- Spirit Aerosystems picks GE veteran Tom Gentile to take helm
- Lawson to retire after turning around key supplier for 737
In a surprise announcement, Spirit Aerosystems Inc. said 58-year-old Chief Executive Officer Larry Lawson is retiring July 31 after a three-year tenure in which he turned around the aerospace manufacturer spun out of Boeing Co. He will be replaced by Tom Gentile, who joined Spirit on April 1.
Gentile, 51, had been viewed as Lawson’s heir apparent since being named chief operating officer at the Wichita-based company following two decades at General Electric Co., where he ran global operations for GE Capital.
Still, analysts and investors were caught off-guard by the speed with which Spirit made the transition. Shares of the company, Boeing’s largest supplier, dropped 3.8 percent to $45.66 at the close in New York. The decline was the steepest since Feb. 11, making Spirit the worst performer among the 134 members of the Russell 1000 Producer Durables Index.
The management change “comes earlier than we expected,” Howard Rubel, an aerospace analyst at Jefferies Inc., said in a note to clients. “However, we do not expect operations to change. A focus on improvement remains.”
Gentile had been working closely with Lawson while assuming responsibility and oversight of all Spirit programs and all aspects of engineering, operations and business development, the company said in a statement Wednesday. Prior to joining Spirit, Gentile served as president and chief operating officer at GE Capital, where he served on its board and oversaw global operations, information technology and capital planning.
The Harvard-educated Gentile, who earned bachelors and MBA degrees, also held stints as president and CEO of its health-care systems and aviation-service divisions. In the latter post, which he held from 2008 to 2011, Gentile expanded and marketed GE’s engine services business to airline customers.
As CEO of Spirit, he’ll face the challenge of completing long-running contract talks with Boeing over a master agreement that covers every facet of Spirit’s work for the largest U.S. planemaker. Spirit manufactures fuselages for Boeing’s best-selling 737 narrow-body plane, whose production tempo is speeding by 36 percent to a 57-jet monthly output by the end of the decade. Boeing accounts for 84 percent of Spirit’s revenue, according to data compiled by Bloomberg.
“The CEO transition at Spirit could mean it will take longer for Spirit and Boeing to reach a pricing agreement,” Seth Seifman, an aerospace analyst at JPMorgan Chase Bank NA, said in a report.
Spirit’s board boosted compensation for Sanjay Kapoor, the company’s chief financial officer, at the end of May. He is “a key figure in the negotiations, highlighting the importance of his continued employment at Spirit,” Seifman wrote. “And, while we do not know Mr. Gentile, his background suggests he is no stranger to complex, high-stakes negotiations.”
Lawson will work with the company under a two-year consulting agreement signed June 7, according to a regulatory filing. He’ll be paid $150,000 a year and will receive separation pay of $1.3 million, a $1.1 million cash award and his deferred-compensation account will be credited with $2 million when he retires July 31.
The company played down reports earlier this year that it was searching for a potential successor to Lawson, who joined Spirit from Lockheed Martin Corp. Under his leadership, Spirit’s net income more than tripled to $546.1 million last year from $145.9 million in 2013. Lawson guided the sale of the company’s unprofitable Gulfstream wing production to Triumph in 2014, expanded Spirit’s relationship with Airbus Group SE and landed a key role on the Pentagon’s top-secret new B-21 bomber program.
Several key executives departed in recent months, including David Coleal, executive vice president and general manager for Boeing, business jet and regional programs, and Philip Anderson, Spirit’s senior vice president for special projects.
Lawson had said in February that “he had no near-term plans to step down and that the company had been strengthening its executive bench and undergoing normal succession planning,” Douglas Harned, an analyst at Sanford C. Bernstein & Co., said in a report. “Lawson’s previous contract with the company reportedly ended in April. Our understanding was that this was simply a matter of timing of the contract and not an important milestone, which now appears not to be the case.”
Spirit Chairman Bob Johnson lauded Lawson for accomplishing many of the goals set by its board. The company didn’t elaborate on Lawson’s plans or say why he is leaving now.
“Larry has been the catalyst that enabled Spirit to stabilize critical maturing programs, divest nonprofitable business jet programs, transform operations across the enterprise, build a great team and win new business which has solidified the foundation for future growth,” Johnson said in the statement.