The new Rolls-Royce boss has tapped an executive from oil major BP, his previous employer, to lead an overhaul of Britain’s flagship engineering group.
Tufan Erginbilgic has brought on Nicola Grady-Smith as Rolls-Royce’s chief transformation officer, in the first external appointment since taking the helm at the start of the year, according to the company.
The move by Erginbilgic, who last month described the group as a “burning platform”, is expected to shake up engineers again, just as the group emerged from the overhaul by its predecessor Warren East.
The East has been forced to ax 9,000 jobs to save £1.3bn in costs following the coronavirus pandemic.
Grady-Smith will be responsible for the transformation program Erginbilgic launched last month that focuses on “efficiency and optimization” to help lift profits and compete with larger rivals such as General Electric of the US.
During his nearly two-decade career at BP, he held a number of senior roles, most recently in the company’s City & Corporate Integrated Solutions division focused on providing integrated services to the energy group’s key customers. The division offers customized solutions using different BP technologies to help companies or cities reduce carbon emissions.
He also led the retail business in the UK and worked for Erginbilgic as chief of staff while running the refining and marketing operations.
“All of my roles involve significant change or transformation to create value for our stakeholders. . . I am passionate about building the capabilities for Rolls-Royce to succeed,” Grady-Smith wrote on social media.
Erginbilgic has wasted little time in making his mark on the group. He immediately told employees at a company address last month, parts of which were leaked to the Financial Times, that Rolls-Royce had to change the way it operated or it would not survive.
His comments sent shares in the FTSE 100 group down about 4 percent on the day, although they have since recovered and were trading at 108 in the afternoon in London on Monday.
“Every investment we make, we undermine the value,” he told employees last month, adding that financially, “we don’t do every major competitor out there”.
His comments were widely interpreted as a signal to staff to expect more job cuts, particularly among white-collar workers.
Brutal assessment following the grounding of international air travel that greatly dented the group’s civil aerospace business, which still generates 40 percent of the engineer’s underlying profit.
Although the company is expected to meet its 2022 targets for revenue growth and “modestly positive” free cash flow, its balance sheet remains burdened with debt.
Analysts said Erginbilgic said the restructuring would help restore Rolls-Royce’s margins closer to those of its peers.
“We will welcome the announcement of further restructuring and especially a tighter focus on investment as the group’s research and development spend remains elevated since 2014, despite the lack of meaningful opportunities in its civil business,” wrote Chloe Lemarie at Jefferies.
Rolls-Royce said Grady-Smith will start his new role on February 1 and will report to Erginbilgic. He is a “seasoned leader with extensive international turnround experience and a proven track record of delivery”.
“As Tufan explained to employees last month, we need to improve the performance of Rolls-Royce and Nicola will be instrumental in achieving it. We report the 2022 results on February 23 and will provide more details at that time.