Last year, for example, Turner he admitted clashing with Dick Olver, BAE’s new chairman, casting doubt, according to some reports, over his experience or abilities. There has been talk, too, that he heckled an old BAE colleague, now an executive with one of BAE’s partners, as he gave a presentation. The description Alpha male barely does the man justice.
Yet today Turner, a Mancunian, has never looked so relaxed — or pleased with himself. BAE has been transformed since 2002, when Turner took over from John Weston and the share price plunged to 115p. This was after the aerospace and defence group said that it needed to renegotiate two big contracts, the Nimrod reconnaissance aircraft and Astute nuclear submarine, at a cost of £1 billion.
Now BAE is back on the profit-growth path, with operating profits up 16 per cent to £1.1 billion. The shares have passed the 400p mark. The company, once seen as a bid target for an American group, is now worth £14 billion, larger than all its American peers, except Lockheed Martin and Boeing.
“In 2002, when I came in, the biggest issue of all by a mile was the Ministry of Defence. We had entered into contracts under the old competition rules that frankly we shouldn’t have taken,” Turner says.
This was the fallout of an era of cut-throat competition in defence procurement, ushered in by Lord Levene, who was chief of defence procurement from 1985 to 1991. “That was the only way they were prepared to do business. Competition, competition, competition — it was all tactical, nothing strategic,” Turner says.
“That’s what I had to tackle. We had done the GEC Marconi deal and were much bigger, so we could say that we can’t go on taking inappropriate levels of risk like those on Nimrod and Astute.”
BAE had been forced into competing with American defence companies, whose research and development was mostly funded by their government. There was no level playing field and, worse, a gradual erosion of the technology and skills base that the UK needed to equip its Armed Forces.
“So I started the campaign and I got a lot of bad publicity for pointing out that this was wrong,” Turner says. “If the competition policy had continued unfettered, what chance for the future of the UK defence industry?” In the end, his tough talking appears to have been successful. Cash has stopped flowing from the Nimrod and Astute programmes and last week BAE showed that it can make money from its business with the MoD, with earnings of £133 million on sales of £2.8 billion, up from the £10 million earnings the previous year.
More importantly, a Defence Industrial Strategy, long called for by the industry, has been completed in just four months and appears to be a road map that both the industry and the ministry can accept. BAE is the obvious winner from the strategy, but smaller players have also welcomed it.
“It’s right,” Turner says of the 145-page document published just before Christmas. “It’s right for BAE Systems and it’s right for the UK — and the supply chain.
“We have a responsibility now that we have got what we asked for to make sure that we bring other UK companies into our programmes, and if we don’t do that we deserve to fail.
“We owe a great deal to John Reid (the Defence Secretary) and Lord Drayson (the Defence Procurement Minister). We have politicians there who are prepared to see the long-term consequences of what was going on.”
If it seems that the love-hate relationship is starting to turn into a love-in, that is a misconception. “It’s not a love-in. Lord Drayson talks about a tough partnership. I agree with that. There has to be something in it for both sides,” he says.
“We don’t want to make outrageous profits, although I think we have made outrageous losses in the past. We want to make a steady 7-to-8 per cent margin on our UK programmes. But if we are providing the best technology for the UK Armed Forces and a reasonable return for our shareholders, that’s all we ask.
“They were getting ships and aircraft on the cheap, but it couldn’t go on. We couldn’t go on subsidising the UK Armed Forces.”
Even now, he insists that his threat to quit Britain for good was not an idle one. The company held merger talks with a couple of American contractors and got close with General Dynamics, the defence conglomerate that is now a rival in supplying armoured vehicles.
“There would have been a big upside for both companies, it would have made sharing technology easier, it would have given comfort to the US Government that their technology was safe — as it is, but Congress needs a lot of reassuring,” Turner says.
Of course, since then the share price has trebled and the chances of an American company taking over BAE have receded. Cashflow is strong and the company is taking its pension liabilities on the chin, paying £350 million of cash and property into the main pension fund in an effort to reduce, if not wipe out, the deficit.
The feeling at BAE and in the industry is that the next big deal that the company does will be in the United States, where defence spending is still rising and the budget for research and technology, at $73 billion (£42 billion), is bigger than for the whole of Europe.
BAE makes 26 per cent of its sales in the US. It is one of the few non-American businesses that has real presence in the country, but it is still hampered by the issue of technology sharing. “We have to keep proving to the US Government that we are good citizens, that we can be trusted — and we can,” Turner says.
The British Government intends to buy the Joint Strike Fighter, the next generation of fighter jets on which BAE is a key contractor. However, the British company has no right, as yet, to share the technology that will fly the aircraft. Critics say that if Britain does not have access to this, its fighters will go back to Lockheed Martin for key services and upgrades. For every dollar spent buying fighter jets, four dollars are spent in through-life care.
Lord Drayson has made technology-sharing a priority and the Government could demand a final assembly and checkout line, here in the British Isles. BAE would be the major beneficiary, but this is a deal the Government, rather than the company, needs, Turner says.
