Louis Gallois Outlines EADS Position at Farnborough

July 17, 2008

Louis Gallois faces the Farnborough Air show with news of a possible loss of the tanker contract with the US Airforce, and ongoing corruption investigations

Louise Gallois demonstrates desirable leadership quality in a BBC interview in advance of the Farnborough air show.

His performance is as effortlessly skilled as those expected of his company’s products. Smooth, effortless, competent, flexible (he communicates as well in English as (presumably) he does in French.

It is hard to resist lapsing into cliché, and borrowing other bits of franglais. His communiqué showed considerable sang froid.

The substance of his answers

The substance of his answers was that his company had good highly-competitive products. EADS was, and would continue to be successful.

That’s a message most leaders want to convey, most of the time. But while some leaders have to knack of sounding convincing, others do not.

Here’s the BBC video. It is only eight minutes long, and has great potential for showing as part of leadership development programmes.

The questions (by Nigel Cassidy) were hardly posed in an aggressive way. (You’d need a different style for dealing with the in-you-face blustering of a Paxman or a Humphreys). But they covered the current and recurrent issues facing the company.

Listen to the answers

On the possible loss of the lucrative tanker contract for the USAF: Not a problem. ‘we have the best airplane .. we expect to win.. and anyway, we will go to the US .. this is only one deal.’

On on-going negotiations to sell a UK production facility to GKN:

‘…tough ..always tough, especially at the end of negotiations ..I won’t say precisely when, as that restricts my negotiation possibilities’

On oil prices: Difficult, but on the medium term an opportunity for their advanced technology products.

On the rumbling corruption scandal: Not very pleasant, but in the short-term not important. ‘My [current] people are fully committed, working like hell. And there are no guilty people without a judgement, and there is no judgment’.

Try repeating these quotes. Listen to yourself. Did you sound convincing? M. Gallois did. Why? The mystery of leadership as communication remains.


The Search for a New leader: Now its BA and Willie Walsh

May 15, 2008

Update: The post below [May 15th, 2008] was updated [December 16th, 2009] as British Airways faced a highly damaging strike of Cabin Crew over the Christmas holiday period. Original post follows:

When a company starts looking for a new leader, rumours about the incumbent are bound to arise. The most recent case is that of British Airways and its CEO Willie Walsh. Students of leadership succession should keep a close eye on unfolding events.

The duty of a corporate board is to safeguard a company’s future viability, and that must include monitoring of its leadership. While secrecy is desirable, it may suit pressure groups to bring matters to public attention. For example, shareholder activists seek advantage for their narrower interests, which would include getting the best short-term deals on investments, but might also include the possibility of becoming king-makers for a change of leadership.

The Independent reports that

[British Airways] has appointed the recruitment consultants Whitehead Mann to find a new chief operating officer and possible successor for its embattled chief executive Willie Walsh.

The successful candidate will fill a newly created role, devised after the recent Heathrow Terminal 5 fiasco. Both BA’s director of operations, Gareth Kirkwood, and head of customer service, David Noyes, parted company with the group last month [April 2008] . The two roles will now be combined to create the position of chief operating officer.

The airline, which will publish its full-year results on Monday, is believed to have instructed Whitehead Mann to find a senior level candidate who could be considered for a position on the board within two years, and could also be a potential replacement for Mr Walsh within five years.

Opening Sacrifices?

For ‘parted company’ read sacked. Gareth makes an opening sacrifice in BA’s attempts to allay criticisms for a wave of customer service reactions. David will do for the time-being for operational failings, as Terminal 5 lumbers into action.

Later, [May 13th 2008] BAA, Heathrow’s operating organization announced the departure of Mike Bullock, its Managing Director at Heathrow, another victim of the Terminal 5 opening (or non-opening, if you prefer). At least the BBC announced it, beating the BAA web-site to the news.

The departures at British Airways seem more in the nature of opening gambits, if we want to puruse the theme of chess as a metaphor for corporate strategy.

The Times has reported that public sentiment strongly in favour of BA finding a replacement for Willie Walsh.

