Arconic Names Former GE Executive Blankenship as CEO
October 23 2017 - 1:14PM
Dow Jones News
By Bob Tita
Aerospace parts specialist Arconic Inc. named former General
Electric Co. executive Chip Blankenship as its new chief executive,
seeking to bring an end to a year of management turmoil that
included a bitter fight with an activist investor and the sudden
resignation of its former chief.
Mr. Blankenship, the former head of GE's appliance business,
will become Arconic's CEO on Jan. 15., the company said Monday.
Interim Chief Executive David Hess, who has run the company since
April, will stay as a director.
The appointment came as Arconic missed quarterly earnings
expectations because of rising aluminum prices and
higher-than-expected costs supplying parts for new jet engines
built by units of GE and United Technologies Corp., sending its
shares down 10% at one point.
"Arconic needs improvement in performance across the board," Mr.
Hess told analysts Monday.
Mr. Blankenship, 51 years old, steps into the top job in the
aftermath of a dispute with activist investor Elliott Management
Corp. and as the company deals with the fallout from its connection
to a fatal June fire at Grenfell Tower in London. Mr. Blankenship
also faces margin pressures in Arconic's key businesses of
providing aluminum and metal alloy parts to the aerospace and
automotive industries.
Arconic, which separated from aluminum producer Alcoa a year
ago, has been beset by operating problems that have kept the
company from producing the high margins envisioned by the breakup.
Mr. Blankenship will be expected install better cost controls and
improve efficiency throughout the company's aerospace and
automotive metals businesses.
Arconic's disappointing performance prompted activist investor
Elliott Management to initiate a campaign earlier this year to
replace Chief Executive Klaus Kleinfeld. The campaign, which
involved fights over slates of board candidates, culminated in
April when Mr. Kleinfeld abruptly left the company after he sent a
letter to the hedge fund that Elliott perceived as "a threat to
intimidate or extort" the firm.
Arconic didn't support the letter Mr. Kleinfeld sent and said it
was bad judgment, The Wall Street Journal previously reported. Both
Mr. Kleinfeld and Arconic decided he should leave the company.
Arconic granted Elliott three more board seats in May in a brokered
settlement of the proxy fight.
David Miller, Elliott's senior portfolio manager, called Mr.
Blankenship's hire "an excellent selection" in a statement
Monday.
Mr. Blankenship, whose training is in metallurgy and material
science engineering, joined GE in 1992 and held several jobs with
the conglomerate's aircraft engine business. He holds seven patents
related to jet engine technology, according to Arconic. He headed
GE's appliance business from 2011 until 2016 when it was sold to
China's Haier Co.
"Chip is both a colleague and someone I know well and respect,"
said Mr. Hess during a conference call Monday with analysts. "He
brings significant aerospace experience and strong leadership
qualities and a strong record of delivering results."
Mr. Blankenship is described as having a low-key personality but
a hands-on leadership style, according to someone who knows him
well.
On Monday, Arconic said that board member John Plant will become
board chairman, effective immediately, succeeding interim Chair Pat
Russo.
Mr. Plant joined the board in 2016 as an Elliott appointee under
an agreement between Mr. Kleinfeld and the hedge fund. He is a
former chief executive of TRW Automotive.
Arconic continues to face multiple lawsuits and a U.K. inquiry
in connection with the Grenfell Tower fire, which killed at least
80 people. Aluminum panels with combustible polyethylene cores
produced by Arconic were cited by investors as a factor in the
spread of the fire over the building's exterior. Arconic has said
that it wasn't involved in the design or installation of the
exterior cladding system used at the tower, which included
insulation that also burned.
The company reported $7 million in legal and advisory costs in
its latest quarter in connection with the fire. Mr. Hess warned of
a long inquiry into the fire. "It's not unusual for these things to
take a number of years to resolve," he said.
Arconic also on Monday reported a third-quarter profit of $119
million, down roughly 28% from a year ago and shy of analysts'
expectations. Revenue rose 3% to $3.2 billion, but the company
missed analysts' per-share profit expectation. Arconic cited rising
costs for aluminum for eroding profit from its rolled products
business, which supplies aluminum sheet for auto builders. The
company reported a 5% gain in profit from its engineered products
unit, but the margin for the business was flat with a year ago.
The company increased its revenue guidance for the year to $12.6
billion to $12.8 billion, compared with its prior forecast of $12.3
billion to $12.7 billion.
--Allison Prang contributed to this article.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
October 23, 2017 13:59 ET (17:59 GMT)
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