CEO Communications

Agenda Setting Conference, Zurich, Dec 4, 2008

Eckhard Zanger, MTU Aero Engines, SVP Communications and IR

8. Oktober 2007 2

The product: turbofan engine

HPC

high-pressurecompressor

HPT

high-pressureturbine

LPT

low-pressureturbine

combustor

Fan

LPC

low-pressurecompressor

8. Oktober 2007 3

The commercial product application range

PW4000 Growth GP7000 CF6 PW2000 V2500

JT8D PW500PW300PW6000

Airbus A319,A320, A321,Boeing MD-90

Boeing 757, Boeing C-17,(milit.: F117)

Airbus A380 Airbus A300, A310, A330,Boeing 747, 767,MD-11

Boeing 777

Boeing MD-80-Series

Cessna Bravo,Cessna Excel

Learjet 60, Do328JET, Gulfstream G200, Hawker 1000,Dassault Falcon 7X, Cessna Sovereign

Airbus A318

8. Oktober 2007 4

The military product application range

GP7000

F/A-18 Hornet

Sikorsky CH53-G

PAH-1EurocopterTiger

TransallBreguet Atlantic

TP400-D6 Tyne T64 MTR390 250-C20

Alpha JetPanavia Tornado F4-Phantom IIEurofighterTyphoon

EJ200 RB199 J79 Larzac04F414 / F404

Airbus A400M

8. Oktober 2007 5

Cooperation structures in the aero engines industry

8. Oktober 2007 6

MTU Aero Engines

• German Mid-Cap Company

• Revenues: 2.6 bn €

• Employees: 7,500

• CEO: Egon Behle

• Prior positions at ZF Lenksysteme GmbH, ZF

Friedrichshafen AG, Fortuna Spezialmaschinen GmbH,

Renk AG, Dornier GmbH and Robert Bosch GmbH

• Studies in Aerospace Engineering at Stuttgart University

8. Oktober 2007 7

9,94%

11,54%

13,63%

12,58%

13,66%14,04%

2002 2003 2004 2005 2006 20078%

10%

12%

14%

16%

Personalisation (CEO)

CEOs occupy a bigger slice of reporting

The growing personalisation of business coverage – as shown in the example of German DAX 30 blue chip companies – is part of bigger general trend. One cause is the increasing competition between media outlets.

100%= all reports about DAX 30 companies and board members

8. Oktober 2007 8

1,14% 0,9% 1,04% 0,99%

1,37% 1,51%

0,65% 0,56% 0,27% 0,18% 0,18% 0,15%

4,64%4,14%

4,95%

7,24%7,58%

9,63%

2002 2003 2004 2005 2006 2007

0%

2%

4%

6%

8%

10%

12%

Position Capability Personality

Management turnover accelerates

Reporting about management changes has increased notably over the last years, while references to the capabilities of top managers declined. Rumours about impending resignations are becoming more often self-fulfilling prophecies.

100%= all reports about DAX 30 CEOs, missing to 100%: corporate issues

8. Oktober 2007 9

20022003

20042005

20062007

0%

10%

20%

30%

40%

-10%

-20%

Personality Capabilities

Integrity of CEOs gets questioned

more positive

more negative

While positive reports about top executives have been the rule in the first years of the decade, the scandals of the new economy period have affected the media image of the personal integrity of top managers – with a marked effect on the public trust.

Share of positive – share of negative reports

8. Oktober 2007 10

II/03III/03

IV/03I/04

II/04III/04

IV/04I/05

II/05III/05

IV/05I/06

II/06III/06

IV/06I/07

II/07

0%

10%

20%

30%

40%

-10%

-20%

-30%

-40%

-50%

CEO DC

Communication generates opportunities

more positive

morenegative

The coverage of DC demonstrates how a CEO loses his operative freedom when he comes under continuous attack from the media. Successful communications, on the other hand, can improve the outlook, even when the problems have not yet been tackled.