However, Richard Northedge argues that

Walsh ..is directly culpable too [for the recent Terminal 5 opening fiasco]. Unfortunately, BA cannot afford to lose him. It has other problems that require solutions – from its pension deficit to its industrial relations – and Walsh is the best man it has. But stakeholders require some recognition that Walsh’s acceptance of responsibility is not just hollow words: it would be appropriate if, when the remuneration committee considers bonuses, it acknowledged the need to punish Walsh.

The Walsh Legend

Mr Walsh arrived at British Airways in 2005 already as something of a celebrity. His reputation had been secured as a former pilot who aspired to leadership. He had risen through the ranks at Aer Lingus to be acknowledged as a transformational figures for the fortunes of that company.

Stories accumulated about his hands-on style, and were used to sketch his operating methods.

He was known for negotiating toughness. Successfully reinventing Aer Lingus as a profitable no-frills airline, while other established European flag carriers went to the wall, he slashed costs by 30% and shed more than a third of staff. [saying]”we make no apologies for focusing on profit” … [and that] “a reasonable man gets nowhere in negotiations”.
He is renowned for not driving an expensive car and choosing not to take on a secretary, instead writing all his own letters and answering his own phone.

Mr Walsh’s obvious toughness and eye for increased profitability no doubt caught the attention of BA’s board. After the UK airline’s long history of staff disputes, most recently the wildcat walkouts in August 2005 in support of sacked workers at the airline’s main caterer, he must have seemed ideal.

Be careful of what you want…

‘Be careful of what you want. You might get it’ runs an office-wall summary, capturing the myth of the Faustian pact. Maybe that is another version of getting the leaders we deserve. The appeal of a tough leader for BA was obviously appealing, not just to the Board, but to its major shareholders.

Students of leadership succession should keep an eye on events at British Airlines. We will continue to watch Willie, at Leaders We Deserve.

To go more deeply into succession planning

We touched on British Airways in the context of Mandrill Management .

Travolution is a useful site for wider issues of the industry

The Post Office/Royal Mail leadership succession activities were noted including attempts to have a fall-back plan if Allen Leighton were to leave.

Times Warner’s appointment of Jeff Bewkes also makes an interesting succession story.

EADS strategic issues under Louis Gallois
and also its leadership challenges have been covered.

There have stories of the rise and fall of varous sporting leaders. When Liverpool owners approached Jurgen Klinsmann, the story blew-up as a scheme to get rid of the popular Rafa Benitez.

England’s Rugby Football Union eventually appointed Martin Johnson and relegated Bryan Ashton to the bench.

Numerous posts covered the stories the longest leadership succession saga of modern times.

The transition from President Vladimir Putin to Dmitry Medvedev is offering further insights into succession issues in internationally important arenas.

Overall, the events covered in these posts indicate recurring themes within recent leadership succession stories. A thorough examination might produce a valuable contribution to understanding of the dynamics of leadership succession. They may also hint at the likely outome to the story of Willie Walsh at British Airways.


Boeing loses Mega-Contract to Northrop Grumman

March 1, 2008

boing-kc-135.jpg

The US Air Force announces it is to award a giant procurement contract to Northrop Grumman and its European partners. Boeing had been expected to win the estimated $40 billion of business for delivery of mid-air refuelling planes for the US military. The decision seems likely to raise questions of factors that influenced it

Northrop Grumman has snatched a $35 billion Air Force contract to build refueling planes in a surprise victory over Boeing, the company that has supplied such tankers for 50 years.

The Los Angeles-based Northrop Grumman and its partner in the competition, the European Aeronautic Defence and Space Co. of France, plan to do most of the tanker assembly work in Mobile, Ala., some frame work in Europe and the refueling systems at Northrop Grumman’s new facilities in Bridgeport, W.Va.

“The tanker is the number one procurement priority for us right now,” General Duncan McNabb, vice chief of staff for the Air Force, said Friday [February 29th 2008] in announcing the bid winner. “Buying the new KC-45A is a major step forward and another demonstration of our commitment to recapitalizing our Eisenhower-era inventory of these critical national assets.”

