Rolls-Royce has named a veteran former BP executive as its next boss, as the aerospace and defence giant attempts to revive its fortunes after a turbulent few years.
Tufan Erginbilgic, 62, will take the top job at the FTSE 100 engineering group in January, succeeding Warren East, 60, who announced in February that he planned to retire having led the company since 2015.
Erginbilgic, a dual Turkish and UK national, is best known for his two decades at BP where he rose to become chief executive of its refining and marketing business. He left the oil giant in 2020 after being passed over for the top job, and later that year joined Global Infrastructure Partners, the private equity infrastructure investor, as a partner.
Rolls-Royce said that Erginbilgic would be paid a base salary of £1.25 million and would receive £3.75 million in shares as a “golden hello” to reflect “compensation he will forego as a result of leaving GIP”. The shares are due to vest in two tranches in 2027 and 2028.
Erginbilgic was a surprise choice for the role and relatively unknown to investors in the group. Anita Frew, Rolls-Royce’s chairman, said that he was “a proven leader of winning teams within complex multinational organisations, with an ability to drive a high-performance culture and deliver results for investors”.
She added: “He has extensive strategic and operational experience and a firm understanding of safety critical industries, including aerospace, as well as the challenges and commercial opportunities presented by the drive for low carbon technologies.”
Rolls-Royce makes engines for Boeing and Airbus, RAF Typhoon fighter jets and Royal Navy warships and submarines. It’s primarily paid for its passenger aircraft engines by flying hours and the collapse in air travel during the pandemic brought the company to its knees. It only avoided insolvency in 2020 after an emergency refinancing including a deeply discounted share sale. During East’s tenure the company has also suffered chronic problems with its Trent 1000 engines.
Rolls-Royce is grappling with its long-term strategy as the world moves to decarbonisation and looks for alternatives to the fossil fuels on which most of its engines run. The company is also attempting to capitalise on the energy transition by developing small modular nuclear reactors, which it hopes to deploy in Britain.
Erginbilgic said that he was “determined to deliver the full potential of the market positions which the company has built over many years, through its engineering excellence and innovative technology, and to build a platform for growth in order to create value for all stakeholders”.
The UK government has a golden share in Rolls-Royce because of its role in sensitive defence procurement and the company is obliged to have a wholly British chairman or chief executive, which Frew is. Rolls is understood to be in talks with the Ministry of Defence over any restrictions on Erginbilgic, who was born in Turkey and gained British dual nationality in 2009.
Analysts at Deutsche Bank said: “Tufan Erginbilgic was not one of the names often quoted to take over the CEO role at Rolls-Royce. While he has limited aerospace experience, he appears to be a seasoned industry professional with extensive experience in delivering strong improvement in profitability.”
Rise of the ‘technocrat’
Tufan Erginbilgic’s background in aerospace may be limited to a non-executive role at GKN, but the BP veteran is regarded as an experienced leader with an eye for detail and a relentless focus on delivery. That appears to have ticked the boxes for Rolls-Royce, whose chairwoman, Anita Frew, said in May it was looking for someone who was “used to a big global complex industrial business” and yesterday praised Erginbilgic for his “strong track record for execution, delivery and the creation of significant value”.
After training as an engineer, Erginbilgic began his career in the oil industry with a role at Mobil in 1990, moving to BP in 1997 and holding a variety of positions in its “downstream” division in refining, marketing and fuels in his native Turkey and across Europe.
He also had a spell as head of the chief executive’s office, a training ground for those destined for leadership roles, and was promoted to BP’s executive team in 2014 as head of downstream. Erginbilgic was credited with turning around the fortunes of the unloved business, which operates in more than 50 countries and employs tens of thousands of people.
Those who worked alongside Erginbilgic describe him as a “technocrat” with a firm grip of the numbers and a tendency to appear somewhat stern. “Tufan is deep into the detail, if not naturally warm,” said one. Another used a golfing analogy: “He plays with one club, the driver, and uses it for every shot.”
He is already well known by at least one member of Rolls-Royce’s board: Dame Angela Strank, who was BP’s head of downstream technology and chief scientist and served alongside Erginbilgic on BP’s executive team.
If Frew wanted a further reference for Erginbilgic she’ll have needed look no further than her predecessor Sir Ian Davis, who also served as BP’s senior independent director until 2020.
An agenda full of touch challenges
The in-tray for the new Rolls-Royce chief executive contains plenty of operational, financial and strategic challenges.
Having taken on big debts during the pandemic, Rolls is still facing constrained cashflows from the slow recovery in air travel and now also must contend with supply chain and inflation issues.
In addition, Tufan Erginbilgic must ensure that the company move on from its chronic problems with the Trent 1000 engine for the Boeing 787 and get its run-rate up on the Trent XWB engine for the Airbus A350 airliner, which is due to be the company’s cash cow.
Furthermore, he must keep up morale in a company that has cut thousands of jobs and at the same time carve out a decarbonisation strategy for the business, which at present is focused on making engines that run on fossil fuels.
