Elliott Wins: Klaus Kleinfeld Steps Down As Arconic CEO After Showing "Poor Judgment"

Tyler Durden's picture

Paul Singer, whose Elliott Management has been waging a proxy fight with Alcoa spinoff Arconic, demanding CEO replacement, just achieved a key victory when moments ago the company announced that CEO Klaus Kleinfed has stepped down. According to the press release, the departure took place under odd terms, with Kleinfeld stepping down as Chair and CEO "by mutual agreement after the Board learned that, without consultation with or authorization by the Board, he had sent a letter directly to a senior officer of Elliott Management that the Board determined showed poor judgment."

The release adds that this decision was not made in response to the proxy fight or Elliott Management’s criticisms of the Company’s strategy, leadership or performance and is not in any way related to the financials or records of the Company.

Arconic also hopes that with Kleinfeld's odd departure, the proxy fight waged by Arconis is now over:

Elliott Management’s central objective – a CEO change – has been realized at Arconic. With the completion of Arconic’s transformative separation transaction last November, the substantial refreshment of its Board composition with seven of its twelve directors having joined the Board since the beginning of last year, and now the departure of Mr. Kleinfeld as CEO and Chair of the Board, it is clear that the Company has recently undergone a tremendous amount of change. It is Elliott Management's decision whether to continue to burden Arconic and its shareholders with its highly disruptive and distracting proxy fight, or to support Arconic in facilitating an effective CEO search and a strong transition.

While the stock is up nearly $2 on the news, we doubt that it will be enough to satisfy Elliott, which will surely demand more changes from the company (as laid out in the hedge fund's massive, 336-page presentation laying out its vision for a "New Arconic") especially now that major changes for the aluminum industry may be imminent in light of the previously discussed imminent liquidity crunch facing China's, and the world's biggest aluminum producer, China Hongqiao Group.

Full press release below:

Klaus Kleinfeld Steps Down as Chair and CEO of Arconic

 

Arconic today announced that Klaus Kleinfeld, by mutual agreement with the Arconic Board of Directors, has stepped down as Chair and Chief Executive Officer of Arconic and has resigned as a Board member.

 

David P. Hess, a current Board member, has been appointed as Interim CEO of Arconic and will remain on the Board. Mr. Hess has decades of experience in leading aerospace and industrial businesses. Patricia F. Russo, Arconic’s current Lead Director, has been appointed as Interim Chair of the Board. Ms. Russo has served on the Board since 2008 and has been serving as Lead Director since 2015.

 

“The Board is focused on hiring a world-class CEO to lead Arconic into its next chapter. We are focused on ensuring a smooth leadership transition for our customers, employees and many stakeholders,” said Ms. Russo. “The Board is deeply grateful to Klaus Kleinfeld for his dedication and service as Chair and CEO of Arconic, and previously of Alcoa Inc., and appreciates his assistance with this transition. Klaus led a complex and highly successful transformation of Alcoa Inc. that culminated in the launch of two strong, standalone companies – Alcoa Corporation and Arconic. Today,  Arconic is a leading advanced manufacturer of highly engineered products with strong market positions.”

 

Mr. Kleinfeld said, “I have had the honor and the privilege of working with so many talented and dedicated colleagues at Alcoa Inc. and now at Arconic. Together we have accomplished a lot. Today, Arconic is well positioned for the next phase. I am committed to supporting David and the Board through this transition phase.”

 

Ms. Russo continued, “We are fortunate to have a proven leader of David Hess’ caliber to step into the CEO role on an interim basis while the Board conducts its search process for a permanent CEO. We are confident that David’s abilities and experience will ensure a smooth transition for the benefit of all of our stakeholders.”

 

Mr. Hess said, “I look forward to working closely with the Board, senior leadership team and our dedicated and hard-working employees. Klaus and the Arconic team have built a great company and over the coming months my focus will be on continuing to serve our customers seamlessly, and deliver for our shareholders.”

 

Mr. Kleinfeld stepped down as Chair and CEO by mutual agreement after the Board learned that, without consultation with or authorization by the Board, he had sent a letter directly to a senior officer of Elliott Management that the Board determined showed poor judgment.

 

Importantly, this decision was not made in response to the proxy fight or Elliott Management’s criticisms of the Company’s strategy, leadership or performance and is not in any way related to the financials or records of the Company. The Board continues to believe that under Mr. Kleinfeld’s leadership, the Company successfully executed a transformative vision and improved business performance amid a complex market environment, and the Board reaffirms the strategy developed under Mr. Kleinfeld’s leadership and shared with our investors, customers and employees.

 

Elliott Management’s central objective – a CEO change – has been realized at Arconic. With the completion of Arconic’s transformative separation transaction last November, the substantial refreshment of its Board composition with seven of its twelve directors having joined the Board since the beginning of last year, and now the departure of Mr. Kleinfeld as CEO and Chair of the Board, it is clear that the Company has recently undergone a tremendous amount of change. It is Elliott Management's decision whether to continue to burden Arconic and its shareholders with its highly disruptive and distracting proxy fight, or to support Arconic in facilitating an effective CEO search and a strong transition.

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docloxvio's picture

Great 'Jetsons' commercial anyway.

ThanksIwillHaveAnother's picture

Roll 'em, Break 'em down.  Rinse, Repeat.   All enabled by FED Phoney Money.

humptyhump's picture

Is this an article or an Arconic press release?