The contract gives Northrop Grumman an opening to further future billions of dollars because the Air Force wants to replace its entire fleet of 600 refueling tankers. For EADS, the maker of Airbus planes, the victory is an entry into the lucrative U.S. military market.

The Loser without doubt is Boeing

Business Week makes it clear, and even points to an explanation

The decision represents a major coup for a European aviation behemoth—and a major blow for Boeing, considering that the business was firmly in its grasp four years ago but slipped away in a scandal that led to the departure of the company’s chief executive. … Nevertheless, there was outrage in Washington State, where Boeing’s commercial jetliner operations are based. “We are shocked that the Air Force tapped a European company and its foreign workers to provide a tanker to our American military,” Senator Patty Murray (D-Wash.) said in a statement. “At a time when our economy is hurting, this decision to outsource our tankers is a blow to the American aerospace industry, American workers and America’s military.”

Scandal? What scandal?

The scandal story can be traced back to events over the last six years.

The Decatur Daily account paints the gruesome details

Boeing Co. CEO Harry Stonecipher, brought back from retirement 15 months ago to boost the aerospace manufacturer’s tainted image, has been forced out because of a new ethics scandal involving an affair he had this year with a female company executive.

In a stunning announcement that left the exact circumstances behind the ouster unclear, Boeing said Monday the 68-year-old president and chief executive officer had resigned at the board’s request a day earlier for improper behavior while carrying out the consensual relationship.

The emergence of another ethical flap is an embarrassing jolt to a company that had been trying to put two years of scandal behind it.
Stonecipher’s predecessor, Phil Condit, resigned Dec. 1, 2003, as a result of the defense contracting controversies that ultimately sent two Boeing executives — ex-Air Force procurement official Darleen Druyun and chief financial officer Mike Sears — to prison.

These controversies resulted in the U.S. Air Force suspending Boeing for about 20 months, the longest such suspension of a large defense contractor in procurement history.
Boeing had thousands of documents belonging to Lockheed Martin Inc., documents the Air Force said gave Boeing an unfair advantage in bidding for rocket contracts.

As the LA Times put it

The surprising award [to Northrup] is likely to add to one of Pentagon’s more sordid and tangled procurement scandals that evoked the wrath of a presidential candidate and led to prison sentences for two Boeing executives.

The European Dimension

In Europe the coup was hailed as a success for EADS, partnering Northrop Gumman. American commentators noted Northrop Grumman as LA based, and partnering EADS.

Louis Gallois, EADS chief executive, said on Friday night the contract was a ”breakthrough for EADS” in the biggest defence market in the world. ”To win against Boeing is just great,” he told the FT.

As recently as Friday afternoon the EADS team had been convinced that Boeing would take the contract. Mr Gallois, about to leave Paris for a mountain holiday, said he had simply not believed his ears when informed at 10.25pm local time last night. ”I think it is the best contract I have won in my life.”

So Louis was as surprised as commentators outside the company.

In America more is made of the role played by Ronald Sugar, CEO of said international firm Nothrup Grumman. Mr. Sugar is a business leader who has operated largely away from the headlines.

As well as a successful business career he is extremely well connected through his efforts for prestigious charities, including the post of national fundraising chairman of the Pearl Harbor Memorial Fund. He is a past Chairman of the Aerospace Industries Association, and earlier was appointed by the President of the United States to the National Security Telecommunications Advisory Committee. He is a national trustee of the Boys & Girls Clubs of America, a director of the Los Angeles Philharmonic Association and a trustee of the University of Southern California.

The Morphing of International Companies

The differing treatments of the story around the globe is instructive. Globalization is acquiring its special features. One is the capacity of a global firm to represent itself somewhat selectively. Retention of ambiguity is made easier when international contracts are operated from a consortium. In the United States, a consortium arrangement may be presented as American as Apple Pie, while in Tokyo as Japanese as Sushi …

So in this instance, in America, emphasis is placed on planes that will be built in America. In France, the venture is French-led.

I am reminded of international business executives who hold several passports, more for convenience than deception. They avoid the double-sided business card in two languages in favour of several cards, each with a specific corporate location, and often with different job handles for the executive.

Acknowledgement

The image is from the industry journal Space Mart