Rolls-Royce Pushes Focus on Singapore: Regional Director Jonathan Asherson discusses why the company is investing in Singapore

Boss Talk Asia -   September 15, 2013, 12:48 p.m. ET 

By GAURAV RAGHUVANSHI

The Wall Street Journal

Roll-Royce PLC, the British aircraft and marine-engines maker, has had a bumpy ride in Asia in recent years.

In 2010, faulty parts in engines supplied by Rolls-Royce caused a Qantas Airways Ltd. flight to make an emergency landing in Singapore. No one was injured, and Rolls Royce says it has learned from its mistake, but the event damaged the company's reputation in the region.

Last year, the company found itself in hot water again when the U.K.'s Serious Fraud Office alleged corruption by company officials in Indonesia and China. An internal investigation "identified matters of concern in these, and in other overseas markets," Rolls-Royce said. It is now waiting for the SFO to announce its findings on the investigation.

Elsewhere, Rolls-Royce is trying to shift attention to its $550 million plant in Singapore where it has started assembling engines for the A380 long-haul jets manufactured by Airbus. Air travel demand has surged, pushing Rolls-Royce to expand the Singapore facility and establish academic collaborations to build a stronger local talent pool.

Jonathan Asherson, Rolls-Royce's regional director for Southeast Asia and the Pacific, told The Wall Street Journal about how the company is handling the U.K. investigation and why it is investing in Singapore. Edited excerpts:

WSJ: What's the latest in the Serious Fraud Office probe against Rolls-Royce?

Mr. Asherson: In December, we disclosed matters of concern to the SFO relating to the use of intermediaries in certain overseas markets. This followed a request for information from the SFO about allegations of malpractice in Indonesia and China. The SFO will decide what, if any, further action will be taken.

In recent years, we have significantly strengthened our compliance procedures, including new policies for global ethics and intermediaries.

WSJ: Has the issue of the Qantas A380 engine incident been resolved? What lessons did the company learn from the incident?

Mr. Asherson: Rolls-Royce supports the findings of the Australian Transport Safety Bureau report on the incident. It was a very serious and rare event which we very much regret.

What is important, as the ATSB's report acknowledges, is that we have applied the lessons learned throughout our manufacturing and quality assurance procedures to prevent this type of event from happening again.

Today, the Trent 900 remains the most reliable engine on the A380.

WSJ: How important is the Asian market for Rolls-Royce?

Mr. Asherson: Asia is still and will be for the next 20 years the fastest-growing market for all our sectors. We have an order book that represents six to seven years of revenue and an increasing proportion of that is from Asia and the Middle East. It's heading toward 50%. Over the next 20 years, 45% of the revenues would be from Asia and Middle East. That will be the biggest market.

WSJ: Why did you invest in a Singapore engine plant when there are no aircraft manufacturers there. Doesn't that produce a logistics challenge?

Mr. Asherson: Logistics is obviously a part of the equation and is a bit different in different places.

We think that the focus in Asia, from an education and training perspective, will continue to be in areas of technology and engineering. The talent pipeline that we need as an industry and company will remain solid.

Getting closer to the customer is the biggest reason why we're in Asia in the first place—to invest and be more embedded—and we are taking additional steps in that direction.

WSJ: But why invest in an aircraft engine plant at all in Asia?

Mr. Asherson: We think that the focus in Asia, from an education and training perspective, will continue to be in areas of technology and engineering. The talent pipeline that we need as an industry and company will remain solid. That will influence the thinking around our investments. You need to develop technologies and business models that adapt to increasing pressure on costs, increasing pressure on reliability and the environment.

Getting closer to the customer is the biggest reason why we're in Asia in the first place.

WSJ: Why did you decide to partner with Singapore Airlines?

Mr. Asherson: Singapore Airlines  has about 130 aircraft on order with our engines. We have 80% of the Singapore fleet. The airline is highly competent, technically, and wants to be engaged with their important suppliers. It's not just the scale of the customer, it's the kind of customer.

WSJ: You've invested heavily in Singapore, but doesn't its small population leave the talent pool rather shallow?

Mr. Asherson: I think shallow is what it isn't. I would say it's quite deep but it's very focused. Singapore has focused on aerospace as a part of the strategic buildup of both manufacturing and services as a contribution to the GDP.

We've worked with government agencies around developing work skills, qualifications, and developing curricula for the polytechnics and universities, where we work with them to predict the requirement and work on how that pipeline of talent can be built. Singapore is quite flexible and nimble where they see the high multiplier effect of, for example, high-value-added manufacturing.

Résumé

Education: Bachelor's degree in mechanical engineering from Kingston University

Career: Joined Rolls-Royce as regional executive in Malaysia in 1999. Previously spent 15 years with Siemens AG in various roles. Came to Singapore as regional director in 1999 and now covers the Southeast Asia and the Pacific region for Rolls-Royce.

Extracurricular: Art, skiing, scuba diving  and golf

Corrections & Amplifications

The A380 long-haul jet is manufactured by Airbus. An earlier version of this article incorrectly said Airbus makes the Dreamliner jet, which is manufactured by Boeing.

Source:   http://online.wsj.com