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Rolls-Royce’s new CEO says focus will be on opportunity and strategic clarity- Newshubweek

Rolls-Royce’s new CEO says focus will be on opportunity and strategic clarity
Written by Arindam

Three years ago, Tufan Erginbilgic lost out in the race for the top job at BP. After 23 years at the oil company, latterly as the head of its refining and marketing operations, he left in March 2020.

This week Erginbilgic was back in the corporate spotlight after being chosen to take the helm of another British industrial giant, Rolls-Royce. The 62-year-old, a dual Turkish and UK citizen, will replace Warren East as chief executive in January.

The appointment puzzled some industry experts, who had expected a big hitter with connections in the City of London and Whitehall. “What makes him think he is qualified to run Rolls-Royce?” one asked.

Erginbilgic cites his experience at BP, where he spent a “lot of time” on the energy transition, as relevant. Similarly to Rolls-Royce, he told the Financial Times this week, the energy group had a highly successful cash generating business but needed to invest for a low-carbon world.

“I am going into Rolls-Royce with a focus on how can we create a big opportunity for all stakeholders,” he said. “My focus is on strategic clarity.”

Those who have worked closely with him say he is a good operator. Tony Hayward, former BP chief executive who made Erginbilgic his chief of staff, said the incoming CEO “is tough and his style is quite harsh but he builds great teams and has a strong record of delivery. He is a good appointment for Rolls-Royce at this point.”

Erginbilgic, whose main role since leaving BP has been as a partner at private equity group Global Infrastructure Partners, will be taking on one of the trickiest jobs in British industry.

One of Britain’s oldest industrial names, Rolls-Royce brings with it a level of political and public scrutiny that the new chief will need to navigate carefully. The UK government still holds a “golden share”, which allows it to block any takeover. Erginbilgic will need to develop relationships in Whitehall, as well as with key customers Airbus and Boeing.

Samuel Johar, chair of board advisory group Buchanan Harvey, said that while Erginbilgic was “clearly a successful divisional CEO”, the step up to group CEO “is always a big one because strategy, external stakeholders and public scrutiny play a much bigger part.”

The engineering champion, a global leader in the manufacture of engines for large passenger jets, is still recovering from one of the worst crises in its 116-year history. The pandemic led to the grounding of much of the global fleet, forcing Rolls-Royce to shore up its balance sheet with £7.3bn of new equity and debt. A restructuring and asset disposal programme launched by East is almost complete but the company is only just starting to generate cash again.

An engineer by training, Erginbilgic started his career in the oil industry at Mobil in 1990 before moving to BP in 1997. He held several roles in the company’s “downstream” division of lubricants, refining and marketing, spending time in Turkey and across Europe.

After two years heading up the chief executive’s office — a stepping stone for those deemed to be future leaders and where he worked closely with Hayward — Erginbilgic was promoted to chief operating officer of the downstream division. He became its head in 2014 after Iain Conn left to join Centrica.

Before appointing Erginbilgic, Rolls-Royce chair Anita Frew had already made clear the board was looking for a seasoned executive with a record in operational excellence across continents.

It needs to be someone “who is used to a big global complex industrial business,” she told the Financial Times last month.

On that front, Erginbilgic ticks the box. People familiar with his time at BP credit him with having strong industrial expertise with a relentless focus on performance and driving down costs.

He is “quite a technocrat”, one of the people said. “During his time he really took the business to pieces and put it back together again. He turned it around in terms of making profit.”

For investors in Rolls-Royce, whose recent history is marked by a series of transformation plans that never quite delivered, Erginbilgic’s focus on the bottom line could be a breath of fresh air.

But he will need to balance this with difficult economic conditions. Concerns about high inflation and supply chain constraints are high, while morale among the company’s employees has taken a blow after thousands of job cuts during the pandemic. The decarbonisation challenge also looms large — and will require investment as well as partnerships.

“It’s an interesting appointment — he’s older than the current CEO,” said one person close to BP. “He’s the exact opposite of Bernard Looney [BP’s current CEO]: he doesn’t do being woke, being charming, being a social media star. He’s not a people person. He’s quite stern in his demeanour.”

“Performance is what he does, but performance without EQ could be a challenge. The relationship he has with the chair, Anita Frew, will be important as it will be for her to fill in some of those blanks,” the person added.

Despite the challenges, Erginbilgic inherits a company emerging from an extensive restructuring under East and as international air travel has started to recover. Airlines are back in the market for widebody aircraft that fly with the group’s engines. If the recovery takes off, it might yet provide a welcome tailwind for Rolls-Royce and its new CEO.

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Arindam

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