The Face of MD Helicopters—Lynn Tilton in New Zealand

By Rob Neil.

Your Windows operating system has just crashed – again. Your frustration at having paid good money for your expensive software knows no bounds. “I know,” you think to yourself, “I’ll just email Bill Gates and ask him to fix the problem.” Yeah, right!

However, as Rob Neil discovered, if you owned an MD helicopter and suddenly found it AOG (aircraft on the ground), you really could go straight to the top and email Lynn Tilton, CEO and founder of a multi-billion conglomerate and ask her to get it sorted (take note, Bill!).

This degree of commitment from the matriarch of Patriarch (Patriarch Partners LLC – the global investment holding company headed by Tilton) is what has brought MD Helicopters—which the world had written off as being beyond help – back from beyond the grave.

In the short space of two years, and against the predictions of many doom-sayers and pessimists in the industry, MD’s resurrection has been so successful that not only is it once again producing great helicopters (and, more importantly, parts for them) but also, in a recent Aviation International customer satisfaction survey, MD came second behind only Bell Helicopters – and ahead of major players like Sikorsky and Eurocopter. Two years earlier, MD wasn’t even included in the survey!

How has Tilton brought MD back? With qualities like dedication, determination, commitment – and honesty and integrity, for a start! Tilton, who had no aerospace expertise or industry knowledge before buying MD, simply addressed the issues surrounding its collapse in the same way she addresses the obstacles that plague all of her businesses; she identified the problems and then looked for solutions. While this sounds too simplistic and obvious, as Tilton says, “Much of the aerospace industry works on the principle of ‘We do it this way because this is the way it has always been done.’ Although there have been major shifts in the dynamics of the global economy, industry players continue to expect that doing the same things they’ve always done will yield different results.” Tilton’s answer when she took over was simple: “I don’t know anything about helicopters or the helicopter industry – I do know about business. I’ll fix the business and find the right people to engineer, manufacture and upgrade the helicopters.”

Lynn Tilton’s business empire includes more than 70 different companies around the world. Her companies variously build such diverse products as fire-trucks, ambulances, cars, steel doors and water filtration systems. One of her companies is the world’s largest producer of denim fabric, and she owns companies in the health-care and technology fields.

Tilton buys broken companies. Unlike many others who do this, she doesn’t then strip them for quick profit and move on to the next “victim”. Instead, she rebuilds her broken companies to good health and keeps people in work. She has a strong social conscience and it is constantly at the forefront of her mind that more than 50,000 people rely on her business acumen for their livelihoods. “I’m sure as heck not in this for the money – if it was all about making money, I’d have retired long ago and be lying on a beach somewhere; it is about social responsibility.”

She acknowledges that MD Helicopters was the most broken company she’d ever bought when she put the first six million dollars on the table in June 2005 – to keep the banks from foreclosure long enough to close the transaction. The company’s doors were already shut and the business was being sold off piece by piece; the day she walked in, they were selling the spare parts business. One day later would have been too late – literally. She managed to retrieve the devastated spare parts business – she would not have wanted the company without it – and the restoration of the parts supply business to good health has since been a primary focus of her efforts.

Tilton is adamant that spare parts availability is fundamental to any successful aircraft producer’s business. She constantly checks MD’s global AOG situation, getting weekly reports and demanding answers from her people as to what is being done in each case. “I don’t see the point in producing helicopters if our customers can’t keep them in the air,” she says.

Failures in parts and service were the things that almost killed MD. Customers like the UK police who bought early MD902 helicopters (during MD’s previous ownership) initially regretted their decision, as their helicopters were grounded through lack of parts. It is one of Tilton’s greatest satisfactions that today, her once very negative UK police customers are now strongly supportive of the new MD and are thrilled to have stuck with their extremely capable MD902s. As evidence, Greater Manchester Police will take delivery of a new MD902 in December of this year.

At Heli-Tech this year, Tilton sat down with a group of her UK police and the European users group customers, all of whom described the current situation as “night and day” compared to the old MD and they told her they couldn’t be happier with service they’re now getting.

