VideoAccounting and capital-markets backgrounds sustain many a CFO. But for Doug Penner, who heads finance at ThyssenKrupp Aerospace, 16 years spent working for various operating units at Boeing instilled an operations orientation that he says continues to pay solid dividends in his current post.
Largely entrusting the accuracy of financial statements to others, Penner, who is not an accountant, spends the bulk of his time working with the general managers of ThyssenKrupp Aerospace's business units. The private, U.S.-based company — a couple of levels down in the organizational structure of ThyssenKrupp AG, a publicly held German industrial conglomerate — distributes such raw materials as aluminum and titanium to aircraft manufacturers and provides supply-chain logistics management services.
Indeed, building close working relationships between finance and operations has been a central theme in the two years since Penner came to the company, after five years as CFO at Panasonic Avionics. He engineered a transfer of finance functions away from a shared-services operation run by the German conglomerate's North American holding company so that processes could be tailored to his company's specific operational needs. Now he's looking to move finance personnel directly into field locations so they can be even closer to operations.
Penner — who says ThyssenKrupp Aerospace's revenue is "more than $200 million" — recently spoke with CFO.com about those machinations, getting through the recession, the top challenges confronting him, and more. An edited transcript of the interview follows.
CFOs who came up through the CPA route often have to manage around the fact that they don't have strong operations experience. For you it's the reverse. What has that been like?
As I've moved around, I think it's been an advantage to me that I've been more of an operating CFO. My relationships with the business units and the GMs have been pretty strong. I'm not talking debits and credits to them.
But I've worked in every facet of finance. I had a controller's job where I was responsible for the financial statements. I've been in estimating, cost management, treasury, and other subfunctions. I've taken opportunities to do a lot of different things with subcontract management, which was my initial experience with Boeing — understanding costs and working out agreements with subcontractors. That involved auditing their financial and reporting systems, seeing how they put together bids and prices, and understanding how different companies recapture costs and price their products. That was really invaluable experience.
As I progressed and was given more responsibility, I leaned on the accountants to make sure the books were right. I spent most of my time working with the GMs, making sure I would help grow revenue and at the same time ensuring through proper pricing and cost allocations that we were growing the bottom line, too. I still do that today. As we bid contracts, I make sure we get it right up front and have an opportunity to make money.
What does "getting it right" involve?
It means understanding exactly how you plan to execute the work. You have to understand the incremental costs, what resources are required, and [have] an idea of what price the market will bear.
How do you figure out what price is right?
A lot of it comes from feedback from the general managers on their talks with customers about related services they're paying for or contracts that they're recompeting. You get some type of market intelligence — sometimes you don't get a lot, but you take what you can get.
Some of the aircraft manufacturers have had high-profile delays in bringing out new models. Has that hurt your business in turn?
Overall, Boeing and Airbus have very strong production rates across most of their models. The order backlog has been quite strong. At the next level, where you've got Bombardier, which builds midsize regional jets, the backlog is pretty good as well. Some models, like the Airbus A380 and Boeing 787, are not quite up to the build rates that had been anticipated. Aerospace does go through its cycles. But with the more fuel-efficient aircraft models that both Airbus and Boeing are putting out, there's a lot of old, inefficient models out there that the airlines will be trying to retire.
But did the economic downturn affect you?
We had identified that reductions in volumes were coming. So we created an action plan for what kind of labor and nonlabor costs we were going to have to reduce. We provided a lot of different scenarios for the business units, with different alternatives within each classification of cost. Then when the time came and [the recession] became reality, we were able to just execute. It greatly minimized the impact on our bottom line.
We did have to cut back on employees, and we really reduced our temp staff, which was quite large at the time. With nonlabor costs, we basically put everything nonessential on hold. We cut out all travel, except going out to bid on new pieces of work. We also reduced a lot of our nonlabor costs in the warehouse, which were quite variable. We took a big chunk out of our costs — about 30%.
Reader Comments» Post a comment