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New Northrop Grumman CEO Wesley Bush shows why he got the job

AEROSPACE

His decision to move the firm's headquarters from Los Angeles to Washington, D.C., indicates that he is gunning to make Northrop the nation's leading defense contractor, analysts say.

January 07, 2010|By W.J. Hennigan
  • Wesley G. Bush speaks at the opening ceremony for Northrop Grumman's radar test facility in Linthicum, Md.
Wesley G. Bush speaks at the opening ceremony for Northrop Grumman's… (Dennis Drenner / Bloomberg…)

It didn't take very long for Wesley G. Bush, Northrop Grumman Corp.'s new chief executive, to make his mark.

On his very first day on the job, Bush announced that he was uprooting the company's headquarters from Los Angeles -- where it has been since its founding in 1939 -- and relocating it to the Washington, D.C., area. The move, he said, was made to bring the nation's second-largest defense contractor closer to its key customer: the U.S. government.

But the timing of the stunning announcement also sent a decisive message to the company's top brass that under Bush's new leadership it would no longer be business as usual, analysts said.

"In making a decision like this, he's looking to change the culture at Northrop," said James McAleese, a lawyer in McLean, Va., who specializes in military contracts.

"I believe the shift is a sign that he's looking to cut the dead weight and infuse the company with new blood. . . . People who don't live up to or exceed expectations won't be making the move."

Northrop said Monday that it was moving its corporate office in Century City, where about 300 people work. But the bulk of its workforce of 27,000 employees in the Southland will not be affected, the company said. Northrop develops and makes an array of military hardware, including unmanned aircraft, satellites and nuclear submarines.

McAleese, who has consulted for Northrop on several transactions, said the company has had problems demonstrating to Wall Street that it could win contracts and guarantee healthy profitability. As a former chief financial officer at Northrop, Bush is mindful of this, McAleese said.

Peter Arment, an analyst with equity research firm Broadpoint AmTech Inc. in Greenwich, Conn., said that Northrop's shares had historically sold at a discount relative to its peers'.

"It is perceived that the company's competitors have stronger ties within government," Arment said. "The move could perhaps change that perception."

Although not much is known about Bush, a baby-faced 48-year-old, analysts say he is an observant businessman who is gunning to make Northrop the nation's leading defense contractor.

"The man has an engaging demeanor, but believe me, underneath that surface he's as tough as nails," said Loren Thompson, a defense policy analyst for the Lexington Institute in Virginia.

Take, for example, his first action as chief executive. Bush's predecessors, Kent Kresa and Ronald D. Sugar, had deep roots in Southern California. Both resisted efforts to relocate to the nation's capital, despite the advantages of doing so, Thompson said.

"Wes Bush isn't sentimental like that," he said. "If his key customers were Eskimos, he would move the corporate headquarters to Nome."

Defense rivals Lockheed Martin Corp. and General Dynamics Corp. both moved their headquarters from Southern California to the Washington area.

Bush, whose rise to power at Northrop is nothing short of meteoric, declined requests for an interview.

After earning undergraduate and master's degrees in electrical engineering from the Massachusetts Institute of Technology, Bush joined TRW Inc.'s space technology operations as a systems engineer in Redondo Beach in 1987.

By 1999, Bush, who was then barely 35, was running TRW's high-profile, multibillion-dollar military satellite program. Two years later, he was promoted to president and chief executive of TRW's aeronautical systems unit in Britain.

Simon Ramo, the 96-year-old co-founder of TRW, said he recognized Bush's talent immediately.

"He was seen as being so outstanding very early in his career," Ramo said. "His analytical mind and ability to think broadly about business really won everyone over."

After Northrop bought TRW in 2002, Bush became the youngest senior executive at Northrop when he was named to head its Redondo Beach division. He also held key jobs as chief financial officer and president of the company's space division before being named Northrop's president in 2006 and chief operating officer in 2007.

Ramo, who still meets regularly with Bush for lunch, said that by moving closer to the nation's capital Bush would be able to be a "little bit more conspicuous" to government department heads and politicians, who hold the government's purse strings.

"It's a lot easier to do business with somebody who works down the street," Ramo said.

Without question, Bush faces a challenging environment. In the years after the Sept. 11, 2001, terrorist attacks, defense contractors experienced double-digit growth in the Pentagon budget.

But last year the Pentagon announced that it was shifting gears, saying there would be a slowdown in spending on military hardware, such as fighter jets and warships. After nearly a decade of growth, Northrop -- like other defense firms -- is facing significant turbulence.

"The government cutback is going to be difficult to navigate," said Paul H. Nisbet, a veteran aerospace analyst with JSA Research Inc. "The company has to try to grow in whatever direction they can."

william.hennigan@

latimes.com

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