Pratt & Whitney was originally a subsidiary company of the Niles-Bement-Pond group, and had no aircraft connections at all. The President of Niles-Bement-Pond was a James K. Cullen, and he was a family friend of F.B. Rentschler who was at the time President of Wright Aeronautical Co. Due to disagreements within Wright over development of engines for the US Navy, Rentschler resigned his position and with capital and plant supplied by the Pratt & Whitney Co., started a new company, Pratt & Whitney Aircraft Co., based at Hartford, Connecticut.
Other senior Wright Aeronautical personnel followed Rentschler, as part of an informal agreement made between themselves and Rentschler at the time he left Wright. These included George J. Mead who became Chief engineer, and A.V.D. Willgoos who became Assistant Engineer in charge of Design at the new company. Wright were trying to get a new engine together (The Simoon) for the US Navy, and P&W were out to get their new engine, The Wasp, onto the market before Wright. The target was 400hp from 1344 cu in.
The US Navy were happy to have more competition on the engine project, and gave the go-ahead to Pratt & Whitney in the form of a promise of an order for six engines, although P&W would have to finance the development of the engine out of its own funds. The promise of a follow-on contract at a price that would enable P&W to recover its development costs was also made, although unit costs were not to exceed the current cost of the Curtiss D-12, at the time about $9100. The utlimate price set for production Wasps was $8750, of which $750 was set aside as development cost amortisation.
The staff at P&W were not constrained by the internal politics that existed at Wright Aeronautical, and the new engine proceeded at speed. A forged crankcase was used instead of the normal cast type, and a two-piece crankshaft with one-piece forged master connecting rod was used to enable higher output power from higher maximum rpm. The use of both features was not new, as Bristol in the UK had used both before the Wasp was designed, but the P&W engineers probably got more out of the combination at the time than the engineers at Bristol. While the new rod and crankshaft were being developed, a single-piece crankshaft and split rod were used in prototype engines.
The new engine was tested at 400hp @ 1900rpm at sea level in May 1926, and was flown in the Wright Apache. The engine was immediately ordered into production following testing of the six prototypes, and this contract for 200 engines plus a further civilian order for 28 engines for the Boeing 40 enabled P&W to recoup all their development costs and leave a decent margin of profit for the company. The Simoon engine never made production, and the R1454 Curtiss engine was also abandoned by the Army and Curtiss at the same time.
Following the Wasp, the company designed and put into production the Hornet, an engine of 1690 cu in capacity with 2:1 propellor gearing off the crankshaft. This was run in June 1926 and passed a Navy type test at 525hp about a year later. A direct drive version of the Hornet was the first quantity order obtained by P&W, to be fitted to the Martin T4M airplane.
The passing of the Vinson-Trammell Act and the Air Corps Act of 1926 ensured that both Wright and P&W had regular orders for their engines, although profitability was always at the higher powered engine ranges, thus encouraging both companies to put money into development of new and larger engines. While the US Navy and Army continued to fund development of engines, their money only covered the prototype hand-built engines for type testing, the greater part of the development costs being boprne by the engine manufacturers. THis pattern of development ensured a faster rate of engine improvement, and was to be of great impact at the time of the outbreak of WW2.