Fear of flying could keep Goodrich from climbing.

• Author: O'Connor, Brian J.
• Position: Money Matters - Losing enthusiasm for plans to spin off its industrial-products business 2002 to focus on aerospace

For years, B.F. Goodrich was the tire company without the blimp. Then it took to the skies in a big way, selling its tire business in 1986 and buying and selling dozens of other lines. In June, it dropped the B.F. from its name to complete its changeover to Goodrich Corp., a Charlotte-based maker of aerospace and industrial products.

In early September, Goodrich announced it would spin off its industrial-products business in early 2002 to focus on aerospace, including ejector seats for F-16 fighters, satellite electronics and aircraft maintenance. A week later came the Sept. 11 hijackings and, two months after that, the American Airlines crash. Now the idea of becoming a pure-play aerospace company isn't flying so high.

Even before, the company's stock had been losing altitude, dropping from a 52-week high of $44.50 in May to $30.54 on Sept. 10. By mid-November, it was in the low 20s. At a price-earnings ratio of about 5.8, Goodrich looks cheap. But are you buying low - or buying trouble?

The spinoff attempts to simplify the company's "story" so investors can compare Goodrich with competitors. It's also supposed to insulate the more-profitable aerospace business from asbestos liability that came with the 1999 purchase of Charlotte's Coltec Industries.

But it's coming at a bad time. Since Sept. 11, airlines have cut flights and canceled orders for more planes. Boeing's 717 project, in which Goodrich has invested about $121 million in R&D, is in limbo. And Goodrich is projecting a 10% dip in aerospace revenue in 2002.

In its favor, the aerospace business is diverse, blending military, commercial and small-jet customers. Goodrich hopes to get as much as $5 billion in military business over the next seven years from the Joint Strike Fighter Prorgram and an undisclosed amount from the F-22 fighter.

The company is working on the other side of its ledger, too. Plans to cut about 1% of its jobs and dose 16 plants should save $125 million next year. Analyst Peter Jacobs of Wells Fargo Van Kasper in Seattle says strong management, margins and cash flow - $122 million in the third quarter - should help it weather the post-Sept. 11 storm.

That assumes things work as planned, managers aren't too dizzied by divisions coming and going, and nothing else happens to keep travelers out of the sky and on the roads. If something does, Goodrich might wish it had kept an even simpler "story" - the one in which once upon a time it made tires.

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