Tufan Erginbilgic vows: ‘I’ll fire up the Rolls-Royce profit engine’

High flyer: Rolls-Royce boss Tufan Erginbilgic

This time last year, Tufan Erginbilgic was on the brink of taking the reins at Britain’s flagship engineer, Rolls-Royce. 

While most of us might spend the day before starting a new job doing some last-minute swotting up, Erginbilgic had already spent four months doing his homework to figure out why the group was in such dire straits.

Despite the long months of preparation, he cancelled his Christmas holiday to finalise a ‘game plan’ for reviving the FTSE 100 engine maker.

In his first-ever UK newspaper interview, Erginbilgic reveals that throughout his research, one theme had become apparent.

He says: ‘A banker told me he would summarise what my investors think with one word.’ That word was ‘frustration’.

Erginbilgic was quick to pass on this message to staff and the City – without mincing his words. Within weeks of his January 1 start date, he had described the 117-year-old company as a ‘burning platform’ and claimed it was underperforming ‘every key competitor out there’.

He added: ‘Every investment we make, we destroy value.’

Erginbilgic says his bleak assessment was justified by the vast reams of statistics which he asked an external organisation to compile.

‘I used that data rather than being just a new person who showed up and made lots of assertions,’ he says.

This is not his first rodeo, as he developed a fierce reputation for turning around two underperforming businesses at his former employer BP.

His nickname in the City is Tufan ‘Turbofan’ because of the impressive speed at which he works.

He knows the ins and outs of a restructuring very well by now. ‘I have seen this movie three times,’ he says. ‘It is almost identical after a while.’

His early harsh words for those at Rolls were part of the first step of his own four-pronged approach to overhauling a business.

Described as ‘holding up a mirror’ to a company, this first stage involves collecting masses of data and then presenting it back to staff.

The other parts include establishing a clear, granular strategy and doing it all with pace and intensity.

In practical terms, he has reshuffled the leadership team and helicoptered in some of his most trusted former BP colleagues.

Erginbilgic, a Turkish-British citizen, insists that delivering the stark feedback at the start of his tenure was necessary to galvanise his 42,000-strong workforce and bring in a ‘mindset change’.

He says: ‘It’s important because then people understand where they are, but they also understand there is a possibility of a bright future.

‘And that injects momentum and energy into the organisation. It gives it purpose.’

But it is the City that has most obviously responded well to his no-nonsense management style.

In the space of just one year, Rolls has tripled in value to £25 billion, making it the biggest riser on the Footsie in 2023. Erginbilgic has laid out a mind-boggling blueprint that includes quadrupling profits by 2027 and increasing its currently tiny margins to be more in line with the company’s peers in the US.

Erginbilgic, 64, was a left-field choice to lead Rolls, which has long been seen as a prestigious but ailing company struggling to keep profits up and debts down while trapped in a loop of constant restructurings.

Despite working in the defence and energy industries, Rolls was crippled by pandemic travel restrictions as the biggest chunk of its earnings come from making and servicing airliner engines, meaning much of its revenue is dependent on the number of flying hours.

Many had thought a new boss would be plucked directly from the aerospace and defence sector.

Erginbilgic had spent two decades at BP, where his last job involved leading the downstream division that includes petrol forecourts. He built up a solid reputation for being able to revive any ailing business. He believes this allowed him to clinch the job at Rolls despite his perceived lack of experience in the firm’s core industry.

He left BP in 2020 when he was passed over for the energy giant’s top job, which went to Bernard Looney, who stepped down in September after failing to tell the board about the extent of his relationships with colleagues.

It was said to have been a two-horse race that Erginbilgic was bitterly disappointed to lose.

After BP he went to a lucrative partner role at private equity group Global Infrastructure Partners. It would have been easy for him to stay there. As he tactfully puts it, pay is ‘different’ in private equity and he was doing well at the firm.

When Erginbilgic’s friends heard he was going to accept the Rolls job, some joked he needed to take an IQ test because he was already a great success in private equity.

His base salary at Rolls is £1.25 million and he is being given two payments of £3.75 million to compensate him for the vast earnings he has lost by moving to a publicly listed firm.

The stonking rise in Rolls’ share price shows investors endorse the details of his master plan, which includes cutting 2,500 jobs and offloading superfluous parts of the business such as an electric flying taxi project, which is now for sale.

Is there a chance that the City has been buoyed by Erginbilgic’s confidence and strong words alone? Could this stellar reception actually just be a honeymoon period? He says: ‘We delivered the best-on-record profit and cash while flying hours are only 86 per cent of pre-pandemic levels.

‘So I think it’s not just words that investors are reacting to. Frankly, it’s delivery.’

Erginbilgic says he has managed to turn Rolls into ‘one engineering company’ – rather than an umbrella leadership overseeing several siloed businesses.

Many of the firm’s top employees were disproportionately going to the cash cow engines business. ‘You will struggle to resource some programmes if you are losing talent in the civil aerospace division,’ he says. ‘Now you have one engineering organisation, you can actually deploy them.’

Rolls specialises in making engines for larger planes after ditching the much bigger market for narrowbody aircraft. However, Erginbilgic has said he would consider working with a partner to re-enter this part of the industry.

The other parts of Rolls’ business will be some of the most critical to its future growth. Its work leading a consortium to design mini nuclear power stations has received the most attention. These plants – called small modular reactors (SMRs) – could help to solve Britain’s energy crisis as they are much easier to construct than the hugely expensive plants such as Hinkley Point C.

They could also form an important export industry as a number of countries are already lining up to buy them.

Rolls has put £50 million into the venture, which is now a business which it majority owns, while the Government has contributed £210 million.

Earlier this year, Ministers made a puzzling move by opening a public bidding process for the SMR contract, potentially allowing the deal to go to another company.

Rolls is the frontrunner and Erginbilgic believes it can win, saying it will be an ‘enormously surprising outcome’ if it loses.

‘They should pick whoever they want on merit,’ he says. ‘This process needs to be fair. But what does that mean when I am ahead of everybody else? That needs to be recognised rather than supporting everyone else to catch up.

‘We are in phase two [of developing SMRs]. Show me one other company like that. You can hardly show any company in phase one. If they slow down the process further for others to catch up, is that fairness or unfairness?’

After all the hard work this year, Erginbilgic finally managed to take some time off this Christmas. ‘This is not to say we don’t have a lot to do next year,’ he says. ‘But I think the business is in a much better shape.’ Time will tell.

This post first appeared on Dailymail.co.uk