Analysts: Retirement of Spirit’s Lawson sudden but not unexpected

Larry Lawson will retire from the Wichita-based Spirit AeroSystems in July, following months of speculation that he would be leaving the commercial aircraft supplier.

New chief operating officer Tom Gentile will assume Spirit’s CEO post.

Lawson, 58, has been widely credited by Wall Street analysts for improving the company’s financial performance since taking on Spirit’s CEO job in April 2013 after serving as executive vice president of Lockheed Martin’s aeronautics segment.

Those analysts, by way of notes to investors on Wednesday, reiterated that sentiment.

“While the change is not unexpected, the timing is earlier than we expected,” wrote Wells Fargo Securities senior analyst Sam Pearlstein. “We think the initial stock reaction to this news could be negative as Lawson is credited with the dramatic turnaround in company performance.”

Speculation about Lawson’s pending departure largely surfaced following the February announcement that Spirit was hiring GE executive Gentile as chief operating officer, a post that had been vacant since June 2013 and widely considered the second-highest executive post at the company.

“Our industry sources suggest that Lawson’s decision to leave Spirit after turning the company around is heavily motivated by personal factors,” wrote Cowen & Co. analyst Cai von Rumohr. “However, his sudden decision to go with contract negotiations with Boeing and Airbus unresolved is puzzling.”

Spirit, which makes major parts of all Boeing and some Airbus planes, has been in negotiations with Boeing for a master pricing agreement for several years now. The agreement with Airbus is around its newest widebody jetliner, the A350.

Gentile, 51, joined Spirit in April after 18 years at GE, most recently as president and COO of GE Capital. He also held similar roles at GE Aviation Services and GE Healthcare Systems.

Von Rumohr wrote that Gentile brings to Spirit an “impressive resume,” while J.P. Morgan analyst Seth Seifman wrote that Gentile’s roles at GE “suggest he is no stranger to complex, high-stakes negotiations.”

Analysts wrote that Gentile will be helped in those negotiations by Spirit chief financial officer Sanjay Kapoor, who Seifman said “has been instrumental in driving Spirit’s success in recent years.”

“We also believe Mr Kapoor is a key figure in the negotiations, highlighting the importance of his continued employment,” Seifman wrote.

On May 31, Spirit’s board of directors increased Kapoor’s base salary from $600,000 to $650,000 and granted a one-time award of 28,275 restricted shares of stock.

“This should mean the financial organization remains unchanged,” Pearlstein wrote.

Lawson’s last day at Spirit will be July 31. According to a Securities and Exchange Commission filing Wednesday, Lawson will be retained as a consultant to the company for two years at an annual salary of $150,000. Lawson also will receive separation payments totaling $1.3 million and a cash award of $1.1 million for 2016, the filing said.

Spirit employs about 10,500 people in Wichita. It also has operations in Chanute, Kan.; McAlester and Tulsa, Okla.; Kinston, N.C.; Scotland; France and Malaysia, with global employment totaling 14,800.

In 2015 Spirit recorded $789 million in net income on revenue of $6.6 billion.

This story was originally published June 8, 2016 at 8:57 AM with the headline "Analysts: Retirement of Spirit’s Lawson sudden but not unexpected."