The Six Sigma 'Plus' Quality Initiative at Honeywell

            
 
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Case Details:

Case Code : OPER024
Case Length : 16 Pages
Period : 2003
Organization : Amazon.com
Pub Date : 2003
Teaching Note : Available
Countries : USA, Global
Industry : Online Retailing

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"Adding elements of the Baldrige assessment process to Six Sigma will help us put more emphasis on identifying and meeting - or exceeding - customer requirements than ever before."

- Michael R. Bonsignore, Chairman & CEO, Honeywell Inc., in mid-2000.1

Integration of Forces

In June 1999, AlliedSignal, a US-based aerospace and auto parts company announced its merger with Honeywell, another US-based aerospace and industrial controls major. The merger, valued at $15.5 billion in stock and assumed debt, created a Fortune 50 company, with $24 billion in revenues and over $45 billion in market capitalization. Slated to function under the name 'Honeywell International Inc' (Honeywell), it was a truly global technology company, with technical and product leadership in various industries.

Besides cost savings of over $500 million annually, the merger was expected to offer many business synergies to the two companies.

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The combined financial, technological, managerial, cultural and operational strengths of both the companies were expected to drive the growth of the new company. Savings were to be made by way of rationalization of overhead costs, integration of research and development (R&D), quality initiatives and purchasing efficiencies.

Commenting on the merger, Lawrence A. Bossidy (Bossidy), Chairman and CEO, AlliedSignal, said, "We will be a world-class company in every sense of the word. Growth and productivity will be our dual focus. Combining Honeywell's proven strengths with those of AlliedSignal will enable us to reduce cyclicality while enhancing earnings consistency."

Michael R. Bonsignore, (Bonsignore) Chairman and CEO, Honeywell said, "The merger would result in the creation of a new global corporation with a strong balance sheet, efficient management, technology leadership, vast potential and the vision and ability to achieve the company's ambitious financial goals.2

The merger was completed in December 1999 and Bonsignore became Honeywell's CEO. By this time, the company had identified many revenue and growth synergies, and opportunities from integration of businesses and resources. It had also increased its cost-savings estimate from $500 million to $750 million annually by 2002.

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1] "The Rise, Fall and Revival of Six Sigma Quality," Measuring Business Excellence - The Journal of Business Performance Measurement, Volume 4, Second Quarter 2000.

2] These financial goals included increase in earnings per share by 15% annually, revenue growth between 8%-10% annually, and increasing the annual cash flow of the company to over $2 billion by 2002.

 

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