Tufan Erginbilgic says Rolls is getting better, 'but we still have a lot to do'; Photo: Rolls-Royce
If Tufan Erginbilgic succeeds in fulfilling his mission, he will lose his job.
At least that's what the Rolls-Royce CEO himself says: a year and a half into a business turnaround that deserves rave praise from the city.
“I came with a purpose,” he tells The Telegraph. “I tell people I want to be the odd one out.”
“My vision is that you go to a meeting and people tell you about problems and what they're doing about them, and you kind of look and say, 'Wow, okay, thanks. I really appreciate what you're doing” but you realize you can't contribute anymore because they've done everything.
“This has happened to me on previous conversions, but not yet with Rolls -Royce.”
Making lasting cultural changes at Rolls, a 118-year-old engine maker known for its bureaucracy, will be a challenge. far from easy. But this was at the core of Mr Erginbilgic's strategy from the very beginning and sometimes required him to use shock therapy.
Shortly after taking office in January 2023, the Turkish executive, nicknamed “Turbo” by enthusiastic stock market analysts, told the company's 40,000 employees they were standing on a “burning platform.” He later described Germany's power systems business as “grossly mismanaged” after he allowed profits to fall despite rising sales.
The harsh remarks initially rankled, with critics accusing him of hammering unnecessary own goals.
During an interview at The Telegraph's London offices, Mr Erginbilgic said the tough comments were needed to shake the company out of its funk.
Rolls-Royce suffered a near-death experience during the coronavirus pandemic under former boss Warren East. but too many people were still complacent.
“Some people knew something was wrong and were disappointed, and some people weren’t,” he says. “So you need to change the mindset, change the culture, change the processes and, in some cases, change the people.”
“But I shared my vision of where I thought we could go, and that got people excited.
“You need a clear strategy if you're going to mobilize 40,000 employees. And for me, strategy is not a board of directors.”
Mr Erginbilgic's initial comments have now been reassessed following his success. He managed to reduce costs and increase profitability.
At the same time, he spent much of last year renegotiating money-losing contracts with airlines and aircraft makers, including Airbus and Boeing, that were awarded under previous management. .
“Making engines is normal,” says Mr. Erginbilgic. “But if they don't make a profit, a million times zero is still zero, right?
So – and I'm not kidding – last year we renegotiated all the contracts [with the original equipment manufacturer]. We signed the last one on December 28. Then we renegotiated unprofitable contracts with airlines, some of which we signed last year, and some of which we are still working on.”
Previous Rolls management teams avoided raising prices for fear of losing market share.
“Is this light talk? Of course not,” says Mr. Erginbilgic. “But we went out saying, 'We're partners,' and we actually told them what the problem was.
“Any sustainable partnership must be mutually beneficial, otherwise it is unsustainable. I've also been on too good a side of contracts in my career and they weren't really sustainable. They were good. But one day the other side says, “Enough is enough.”
“So these are tough conversations. But as long as there is mutual respect, I can assure you that it is a win-win either way. I will never take advantage of Rolls-Royce's position, but I want us to get more value that we bring. This never happened before.”
Mr. Erginbilgic also ensured that all contracts signed since his arrival were profitable. He hopes this will break the vicious cycle in which Rolls has long been stuck.< /p>
The approach is not limited to just the company's civil aviation division. He also renegotiated deals with the defense and energy systems divisions, while steadily cutting costs and centralizing key functions such as procurement to spread best practices across the business.
The result was a doubling of total profits. Meanwhile, Rolls is reporting record free cash flow of £1.3 billion in 2023.
The stronger numbers cemented Erginbilgic as a hero among long-suffering Rolls investors. However, he insists this is just the beginning of his plan to improve.
“We are changing, but we still have a lot to do. And if you're sitting there thinking, “These guys are done,” we're far from it.
“We set new expectations every day. I can tell you that even yesterday I interfered with our way of thinking.”
Inside Rolls – Royce's extraordinary British revival. Read more
Many long-suffering shareholders are now eagerly awaiting news of when they will finally receive their payout.
This could come in the form of a dividend return or perhaps a share buyback, although Mr Erginbilgic did not give a precise time frame.
Previously, he assumed that this would happen only after the company's debts fell and all the major events began. The credit rating agencies are restoring Rolls to investment status, something that S&P and Fitch have done so far, but not yet Moody's.
Can investors dare hope for a surprise this year?
< p>“Shareholder distribution can come in many forms, and we are not ruling out any of them,” he says.
“We have defined the criteria and are making progress. If we can meet the criteria, it will happen as soon as possible.
“I need a strong balance and I can’t tell you more.”
Early results From Mr Erginbilgic's strategy, giving the CEO the opportunity to consider long-term options for Rolls.
He cites a list of circumstances that bode well for the company: the fruits of a three-year, £1bn investment program to improve its engines; rising UK defense spending, including Aukus-class submarines and the Tempest fighter jet; and growing demand for backup power generators from artificial intelligence-focused data centers.
“What we do now will have an impact beyond 2027,” he says, referring to when current medium-term goals set for the business came to an end. “I'm excited about what we're creating.”
The company is also mulling a return to the narrow-body aircraft market – likely through a partnership with another engine maker – and sees great potential for its mini-nuclear reactor business beyond 2030. that nothing is working today.
“Opportunities are everywhere, in all our divisions. But it has to be beneficial, and we are in no hurry,” he says. “We don’t need mergers and acquisitions to develop the company.”
Mr. Erginbilgic, a father of two, rarely looks up during the hour-long conversation. His persistence and relentless focus on results have earned him a reputation as a stoic operator and even a corporate tough man.
However, at times during conversation he borders on the professor.
“Who doesn't want to win? Who doesn't want to succeed? He says. “Everyone uses the term transformation at their own discretion. But for me the transformation takes Rolls-Royce to places it has never been before. The ultimate goal is to create what I call a high-performing, competitive, sustainable and growing business.
“To be honest, I'm not here for short-term results. I've said this from day one. This is a holistic transformation that will benefit all stakeholders – not just investors, but also employees and society.”
With such lofty ambitions, it will be a long time before Mr Erginbilgic is retired from Rolls. But if he manages to quit his job, he has nothing to worry about: he will become the most sought-after head of the city.
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