Thus far, Tilton has deliberately focussed on the parts supply issue at the expense of helicopter deliveries to ensure such a situation doesn’t develop again; she has a definite and, she believes, achievable goal to be consistently number one in customer service. She wishes that the US government had appreciated that commitment before awarding its LUH contract to Eurocopter’s UH-145 (EC-145) instead of MD’s MD902. The timing of the LUH contract was unfortunate for Tilton, occurring, as it did, just as she took over the reigns of an MD that many assumed to be in its death throes.

Interestingly, the US Army’s new UH-72 Lakota (EC/UH-145) has recently become the subject of some controversy as a result of its inability to perform as predicted in extreme hot and high conditions at some of its US bases – an issue that has come to light since the previously unforeseen need to install air conditioning units in the aircraft. One can’t help but compare this to the MD902 – which has the ability to carry its maximum payload in temperatures up to 40 degrees (ISA +25). An MD902 was recently displayed at the Dubai airshow prior to delivery to a Middle Eastern royal flight customer for use in a very hot desert environment.

Tilton poured $200 million into MD between July 2005 and February 2006 – losing money to get helicopter operators back in the air – before she realised that very little progress was being made. At the start, the men at the top were very much “aerospace guys”, who thought they knew better than she what needed to be done – entirely missing the point that such thinking was what got MD into its dire predicament. “While they might have known far more than I about helicopters, I know business,” says Tilton. “I used to find out they’d ignored things I’d told them to do; that’s not the way it’s done when you work for me!” Having said that, Tilton doesn’t want “yes men” around her: “I want people to feel free to tell me what they think; I want to be challenged. If I think they’re right, then we’ll do what they suggest, but when I make the ultimate decision and I set a direction – I expect them to go forward, even if they think I’m wrong. The only exception to the rule is if someone believes that what I ask compromises his or her integrity, which I would never want to do. If perceived, I would want that person to point that out to me.”

The early management malaise prompted the first of several management shake-ups and a decision by Tilton that she would have to become the “face” of a new MD if it was to gain the credibility it needed to survive.

It was a momentous decision for Tilton, who – despite her glamorous appearance and now public persona – is an inherently private person. Having previously eschewed the limelight throughout her career, she found herself the subject of intense scrutiny by both industry and media, which was – and remains – something she would prefer to avoid. However, she realised there wasn’t another person she could afford to take a chance on – the only person she was prepared to take a chance on was herself.

It is no “boast” for a person in Tilton’s position to say such a thing – it is simply a statement of fact. Nor was there any bravado or ego involved when she faced aerospace industry and aviation media detractors in 2006 and told them, “What you don’t realise is that while you only see me and what I do each day only in terms of your small industry, it is only a very small part of who I am and what I do each day. At the same time as I am here answering your questions, among other things, I have got a billion-dollar IPO in the market on the first Chinese media company platform where I am the largest shareholder and I am in the midst of raising a $1.2 billion investment fund using a financial structure for which I have been granted a US patent. You can say or write what you like, but if people are betting on you rather than betting on me, they’re making the wrong bet!”

As Tilton says today, “It’s very easy for those who don’t know me – don’t know who I am – to pass judgement upon me. But when I sit down with world leaders and global business leaders, I don’t have to put on a show for them; they know who I am and they don’t pass judgement. With them, my accomplishments – and truth – speak for themselves.

“That doesn’t mean I don’t make mistakes – but the difference between those who achieve greatness and those who give up is that those who achieve greatness learn from their mistakes and keep going – no matter how many body blows they must endure. Believe me, I take body blows every day. I don’t like it, but with each mistake and each beating, I learn, I get better, and I don’t let it stop me from doing that which has to be done.”

