Rolls-Royce needs PR rethink to protect brand
LONDON (Reuters) - Rolls-Royce (RR.L) has found out the hard way it needs to communicate through the media and even social networks after a recent engine blowout showed its tight-lipped approach to business was well out of date.
Rolls was criticised for its muted public response after one of its Trent 900 engines failed mid-flight on a fully-laden Qantas Airbus (EAD.PA) A380, forcing the aircraft to make an emergency landing last month.
Some commentators say its decision to ration information betrayed an aloof approach which backfired and did nothing to allay public safety fears or calm shareholder nerves.
"We knew what was happening but a little more information would not have hurt," said one Rolls investor, who asked not to be named.
Jonathan Hemus, the founder of British crisis management consultancy Insignia, said Rolls, which released just three short statements on the incident, should have communicated better with consumers.
"It is all very well keeping your priority stakeholders posted but when you have members of the public wondering if it is a Rolls engine on the wing of the plane they are in I think it is in their interests to be told what is happening," said Hemus.
Rolls seldom courts publicity and its outgoing chief executive of 15 years, John Rose, is famously reticent with the media and rarely gives interviews.
Qantas CEO Alan Joyce took advantage of Rolls' relative silence and drove the media agenda by talking to the press on a daily basis, laying the blame firmly at Rolls' door.
"Rolls basically ceded control of their communications and reputation to Qantas and that spooked investors who were left wondering who was in control," said Andrew Bruce Smith, the founder of digital communications consultancy, escherman.
British oil major BP (BP.L), like Rolls, was criticised for its response to a media storm after its own crisis -- the Gulf of Mexico oil spill -- but it is already starting to recover.
Its shares have risen 49 percent since their low on June 25 and it has since shaken up its communications team.
Insignia's Hemus said part of Rolls' problem was that it sells products to companies rather than individuals and was not used to communicating with the public.
"Its methods may work in the good times but it made them a hostage to fortune in a crisis situation," said Hemus.
"In a crisis it is always better for a company to communicate often. Rolls needed to be more expansive, open and clear and communicate with a human tone rather than putting out a few bland, technical sounding statements."
A Rolls-Royce spokesman told Reuters: "We have been careful throughout this investigation to stick to the facts and maintain our focus on returning the whole fleet to service."
SOCIAL MEDIA MISS?
Communications professionals say the use of online social media tools, such as Twitter, would likely have helped Rolls disseminate information to the public and the press.
"News on the incident moved online through social networks but Rolls had zero engagement online," said escherman's Smith.
"There is no question channels like Twitter could have been used by Rolls to help. You just need to look at the 'Dell Hell' case to see what can be done with active social network use."
In 2005 U.S. personal computer maker Dell DELL.O suffered a huge blow to its brand image after a popular technology blog repeatedly criticised its products and customer support.
However, Dell invested significant time and money in social media, overcoming much of the negative press, and now actively uses social networks to generate sales and build its reputation.
Rolls' attitude to social media contrasts with that of planemaker Boeing (BA.N) which sent out several twitter messages outlining problems that caused an electrical fire during a test flight of its new 787 Dreamliner earlier this month.
Rolls has kept mum in previous crises, including engine problems on Embraer (ERJ.N) (EMBR3.SA) jets a decade ago and the crash-landing of a Rolls-powered British Airways BAY.L Boeing 777 at Heathrow airport in 2008.
It also used a similar tactic to deal with the recent failure of a Trent 1000 test engine for Boeing's 787 Dreamliner.
"Rolls' reputation has been hit, leading airlines to favour alternative engines when possible," said Credit Agricole analyst Antoine Boivin-Champeaux.
The blowout could present an opportunity for rival engine makers General Electric (GE.N) and Pratt & Whitney (UTX.N).
Rolls shares fell 14 percent in the three days following the blowout, during which it released a short statement that failed to quell concern it had wider engine problems.
"This created uncertainty which was reflected in their share price," said escherman's Smith.
However, some analysts pointed to its shares having been at an all-time high three days before the engine incident.
"Some 1.2 billion pounds was wiped off Rolls' value, which seemed excessive given there are not many industrial stocks pressing all-time highs," said Nomura analyst Jason Adams.
Rolls has recovered losses in the last fortnight after it revealed the failure was confined to a component and the shares will likely rise again after Qantas resumed A380 flights last weekend.
Escherman's Smith says Rolls' attitude to communication stemmed from it being a technical, engineering company used to dealing with companies rather than the public.
"They probably prefer to let their products do the talking," said Smith. "I am not sure that is the right way but their shares could be at a new high in a month so it might work for them." (Additional reporting by Kate Holton; Editing by David Cowell)
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