repair work initially expected to take 60 days per engine was now projected to last up to 300 days per engine, significantly increasing the operational costs. The company also anticipated an up to $3.5 billion pre-tax hit to profits over the next several years and lowered its free cash flow goal for 2025.
4. Impact on Free Cash Flow: The company's free cash flow was affected, with a decreased projected free cash flow of approximately $7.5 billion for 2025, down from the initial $9 billion goal. This reduction in free cash flow would have a significant impact on RTX's financial flexibility and its ability to fund future growth and return capital to shareholders.

In summary, Pratt & Whitney's powder metal manufacturing issue resulted in substantial direct and indirect expenses for RTX in 2023, impacting its financial performance and cash flow.