Rolls -Royce - "a burning platform" - new Boss
 

The new boss of Rolls-Royce has likened the engineering group to a “burning platform” and described the company’s performance as “unsustainable”.

Tufan Erginbilgic, who took over as chief executive from Warren East at the start of the year, told staff “we do have a burning platform, not because I say so but because of what I am going to share with you”. The former BP executive said the company’s performance was “unsustainable”, adding that “it is at a level [at which] it cannot continue. Rolls-Royce has not been performing for a long, long time. It has nothing to do with Covid, let’s be very clear.

“Covid created a crisis, but the issue in hand has nothing to do with it.”

Erginbilgic, who was speaking at Rolls-Royce’s UK manufacturing site at Derby in a global address broadcast to staff, parts of which were seen by the Financial Times, also said “every investment we make, we destroy value”, adding that “[financially] we underperform every key competitor out there”.

The British engineering group is best known for its engines for Boeing and Airbus long-haul aircraft and RAF fighter jets, and propulsion systems for the Royal Navy.

Last night a spokesman for Rolls-Royce said that Erginbilgic “had been speaking with all our people about the need to significantly improve performance. He was honest about our financial underperformance compared with our peers, laid out his priorities for all of us and stressed the need for everyone within the business to work together in order for Rolls-Royce to succeed.

“Our intention throughout this process is to be as open and transparent with our people as we can be. Although it is regrettable someone has leaked details of Tufan’s message, we will continue to speak with our people first, whenever that is possible given our obligations as a publicly-listed company.”

I think that the point is to make world class engines. Last I checked, RR still do that.
A recent new program chose RR when other options were available.
I won't pretend to know what the fiscal issues that are referred to entail, but focusing on core competencies would seem to be the important message to send.

Now what could the "AE" possibly stand for ... ? :O
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They once had been in hot water before and returned stronger than ever with the Trent back then.

Harry Stonecipher syndrome?

“When people say I changed the culture of Boeing, that was the intent, so it’s run like a business rather than a great engineering firm.” - Harry Stonecipher, 2004.

A business does have to stay solvent to exist, but it requires careful adjustment, or the cure ends up being at least as bad as the disease.

I think you'll find the point is to turn a profit for their shareholders. With the shareprice having stagnated post-covid and post-brexit that is clearly proving difficult to do.

Allow me to translate: "YOU need to work harder so that I can receive a larger bonus".

But were still unable to make much money. They are completely dysfunctional with the world revolving around Derby - every decision is made in Derby and Derby comes first. Keep expensive people in Derby rather than cheaper people elsewhere. Send technicians flying the world from Derby rather than having local offices properly staffed. Keep the boys on their ex-pat assignments turn after turn without building local credibility and longevity.

It was a previous Chairman of RR who said that RR is a small Derby engineering form trying to do business globally. Its mindset is local, not global and the only purpose of overseas is to keep Derby in work. Everything is subservient to Derby and Derby is where the problems all lie.

That said, Singapore cut the umbilical, and has been highly successful - arguably more so than Derby as its not got the baggage.

What happened to their fan blade issue?

The last time I heard the "Burning Platfrom" statement from a new CEO it was that usless Stephen Elop the Microsoft stooge when he took over Nokia.

Somewhat ironic given that the products in question are burning platforms.

This is the issue. I worked my socks off for a well known IT company in the 90's and Noughties. Weekends, evenings, nights, bank holidays, Christmas you name it.
What did I get? After 9 years and burn out I got made redundant.
My days of doing that are over.

How Wallstreetian. (Yes, I understand, any business intends to make a profit. No sheet, Sherlock, and all that)
I gather from the OP that this was an internal communication which leaked out.
I have had the opportunity to receive a variety of Corporate trickle down info of a similar character.
I guess that he has close personal experience with burning platforms. :p
I do hope he and the team are able to keep it all together. I'd rather not see RR go the way of the plains buffalo.
For DavidReidUK (I am guessing AE meas American Export, but that's a guess from seeing the C version depicted on a V-22)

They wisely ditched Hyfil in the early 1970s.

Technically Allison Engine but close enough...

In todays news which would not be a surprise to anyone who works there, it was stated in the Times that the Civil Aerospace business hasnt made a profit for years. This really isnt a surprise as it was the worst kept secret in the company.

When a certain Senior Exec (responsible for the design flaw which killed the 787 engine) was getting annoyed at being hauled over the coals reguslarly by those at HQ, he issued an email whoch stated in no uncertain terms that there was to be no information on 'performance issues' given to the HQ staff unless said information had been vetted by him first. Of course it leaked and he forgot that the company didnt revolve around him and not everyone reported to him so it becam widely known that civl were in a bigger mess and were hiding the issues. Did that individual suffer ? Nope - promoted, and the organisation that provided the real data to HQ was disbanded.

“every investment we make, we destroy value”

this was the stand-out for me - they buy/start a business and then it goes downhill...................... not a great advert for management..........

