FLUG REVUE June 2005: MTUs new boss outlines plans

June 2005

UDO STARK

CEO of MTU Aero Engines GmbH

At the end of his first 100 days in office, Udo Stark spoke to FLUG REVUE about the future of the engine company.

FLUG REVUE: Mr. Stark, you have a reputation of being a tough rehabilitator of companies in financial difficulty. Is MTU Aero Engines in need of rehabilitation?

Udo Stark: MTU Aero Engines is certainly not in need of rehabilitation. The figures just published for the business year 2004 paint an unequivocal picture: profits rose significantly on only a slight increase in turnover, and operating cash flow improved even more strongly. As a result we have been able in the last year, for example, to pay back the bulk of our bank borrowings. And in the current year we have already made some further capital repayments. That has only been possible because the company is extremely strong financially.

FR: Will you announce your stock market flotation at the Paris Air Show?

Stark: We are working on the preparations for a stock market flotation so that when the time is right we will be in a position to press the button. We have changed our accounting system and the accounts for 2004 will for the first time be prepared on the basis of the IFRS standards. However, we have not yet made any specific decisions about a stock market flotation. We are keeping all our options open for 2005.

FR: Will you continue to maintain a wide mix of programmes or will there be a change of strategy at MTU?

Stark: It is precisely because of our previous strategy of pursuing a wide portfolio of programmes and services that we are in today's position of strength. Hence there is no reason to change anything. On the contrary, we even plan to extend our range of offerings in certain areas.

FR: What is the significance to the future of MTU Maintenance?

Stark: Maintenance is an area in which we want to expand our service portfolio. Here we not only want to win new customers, but to offer new repair methods and also move into the maintenance of accessories. It is the maintenance arm of MTU that will experience the biggest growth. We plan to increase revenue in this area over a period of several years from about 30 percent of total sales to approx. 50percent.

FR: Do you have any plans for further cutbacks or job cuts up your sleeve?

Stark: We are currently in the final phase of implementing our Impact 100 economy programme. After that we have no plans for another round of savings. However, it goes without saying that one always has to keep an eye on the competition and make sure that one's structures keep up with the times, otherwise one could quickly find oneself falling behind in a global market that is hotly contested.

FR: How do you plan to strengthen relations with the big three engine suppliers (GE, Pratt & Whitney and Rolls-Royce)? Do you plan to cooperate with Rolls-Royce in the civil area as well?

Stark: We have already been working with the top three in the industry for decades and our revenue from each of them is about the same. This will not change in the future either. When we cooperate, with whom and how closely depends critically on the future engine programmes as well, of course, as on the framework conditions. But the top priority for us is the cost-effectiveness of the programmes, not certain fundamentally political aspects.

FR: After you were taken over by KKR there was some scepticism as to whether the investors understood the need for long-term strategies in aerospace. What is KKR's attitude?

Stark: As an owner, KKR is very interested in the long-term increase in value of the company and hence it expressly supports our strategy and, along with it, for example, the vast amounts we spend on research and development. In 2004, MTU Aero Engines spent more on R&D than ever before in its history.

FR: Do you see any possible areas of the company in which there is underutilisation of capacity, and, if so, how are you reacting to this?

Stark: Now that civil aviation has noticeably recovered and that the major military programmes are also wrapped up, our utilisation curve is looking rather good. It is possible that there might be a decline in military maintenance due to reduced unit numbers in the Bundeswehr's Tornado fleet. But we will not have any problems making up for this as other parts of the business rally.

FR: Are you interested in the possibility of consolidation amongst the European engine manufacturers?

Stark: It is not currently on our agenda. MTU Aero Engines is currently in such a position of strength both financially and technologically that we are well-positioned to remain independent. If any consolidation talks were to get under way – irrespective of who initiates them – we would be taking part from a position of strength.

FR: Where do you see the MTU in five years?

Stark: In five years' time MTU Aero Engines will not only have strengthened its present position but even expanded it. In the civil area we will be by far the biggest supplier of subsystems and, due to our reliability and top-class quality combined with reasonable prices and to our technological edge, we shall be an indispensable partner of the big manufacturers.

On the military side, we shall continue to be the German systems partner for virtually all the Bundeswehr's aero engines and also an indispensable partner of the European programmes.

In the area of civil maintenance, amongst the independent providers we have already been the number one in the world for years. We intend to further reinforce this position.

From a technological point of view we are the pacemakers in many application areas and we shall be playing an important role on all the major national and international technology programmes. This will play a critical role in securing our competitiveness and, along with this, the size of our highly skilled workforce in the long-term.

From FLUG REVUE 6/2005

Last updated 13 May 2005

FLUG REVUE, Ubierstr. 83, 53173 Bonn, Germany