Both sides, Turner says, will benefit from technology- sharing. Since the September 11 terrorist attacks in 2001, American investment in technology has outstripped that in Europe and Britain. The kit that the American Armed Forces will use in a few years’ time will be networked and mobile, but it may not work with equipment used by the British.
“Thinking people in the US know it is better to have an ally. It’s lonely having an empire, we know that. The inter-operability of our Armed Forces is at stake. If we don’t get it, I think eventually the UK will end up only peacekeeping and not peacemaking,” Turner says.
Turner may be Britain’s biggest arms salesman, but he has no trouble sleeping at night. “I think of the benefit that we bring to the UK economy and the security we provide around the world. The hospitals and schools we provide from being the UK’s biggest exporter,” he says.
Hospitals and schools paid for by selling things that kill people? “Things that protect people,” he says. “I can’t think of any example of our sophisticated weapons in the wrong hands.”
Turner can make a persuasive case for the benign influence of BAE, but he prefers to leave that to Olver. The two men seem to have forged a strong working relationship after a shaky start. “Dick’s great, he’s an excellent chairman. He’s very strong on soft issues and corporate governance issues and brings a lot of experience from a big global company, like BP,” he says.
One black cloud hanging over the company is the Serious Fraud Office’s inquiry into allegedly corrupt arms deals involving the company in Saudi Arabia. “We have done nothing wrong,” Turner says.
There is another big Saudi contract in the offing, after an agreement between the Kingdom and the British Government. Details of the contract to provide Eurofighter Typhoons are scant, but it is clear that “al-Yamamah II”, as it is dubbed, will keep Turner happy for some time. After all his battles, it must be refreshing to see a little flat water ahead.
“All I can say is that, when I make commitments I keep them. If I didn’t, I wouldn’t be in the job. The shareholders would see to that,” he smiles.
Q Who is or was your mentor?
A The first was Norman Barber (British Aerospace and Smiths Aerospace) in the late 1970s and the 1980s. The thing I learnt from him was teamwork and responsibility, and delegation. The second was Dick Evans (chairman of BAE Systems before Dick Olver). He was a great leader. He had vision and optimism. You would never come out of a meeting with Dick Evans feeling worse than when you went in.
Q Which businessman or woman do you most admire?
A A lot of people say Lord Browne or Richard Branson, but how can you admire people you don’t really know. The person I do know well is Sir John Parker, from the board of Babcock’s (the shipbuilder). He knows what he’s talking about, he’s very smooth, has common sense and he’s fantastic at dealing with people.
Q Do you read books on management? If so, which influenced you most?
A No. It’s all about experience. That doesn’t mean I don’t believe in education, I’m just not sure that we need half of all kids to graduate from university.
Q Which is more important: what you know or who you know, and why?
A Of course it’s what you know. Look at me, I’ve got to where I am and I’m a rough guy from the North.
Q What does leadership mean to you?
A It’s about creating a team with different people in it — hopefully people that are better than you. I want people in a team that I can delegate to.
Q If you could change one thing about the business, financial and commercial environment, what would it be?
A We would have technology-sharing with the US. Without it, the UK Armed Forces will be unable to carry out what we need them to do.
Q What is the most important business event, good or bad, to occur in your working life?
A There were three. The first was managing the exit from our loss-making regional aircraft business. The second was negotiating the Airbus single corporate entity. The third was persuading the Ministry of Defence that it had to change our terms of trade, and as part of that, the Defence Industrial Strategy.
Q Does money motivate you?
A Of course it does — I have four kids. It’s still important. This year I have a 52ft boat, I might want a 64ft one. I love my Aston Martin, I love being able to treat friends and family. It gives you choices.
Q What gadget/piece of technology can you not do without?
A A mobile phone and my video, so that I can record Manchester United and watch it at home with a beer.
Q How do you relax?
A With friends and family, watching Man U.
POWER CV
NAME
Mike Turner
AGE
57
HOME
Cobham, Surrey
EDUCATION
BA, Manchester Polytechnic
JOB
Chief executive, BAE Systems
CAREER
With British Aerospace, subsequently BAE Systems, since 1966. Joined Hawker Siddeley Aviation in 1966 as undergraduate commercial apprentice. From 1970, various posts with Hawker Siddeley. Moved up to British Aerospace and became director and general manager of its military aircraft division in 1986. In 1988, became executive vice-president, defence marketing, for British Aerospace
1992: chairman and managing director of British Aerospace Regional Aircraft
1994: joins main board of British Aerospace
1999: chief operating officer of BAE Systems, after merger of British Aerospace and Marconi Electronic Systems
2002: Appointed chief executive of BAE Systems
OTHER INTERESTS
Member of the Government’s National Modern Apprenticeship Task Force; joint chairman of Aerospace Innovation and Growth Team; and a non-executive director of P&O
FAMILY
Married, four children, one grandchild
HOBBIES
Golf, cricket, rugby and, above all, Manchester United and sailing in his new Fairline Targa 52
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