If R-R reduces or cuts its ties to the UK then it risks losing its guaranteed flow of defence investment, which is only justifiable on the basis of preserving domestic jobs, expertise and industrial capacity. It's a tricky balance to strike but like all companies with defence and security arms, the factors underpinning "shareholder value" extend beyond headline financials and the new CEO won't be able to apply red-in-tooth-and-claw business principles without suffering consequences from HM Government.

[The fact that engine issues have just grounded the UK's fast jet training fleet probably isn't endearing R-R to the government right now, so it might not be the best time for the company to go looking for more commercial freedom, although one might also argue it to be a consequence of protectionism lowering engineering standards... a tricky balance for the Government too!]

Are we just too small a country with too small an industrial base to make complex high tec stuff like Aero engines profitably ? We have Airbus of course but bizzarely, as it so important to AI its not British owned . BAe systems deciding (another short term view) that there was more money in robbing the Government on Military equipment than being part of the worlds biggest civil aviation manufacturer. This coming in a week where it was revealed that UK car production has fallen by half since you know what and is now on a par with the strike ridden mid sixties , failure of the much hyped battery plant and failure of the space launcher test. Where now for UK engineering, desperately sad.

As an outsider, who has worked in many areas of commerce since I was 22: Those that mention the old thinking are probably on the nail. I have seen this in so many different companies. They just do not move into the 21st Century. Most famously Kodak, whose own technician developed the very first digital camera. This is why old companies die and get taken over.

The old guard always come to think that the company/political party/charity/whatever it is - is worth more, and is more important, than it's customers/voters or the people it was set up to serve. They always claim otherwise because they have not stood outside and looked in the windows.

I sit to be corrected.

The place to me appeared to be full of managers and not workers.

That speech is often listed as one of the worst and most destructive corporate speeches ever.

How naive to assume a controversial on-line broadcast, challenging a lot of people, will not leak .....

Looks to me, the classic, old-story again, where corporate leadership does demand beyond what the company/people is/are able to deliver. Ignoring that operating on the edge of the technical capabilities is not a place where output/results can be demanded, though proper corporate results are the "consequence" of cooperative working together to sell what the company is able to create.

So many good companies have been destroyed by that leadership approach. And now we see another leader promoting this disastrous strategy.

Or so to say, a derivative of "Oh, by just thinking about it, I did declassify documents". Dreaming "leaders".

Well, a small country doesn't have to be bad, though the big back-country (EU) just got slaughtered with Brexit, to be replaced by prosperous far away green fields (which more and more show to be non-existing). Not to forget, slaughtered in such a way, that a lot of harm has been done in the relations with that big back-country. All on the fake promises of improved and affordable healthcare, which has now (unsurprisingly) collapsed, seemingly beyond the brink of repair in a near future.

Sounds like the Jack Welch “shareholder value” paradigm. That worked not very well at Boeing. Pouring profits into share buybacks rather than investing in the future. Outsourcing to the lowest bidder and getting to the point where no 787s were delivered for a year due to production quality issues, and the corporate reputation stained by the 737max fiasco.

" Pouring profits into share buybacks "

profits and Rolls Royce are not synonymous -

Agreed, but hard talking market friendly CEOs are the first step. To be fair all of the major jet engine OEMs have had problems with maturity/durability, but the Trent 1000 was the gift that kept on giving. Hopefully the Trent 7000 and XWB don’t go the same way.

The particular phrase was an accurate description of Nokia's situation. That they went on to make possibly the worst decision of all with respect to how to resolve it does not mean the diagnosis was wrong.

We all know that in a post-Brexit environment the UK engineering sector is stuffed, just as almost everything else in the UK economy. Anyone who can is fleeing the b*****g p******m. This particular speech was, once again, an accurate description of RR's dilemma.

Widescreen and PP , I certainly share your views about the self inflicted disaster we currently face (tho it appears the City isnt as badlye ffected as 'proper' indesutries . My comment about size was that it is relaly ahrd for a small country in global terms despite qa moderate popualtion size will sruggle up agains t the USA and China and the Eu. Debatebly one could add india to this list as its military is probably bigger than the UK with Brasil and Indonesia soon to follow.

These kinds of CEOs are the commercial world equivalent of Trump (who of course has a foot in both camps) johnson , Putin, Erdogan , Bolsanaro .. They all play the same game adapted to the style and circumstance of their countries . it looks to me like he is just there to be a hatchet man. He is from outside aviation although he was senior figure at BP and the Chair has no knowledge of anyhting technically complex . Same ol' mantra, shareholder value, delivering, driving etc ... All comes down to one thing mass redundancies and scaling back investment to bump up the short term while another genuinely world scale UK entity slides into history.

Indeed, Nokia's problems started long, long before Stephen Elop arrived. By then Nokia, like Kodak, was too far gone to survive.
Disclaimer: I was working for Symbian and we had just been acquired by Nokia a couple of years before. I remember very well when that memo hit.

