Charlotte Observer - Outgoing Chiquita CEO: Company Needs New Leader For Turnaround
Fernando Aguirre addresses students, faculty at Queens University in May, 2012. Photo: Julie Rose Chiquita Brands International, touted as a job-creation engine for Charlotte, now needs someone experienced at turning around troubled companies, outgoing CEO Fernando Aguirre said Wednesday. His comments to the Observer came a day after Chiquita announced it is seeking a new CEO and cutting $60 million worth of costs, including 15 employees at its new Charlotte headquarters. The company reported lackluster quarterly results Tuesday, as its European banana business and prepackaged salad business both fell. "We need to make sure we bring a leader with experience managing a turnaround situation," said Aguirre, 54. "If you talk to people who look at the stock price they'd say yes, this is a turnaround." The company's stock is off about 80 percent from its five-year high of $25.77 a share. Charlotte lured Chiquita, along with 400 jobs, from Cincinnati to uptown's NASCAR Plaza office tower last year with a package of state and local incentives that totals more than $22 million. That covered most of the company's moving costs, and Aguirre said the incentives were crucial to the company choosing Charlotte. The money is tied to job creation, and Chiquita must hit certain targets to get and keep all of the money. The headquarters must remain in Charlotte for 10 years, along with 90 percent of the 400 promised jobs. And the average salary for the Charlotte workforce must be more than $100,000. Aguirre, who is continuing as CEO until a replacement is found, told the Observer the company is still on track to meet its incentives goals. The company will have more than 300 workers here by the end of September, including 150 local hires. Charlotte will conduct an annual review of Chiquita to ensure it sticks to its incentives goals, said city spokeswoman Jamie Banks. Chiquita needs to have 153 employees in Charlotte by Dec. 31 to meet its first-year goals, she said. But the $60 million worth of cuts could have an impact on Charlotte beyond jobs, Aguirre indicated, such as the company cutting its travel budget and flying less through Charlotte Douglas International Airport. "We're looking to cut $60 million," he said. "That doesn't come from 300 jobs eliminated. The budget cuts amounting to those savings are pretty broad-based." Analysts generally praised the cost-cutting moves, as Chiquita looks to reverse several years of falling revenue and profits. Companywide, Chiquita is eliminating 310 jobs, mostly management positions, and cutting back sharply on research, product development and marketing. "Given the plunge in the shares ... and the rapid deterioration in earnings and the balance sheet, we believe aggressive action was required and arguably should have come sooner," wrote Heather Jones, an analyst with BB&T Capital Markets. "The company needs to move quickly to find a new CEO who can right the ship," wrote Kim Noland, an analyst for independent bond research agency Gimme Credit. With increased leverage and less liquidity, she forecast more trouble could be ahead. "The company has survived earnings volatility in the past but tightening bank covenants combined with a likely margin squeeze over the next few quarters doesn't bode well," she wrote. Shares of Chiquita closed up more than 6 percent Wednesday, at $5.62 a share. New skills for a new head News of Aguirre's planned departure came as a surprise to many. He led the company's move to transfer its headquarters from Cincinnati to Charlotte and was already becoming one of the city's most visible CEOs. He's noted for his use of Twitter, where he posts his thoughts on everything from his insomnia to new Chiquita products. Aguirre told the Observer that he called Charlotte Mayor Anthony Foxx and Gov. Bev Perdue's office to tell them minutes before the upcoming change was announced Tuesday. "My skill set and my background obviously point to having experience in branding and marketing, as I did before, that tied very well with the strategy the company set nine years ago," said Aguirre, who spent decades as a Procter & Gamble executive before being named to head Chiquita. "Now we see there's a need for a change in business model." The new CEO also will need experience cutting costs from a supply chain, Aguirre said, as well as experience managing low-margin commodity businesses. The board of directors is currently interviewing prospective candidates, Aguirre said. In 2005, under Aguirre, Chiquita bought salad company Fresh Express for $855 million in an attempt to diversify its products. But salad sales at the company have fallen, from $1.1 billion in 2009 to $953 million last year. In a conference call with analysts Tuesday, Aguirre and other executives repudiated much of his strategy - acquiring other companies, diversifying product lines, marketing new products. They pledged to cut research and development, not acquire other businesses and transform the company into a low-cost, high-volume business model. Aguirre defended his business decisions over his tenure. "Right now, I wouldn't change anything. The only thing I wish we could have done differently is, obviously, get better results," he said. Discussions about succession with his board started last year, Aguirre said. "I believe the diversification of the company at the time we did it was the absolutely right thing to do." Aguirre's transition agreement with the company specifies that he will remain employed as a consultant with Chiquita for 12 months after a new CEO is found, earning $40,000 a month. His employment agreement shows he could also be eligible for a $4.7 million severance payment. Aguirre and his wife purchased a $1.3 million homesite next to Quail Hollow Club's golf course, and they plan to build a home there. "We plan to stay here," he said. "I haven't thought really much about what I should do professionally. I have a few ideas. The first few weeks or months I'll try to spend more time with my family."