At HAI’s Heli Expo in 2006, Tilton described how she had been all but crucified for the sins of MD’s previous owners and managers—despite having honoured $44 million of their debts that she could easily and legally have avoided. However – and probably to the great disappointment of the nay-sayers – she didn’t throw her hands in the air and start crying. Instead, she gave honest answers to some difficult questions and complaints. She outlined her plans for the future and addressed the importance of parts and the supply chain. Not once did she offer “quick fix” solutions, but promised that the solutions – when implemented – would be solid and effective and would see MD helicopters back in the air.

At her 2006 HAI press conference, there was no “spin” nor promises that all would be well overnight (Tilton never prepares for press conferences and doesn’t work from a script – on the principle that if one tells the truth, a “script” is not required). “I’m probably going to need at least 18 months to two years before I can have a supply chain in place that will let me deliver 200 helicopters,” Tilton admitted at the time, “but it will happen.”

The loudest of the questioners and complainers at the 2006 Heli Expo seemed convinced that MD Helicopters’ small and quiet booth tucked away in a corner of the Dallas Convention Centre would be the company’s last public appearance. They would have been doubly disappointed at the obviously vital and resurgent MD that appeared at Heli Expo 2007, where it was announced that the company had a 90% improvement in AOG and that it would deliver 48 new helicopters that (financial) year.

In the event, the company delivered only 33 helicopters of the intended 48 as a result of continuing supply chain issues. However, this was not an MD-specific problem – it continues to be an industry-wide challenge as demand far outstrips suppliers’ ability to supply materials. Importantly, the 33 helicopters that MD produced were 33 more than the total it had hitherto produced since 2000, and it cannot be ignored that even Boeing is not immune from the supply difficulties, as evidenced by recent announcements of delays to its 787!

Tilton believes that the biggest problem facing all players in the industry – not just MD – is the compression in the supply chain in the face of exponentially increased demand. She says that it is the primary reason for massive backlogs across the board in the aerospace industry.

“Six or seven years ago, the world was totally different,” she says. “There was no money in China, India or the Middle East. Demand has increased exponentially as the buyer list has grown. And although we live in a global dynamic world, I remain amazed that many people in this industry still think we can do business the same way as years ago.

“If the problem is that we’ve lost capacity in the global supply chain at the same time as demand has increased, the obvious solution is that we must add capacity to the supply chain. How? By vertical integration – making parts on premises and partnering with suppliers in certain areas who can bring technical expertise to bear.”

This is exactly what Tilton is progressively doing. Rather than sticking with a single manufacturing facility and outsourcing everything (the industry “standard”), she utilises existing assets, such as her facilities in Grand Prairie, Texas, and Monterrey, Mexico, to produce structures and components “in-house”.

This year, MD already has orders for 80 helicopters – 65 single-engine machines and 15 MD902s. “If we could build 200 helicopters, I believe we could sell them,” she says, “but there’s no point if we can’t keep them all in the air, which is why I’ve been directing my focus at producing parts.” The result, which is important to Tilton, is that she has many more happy – existing – customers. Where once she received floods of emails from disgruntled customers, she now gets a similar number of expressions of gratitude from MD owners and operators. Parts are flowing; so much so that she now quotes a 92% fill rate for parts, with 78% available within 24 hours. In the cases of customers who still experience difficulties, she says they are usually the result of misunderstandings or simple mistakes, and she can usually resolve them quickly and they are not generally “supply” issues.

A good example of Tilton’s personal response to customer “issues” is that surrounding rotor blades. Dissatisfaction with availability (or lack thereof) and the quality of blades has frustrated MD500 owners for some time. Even as Pacific Wings interviewed Tilton, she was finalising a deal to add a new supplier. Multi-tasking seamlessly between speaking to me and answering her Blackberry, Tilton announced that MD had negotiated a deal to resume building the old Boeing/MD blades. She is hoping for certification of the new blades in January 2008, with production commencing in February. Furthermore, she says the new blades will be less expensive than existing blades – the price of which had already been scheduled for a substantial increase.