And RR got on the the wrong side of Brexit that cost them £4.4bn with their GBP/USD exchange rate hedge

Indeed, so small countries need to get into bed inside the local hegemon. Or pursue a web of alliances that create even more interdependency and greater loss of sovereignty than being inside the local hegemon. The UK has been trying to have its cake and eat it ever since 1945. Something tells me that it is even less possible now than ever.

Yes, I remember that period very well indeed, for much the same reason.

RR is now permanently on the wrong side of Brexit. If you are not at the table you are on the menu. At this stage RR is poorly performing prey.

Lonewolf50
That platform was a home grown disaster. BP picked up the tab due shall we say US legal practices. Interestingly when Piper Alfa went up somehow the settlement was less how shall we say large ! Interestingly with regards RR my wife employed one of their H&S managers as H&S Director and the comments which I just read hear re Derby centric sound about right. However she has since moved to another large defence contractor.

Cheers
Mr Mac

I'm sure P&W or GE would love to acquire RR, do they have someone on the inside trying to facilitate this?

Yes, it was accurate, but a horrendous and destructive idea to communicate it in that way. He pulled the rug under all existing products, without having a replacement plan in place. He made a bad situation way worse.

And then of course finished the job with the whole MS disaster deal.

Pratt (Raytheon) and GE are both part of massive US conglomerates. Would buying RR help them with Euro contracts but any take over would result in closing down projects RR has that comepte with the new owners product line , unless they ahve soemthign truly exceptional. So lots of job losses and another bit of UK Plc in foreign hands.Unlike the US companies with their immense Mil contracts thats not viable in UK in terms of supportign a global enterpise .The Amricans have 'Military Industrial Complex supporting a huge airforce and navy ours is more of the scale of a Saturday market , scale size of country relative size and sophistication of military .

Ways that might avoid mass reducndancies would included

Would a Chinese company be interested , they want to build airliners well the most complex bit is the engines and buying RR would give China Aviation inc a real leg up. Would it be allowed, we would probably have to ask the Cousins that one .

I dont think Airbus would buy it since OEMs have never really made engines

Tragedy if this goes further down the slippery slope

PB
I am pretty sure UK Govt would not allow a Chinese take over of RR. Airbus also I don’t think would be interested partly because of not what they do, but also I am sorry Brexit. One of the reasons for this is Brexit so why knowing this would you buy it?

Cheers
Mr Mac

That MIC also buys, and has bought, Rolls Royce engines.
In other news, the switch from .45 ACP to 9 MM under a NATO standard went to Beretta. (Has it been 40 years, really?)
Our Army recently bought a Eurocopter/Airbus helo for training at Fort Rucker.
Our Navy recently bought a Leonardo helicopter for basic helicopter training.
I could do on, but I think you are being selective in your outrage.

I sincerely hope RR does what it needs to in order to remain RR and produce excellent engines.

Agreed, however the civil aerospace is the issue. They can keep the defence bit as its profitable and well run. The challenge is a 'new operating model' for civil aerospace and sadly a big chunk of dead weight is in Derby. I know its not nearly as simple as my suggestion, however shrinking Derby on future engine generations and building in Singapore might offset the dea weight. In RR the belief that Derby is the hub of the world is at the heart of the problem.

Take 'Digital' as an example - a large potential opportunity for data based revenues and services. Derby staff were literally giving it all away 'free with the engines' rather than treating it as a revenue stream for the future - because people in Derby only knew how to sell big spinning hunks of metal as they have done for decades. If you could have seen the Digital hub in Deby you would hav laughed. First, having a digital hub in Derby is like having a beach ball stand in the middle of the country. Few 'digital' experts will relocate to Derby - its not exactly a Silicon Glen or Valley. Then if you saw the building it was based in, your eyes would be out on stalks. I had the pleasure of a visit a few years ago and while the inside was very 'modern', the outside was literally a rotting brick building complete with leaking gutters and downpipes - and it HAD to be in Derny. Nobody would let it be in somewhere high tech, digital with a world class reputation - like Singapore !.

Defence makes money and can survive, as could the power business but it is repeated failures to break the Derby dead weight of civil that is at the heart of its issues. Make Derby competitive and RR have a chance. And it needs to start with the top 2 layers with the first line as they all need to go and no longer be shuffled around as 'its their turn'.

My cousin worked for BP for over 20 years. Out of Houston.
He'd worked a few projects on Deepwater Horizon, but was not on it when that went down.
He quit BP less than a year later, and he was dead serious when he shared his reasons with me: it was due to how the company reacted, internally, to that cock up.

He had intended before that to work for them until retirement. He chose to look elsewhere based on how their corporate culture manifested itself.
Your apologia does not sit well.
Granted, the overreaction by the sitting Administration was a mess, but that's a topic for elsewhere.