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‘Big challenges’ await Jeff Turner’s replacement as CEO of Spirit AeroSystems

  • The Wichita Eagle
  • Published Wednesday, Feb. 20, 2013, at 11 p.m.

Jeff Turner’s replacement as CEO and president of Spirit AeroSystems, the world’s biggest aerostructures supplier, will have a big job.

As head of a publicly traded company, the new CEO must be able to deal with shareholders, bankers and Wall Street.

He or she must have a good understanding of the business, improve the company’s performance, get costs under control, have a good relationship with Boeing and be strong in lean manufacturing, experts say.

“Those are … big challenges,” said Cai von Rumohr, an aerospace analyst with Cowen and Co.

In November, Turner, 60, announced his plans to retire in early 2013. He will continue in his role until a replacement is named.

Spirit board members convened a special CEO search committee and say they are looking inside and outside the company.

It may be several weeks before a selection is announced, said a senior executive recruiter in the aerospace industry who’s familiar with Spirit.

“On one hand, I think the board would like to move at a decent pace, but on the other hand, they don’t feel like they have to be in a hurry,” the recruiter said.

Because Spirit is the largest of the aerostructures companies, the board has a special challenge.

“How far outside of that narrow world (of aerostructures) should they be comfortable looking (for a CEO) given the unique nature of the business?” he said.

Turner, a Wichita native, was integral in the sale of Boeing’s commercial aviation business on South Oliver to Onex Corp. in 2005, and led the transition to an independent company.

Under his leadership, Spirit grew from a Boeing-only supplier to successfully winning new work on Airbus, Gulfstream, Sikorsky, Bombardier and Mitsubishi programs. And it expanded around the world.

Spirit became publicly traded on the New York Stock Exchange in 2006.

And it’s the state’s largest private employer, with about 10,800 Wichita employees.

Spirit has had various degrees of success in transitioning from a Boeing cost center to an independent business, said Richard Aboulafia, an aerospace analyst with the Teal Group.

The company successfully transitioned from being a 100 percent Boeing shop to being a global company, he said.

It aggressively sought and won new work in the U.S. and Europe and expanded its portfolio.

“And they discovered a lot of it wasn’t costed out properly,” Aboulafia said.

Building large aircraft structures solely for Boeing is different from independently pricing work packages and winning them, he said.

Spirit took a $590 million charge in the third quarter of 2012 for cost overruns on the Boeing 787, Gulfstream G650 and G280 and other programs.

Aboulafia said it also must reduce costs on the Airbus A350 program.

For the new CEO, “job one is to make sure it’s the end of the financial damage from the contracts and executing them successfully,” he said.

But the new CEO can’t concentrate only on cost execution — not when you also have to deal with a strong influence of private equity and bankers, he said.

“You don’t want to see the pendulum swing too far in either direction,” Aboulafia said.

The new CEO must be able to improve costs on its programs in production and successfully move programs from development into production, von Rumohr said.

“Those are somewhat two different skill sets,” von Rumohr said.

Bob Brewer, Midwest director of the Society of Professional Engineering Employees in Aerospace, said he “can hardly wait to sit down and talk with the new CEO.”

SPEEA represents Spirit’s engineering and professional and technical employees.

“I think there are things that can be accomplished here in Wichita that will help put Spirit back on track,” Brewer said.

Employees are under a lot of pressure and stress to do more with less, he said.

“I think everybody in Wichita should be getting a pat on the back because, overall, Wichita’s performing very well,” Brewer said. “We know that a lot of the (charges) as they broke them down wasn’t associated with Wichita. So finding a way to keep these employees motivated and their drive to be successful is a key. And I think we’re losing some of that, in my opinion, by the overall panic I’m seeing here.”

There’s a lot of concern and angst in the workforce, Brewer said.

“There’s a lot of good structure within the company to make the right things happen,” he said. “I’m just hoping the next CEO coming in is a good fit for everybody concerned at all levels.”

Whether Spirit’s board chooses the next leader from inside or outside the company depends, said Jim Wolff, a Wichita State University professor in management.

If board members choose from inside Spirit, “they’re saying, ‘we’re in a good place and want more of the same. We may need some tweaks and changes, but we don’t need a major shake-up,’ ” Wolff said.

If they search exclusively outside the company, “then they’re looking for somebody as a change agent potentially,” he said. “Someone from another company is likely to bring in some of their own people and kind of shake things up a bit.”

Spirit board members have done an excellent job of recognizing that there are leaders inside the company who could “grow up to be CEO,” said the executive recruiter. The only question is whether they are ready to take on the role or need more time to develop.

When companies hire a new CEO, more than half of those chosen haven’t been a CEO before, the recruiter said.

“Boards take some risk when they hire that person who hasn’t been a CEO before,” he said, adding that there are measures that will help evaluate how that person will perform.

Reach Molly McMillin at 316-269-6708 or mmcmillin@wichitaeagle.com.

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