Every top position at MD has changed since Tilton bought the company. Current COO (Chief Operating Officer) is Craig Kitchen, who came to MD around three months ago from the Eagle Pitcher/Allied Signal companies. Brian Ballard is the new CFO (Chief Financial Officer) and he came to MD through Patriarch from the Mormon Group, having been a highly capable CFO in the trucking industry. David Haines left Sikorsky to join MD as head of Customer Service, while Bob Caldwell—the new Vice President, Sales and Marketing, and a one-time Army helicopter pilot – came from American Eurocopter. Tilton is more than satisfied with her current team who, she feels confident, all share her vision for MD and a desire to see it excel.

And what of Lynn Tilton personally? Does she have any regrets about entering the dog-eat-dog aerospace industry? “No! I don’t regret anything. I don’t live my life that way. Everything that’s happened to me, each experience, has made me what I am and has helped teach me about dealing with what will come in future.”

Would she buy MD again if she had her time over? “Certainly. I might do one or two things differently, but I truly believe that MD is part of my destiny.”

Does she think there is resentment at a woman succeeding in a largely male dominated industry? “You know, I’ve heard people say that, but honestly, I don’t notice – and I don’t care. I am who I am, and business has nothing to do with gender. There were similar questions about me on Wall Street – being the only female CEO of a large private equity firm. Frankly, I see being a woman as a major advantage, because it means I have no ego!

“What’s more, I think a big problem with the helicopter industry – as it is with most ‘boys’ toys’ industries – is that for boys, the toys become the focus and not the business. It takes business people to run businesses, not enthusiasts.”

I asked Tilton why it seemed as if some people wanted her to fail. “I believe that if MD failed, it would justify people’s positions in continuing to do things the way they’ve done them before. MD’s success based on newly paved paths would challenge the industry norms. MD failure would also vindicate much larger companies like Boeing or Sikorsky for their decisions not to buy MD when they had the chance, and it would validate the choices of those who left the company saying it wasn’t going to come back.

“In any case,” she adds, “I see it as a bonus that people are betting against me. If everyone was saying ‘Lynn Tilton – Superwoman: she’s going to save MD,’ it would be too much pressure.”

Since purchasing MD, Tilton has been forced to spend a big percentage of her valuable time at the tactical level in MD instead of focussing on vision and strategic thinking for Patriarch. Has this had an impact? “Of course; however, less so at Patriarch’s existing companies,” she said. “I have management teams who deal with our existing companies and whose collective talent leads them towards success and profitability. However, before I bought MD, I typically purchased 20 companies a year; last year, I acquired two.”

Tilton is someone for whom time is so valuable that she can count the cost of each minute. For someone who works between 18 and 20 hours each day, seven days a week and who – before her very brief visit to New Zealand—had not had a “day off” in over seven years, her Gulfstream G200 and her own MD902 helicopter are essential business tools that allow her to maximise every second of her time when she travels, which she frequently does.

Tilton admits that she (and Patriarch Partners) and MD Helicopters are inextricably linked for evermore – much the same way as Texas Pacific Group’s fortunes will forever be linked with Continental Airlines, and she will always have to live with the outcome of MD. If you Google Tilton, the results will all relate to her part in MD. Because of this, while she doesn’t seek the spotlight, she accepts that for MD to succeed, it is important for her to be the “face” of MD Helicopters. As she says, “Had I not lent my reputation to this company, no one would ever have believed in its future.

“It is something I can never walk from,” she says. “I can never go back to my previous world without a successful MD behind me because no other investor will ever sit down and not ask me about MD.”

When the CEO of one of MD’s major OEMs recently approached Tilton offering to buy the company, she refused because, “People would forever view it as a failure. Besides,” she added, “you have to be here for the journey. If you embrace challenges only for the ecstasy of the outcome, you will always be sorely disappointed because the outcome of all things is but a fleeting moment; in the end, the journey is all-important.”

Tilton is the first to acknowledge that MD Helicopters still has a long way to go on its journey to full recovery. However, the “patient” is no longer on last-ditch life support in the emergency room as it was in July 2005. It has left the intensive care unit and is already well on the way out the door of the recovery ward.