Share of positive – share of negative reports on Jürgen Schrempp (till 31.12.2005) /Dieter Zetsche (since 1.1.2006) versus DaimlerChrysler

Image Malus

Image Bonus

8. Oktober 2007 11

II/03III/03

IV/03I/04

II/04III/04

IV/04I/05

II/05III/05

IV/05I/06

II/06III/06

IV/06I/07

II/07

0%

10%

20%

-10%

-20%

-30%

-40%

-50%

-60%

CEO Siemens

Overwhelmed by the events

more positive

The example of Siemens shows the key role of communications for the protection of the image of the CEO. Already in January 2006, Klaus Kleinfeld was rated worse than the company, before being engulfed by the corruption scandal in September.

Share of positive – share of negative reports on Heinrich von Pierer (till 31.12.2004) /Klaus Kleinfeld (since 1.1.2005) versus Siemens

morenegative

8. Oktober 2007 12

II/03III/03

IV/03I/04

II/04III/04

IV/04I/05

II/05III/05

IV/05I/06

II/06III/06

IV/06I/07

II/07

0%

20%

40%

-20%

-40%

-60%

CEO Deutsche börse

Management remained an image drawback

more positive

more negative

The communication of Deutsche Börse did not manage to transfer the operative success of the business into a favourable reputation for the CEO. This holds true for Werner Seifert as well as for his successor Reto Francioni.

Share of positive – share of negative reports on Werner Seifert (until 10.05.2005) /Reto Francioni (since 1.11.2005) versus Deutsche Börse

8. Oktober 2007 13

II/04

I/04

IV/03

III/03

II/03

I/03

IV/02

,4

,2

0,0

-,2

-,4

Fachkompetenz

Person

Entlohnung

After wages, competency was critizised

Basis: stories in 23 weekly media, TV-news and dailies

Competency

Personality

Salaries

8. Oktober 2007 14

0%

20%

40%

60%

80%

100%

Change of the company‘s public identity

The change of the CEO for MTU was a distinctive conjunction of the public image of managers in 2008. While Stark having drawn positive and partly also negative statements upon himself, Egon Behle is portrayed particularly factually.

0

200

400

600

800

1.000

Stark Behle

negative no clear rating positiveVolume of coverage / statements

8. Oktober 2007 15

Stark, Udo

Winkler, Reiner

Behle, Egon

Martens, Rainer

Kessler, Bernd

Huth, Johannes

Eberhardt, Klaus

Wittig, Sigmar

Steffens, Klaus

Flassbeck, Harald

Fröhlich, Babette

Keller, Michael

0 200 400 600 800 1.000 1.200 1.400

Stark, Udo

Winkler, Reiner

Behle, Egon

Martens, Rainer

Kessler, Bernd

Huth, Johannes

Eberhardt, Klaus

Wittig, Sigmar

Steffens, Klaus

Flassbeck, Harald

Fröhlich, Babette

Keller, Michael

0% 20% 40% 60% 80% 100%

Only Stark had a distinctive coverage in 2007

The managers of MTU were normally portrayed outstandingly neutrally and factually in the media.

2007

negative no clear rating positiveVolume of coverage / statements

8. Oktober 2007 16

Behle, Egon

Stark, Udo

Winkler, Reiner

Martens, Rainer

Huth, Johannes

Hughes, Louis

Steffens, Klaus

Sroka, Günther

Eberhardt, Klaus

0 200 400 600 800 1.000 1.200

Behle, Egon

Stark, Udo

Winkler, Reiner

Martens, Rainer

Huth, Johannes

Hughes, Louis

Steffens, Klaus

Sroka, Günther

Eberhardt, Klaus

0% 20% 40% 60% 80% 100%

Behle and Stark neutral after the change of leadership

The manager image of MTU changed rapidly after January 2008. All top-managers, including the old and the new CEO, were almost exclusively portrayed neutrally in the media.

