September 30, 2010 / 9:45 AM / 8 years ago

Rolls-Royce CEO to retire

LONDON (Reuters) - Aircraft engine maker Rolls-Royce (RR.L) said Chief Executive John Rose would retire next year after 14 years at the helm, to be replaced by John Rishton, the head of Dutch retailer Ahold AHLN.AS.

A Boeing 787 Dreamliner aircraft flies past the Union flag as it makes a salute to its engine makers Rolls-Royce in Derby, July 20, 2010. REUTERS/Darren Staples

Rishton, a former British Airways BAY.L finance director, is due to take the reins at the end of March 2011 when he will have to address problems with some Rolls engines and the aftermath of cuts to the defence budget.

“John (Rishton) has a proven track record as a Chief Executive of a global company and has a background in aerospace and manufacturing,” Rolls Chairman Simon Robertson said on Thursday.

Before joining Ahold in 2006, Rishton was BA’s Chief Financial Officer for four years, having previously been the head of finance for its U.S. division, but left the airline in 2005 after losing out to Willie Walsh for the top job.

Rishton, who has also held senior positions at Ford Motor Company F_ps.N, has been a non-executive director of Rolls-Royce since 2007 and chairs its audit committee.

Shares in Rolls were 0.5 percent down at 609.5 pence by 9:30 a.m. British time, valuing the company at around 11 billion pounds.

“I see this as a pretty safe choice because they have chosen a guy who was already on the board to ensure continuity. I see no strategy change,” said Societe Generale analyst Zafar Khan.

“Rishton has worked at BA — one of Rolls’ biggest customers — so he has seen the business from the customer side.”

The outlook for global defence spending is mired in doom and gloom as governments look to cut costs to rein in spiralling budget deficits.

Defence budgets in Europe will be stagnant at best over the coming years, with many likely to fall sharply, while the U.S. will be more conservative in its future spending.

Rishton’s experience of helping former BA boss Rod Eddington during his cost cutting-focussed turnaround of the airline will likely prove invaluable as Rolls looks to cope with the impact of cuts to global defence procurement programmes.

Rolls is also struggling with problems on its commercial and defence aircraft engines.

U.S. planemaker Boeing Co (BA.N) last month said it had pushed back delivery of its first 787 Dreamliner after the Rolls engine, a Trent 1000, blew up at a test site in Derby, central England, forcing the company to temporarily close the facility.

This week General Electric Co (GE.N) and Rolls said one of the F136 engines they are developing for the F-35 Joint Strike Fighter was damaged during testing on September 23.

News of the incident comes as lawmakers debate whether to

ignore the threat of a White House veto and continue funding the GE-Rolls engine in fiscal 2011.

Rolls said Rishton would earn an annual salary of 850,000 pounds and an annual bonus worth up to 155 percent of base pay.

Outgoing CEO Rose joined Rolls-Royce in 1984, became a board member in 1993 and was appointed Chief Executive in 1996.

Additional reporting by Mark Potter; editing by David Hulmes

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