Arconic Names Former GE Executive Blankenship as CEO
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 email@example.com
(END) Dow Jones Newswires
October 23, 2017 13:59 ET (17:59 GMT)