2008

negative no clear rating positiveVolume of coverage / statements

Position within company

Carreer

Prognosis

Business results

Personal finances

Turnover

Demand

Locational policy

State of business

Other aspect

Private life

State of the industry

Growth

Cooperations

IPO

0 50 100 150 200 250 300

Position within company

Carreer

Prognosis

Business results

Personal finances

Turnover

Demand

Locational policy

State of business

Other aspect

Private life

State of the industry

Growth

Cooperations

IPO

0% 20% 40% 60% 80% 100%

8. Oktober 2007 17

Unexpected parting well configured

Stark’s decision not to prolong his contract came unexpected for the media in 2007. In the course of this management change, the communication was mainly targeted towards pointing out Starks business successes.

negative no clear rating positiveVolume of coverage / statements

53,8%

8,3%

37,9%

Stark, Udo Behle, Egon Other managers

Stark, Udo

Behle, Egon

Other Managers

0% 20% 40% 60% 80% 100%

negativ o. eind. Wertung positiv

8. Oktober 2007 18

Upcoming parting didn‘t weaken Stark

Regardless of communicating Stark’s departure at the end of the year fairly early, MTU managed to avoid having the media set its focus on the successor too early. The image of the company was thus embossed by Stark until the official change of office.

Position within company

Carreer

Cost management

Prognosis

Economic framework

Competency

Currency rates

Cost savings

Dealing with media

Compensation

Redundancies

Growth

Production: Factory

Private life

Costs

0 10 20 30 40 50

Position within company

Carreer

Cost management

Prognosis

Economic framework

Competency

Currency rates

Cost savings

Dealing with media

Compensation

Redundancies

Growth

Production: Factory

Private life

Costs

0% 20% 40% 60% 80% 100%

8. Oktober 2007 19

Getting to know the new CEO was the main issue in the first quarter

The leading nationwide German media mentioned Behle only four times between 2005 and 2007 in his former function as the CEO of ZF-Lenksysteme. Therefore, in the first quarter of 2008, getting to know the new manager dominated the coverage.

negative no clear rating positiveVolume of coverage / statements

Emissions, CO2

Acquisitions

Locational policy

Cost savings

Currency rates

Cost management

Production process

Rel. to busin. partners

Rel. to suppliers

Economical framework

Costs

ROI

Carreer

Turnover

Share holders meeting

Redundancies

Demand

0 5 10 15 20 25

Emissions, CO2

Acquisitions

Locational policy

Cost savings

Currency rates

Cost management

Production process

Rel. to busin. partners

Rel. to suppliers

Economical framework

Costs

ROI

Carreer

Turnover

Share holders meeting

Redundancies

Demand

0% 20% 40% 60% 80% 100%

8. Oktober 2007 20

Factual topics took over in the second quarter

After the short phase of getting to know the new CEO was over, the public profile of Behle concentrated almost exclusively on factual topics. The public got to know him as a technically and economically competent man of action.

negative no clear rating positiveVolume of coverage / statements

8. Oktober 2007 21

CEO Change – Activities at MTU

Media positioning:

• 8 weeks after arrival: clear and open background briefing with top 12 journalists (newswires, business and financial media, trade press)

• resulted in portraits and positive ongoing media coverage

• Interviews with major business / financial dailies and trade magazines

Other than media:

• Welcome speech and discussion with 1,000 employees in week 2

• Internal “Road show” at five other MTU locations worldwide

• Two dozen meetings with relevant top politicians

• Investor and analyst road shows in Europe and the U.S.

8. Oktober 2007 22

Conclusions

1. Personalization of business topics has increased

►In the past, coverage was fact-driven and less demanding for the CEO

►Today, positioning of CEOs has to be story-driven to support the company perception

2. Public appearance of CEO must be as authentic as possible and as necessary

3. “The higher they rise, the deeper they fall” - media presence must be limited and well-balanced

4. Focus on business topics – CEO is the representative of his organization

5. Set your own agenda – don‘t believe you have to react and comment on everything

6. Celebrity status damages the CEO‘s reputation, sooner or later

7. Don’t concentrate on one singular topic or image aspect - if this one fails, all is lost

8. CEO change: the stories about the outgoing and the incoming CEO have to match