FT : Natixis owner’s plans for ‘new European player’ at mercy of Giorgia Meloni

Natixis owner’s plans for ‘new European player’ at mercy of Giorgia Meloni
Chief of French bank BPCE has been on year-long acquisition spree, but asset management deal with Generali remains stuck

The chief of Natixis-owner BPCE wants to turn the French bank into a “new European player . . . in the financing of the European economy” — but a key element of his plan is at the mercy of Rome.

Nicolas Namias has been on a pan-European acquisition spree, agreeing a €6.4bn takeover of Portuguese retail bank Novo Banco, buying Société Générale’s German-based equipment leasing business and striking a deal to merge Natixis Investment Managers with Generali’s asset management business, all in the space of a year.

Namias said Europe needed financiers able to back the initiatives outlined in recent reports by Mario Draghi and Enrico Letta, which set out ways for the EU to bolster its internal market and improve its competitiveness.

“There’s a lot of talk about the Draghi report or the Letta report, which is good. But now we need players who can enact these initiatives and governments to support them,” he said.

But Namias has run into opposition from Prime Minister Giorgia Meloni’s government in Italy. While US private equity group Lone Star’s sale of Novo Banco to BPCE for €6.4bn was welcomed by the Portuguese government, Namias has faced more difficulty obtaining support for the Generali deal.

People familiar with the tie-up said concerns from the Italian government and machinations in the country’s banking sector — where Generali is caught in a wider dealmaking battle that has pitted the Italian government’s allies against the financial establishment — meant it was at risk of failing.

BPCE had hoped to complete the transaction, which would create Europe’s largest asset manager by revenues, by the end of the summer but Namias signalled that this could slip due to factors outside its control. Completing the merger was “dependent on the current environment in Italy” and the timetable was not “in the hands” of BPCE, he said.

Generali is the largest buyer of Italian government bonds, and domestic opponents have claimed a deal could threaten the country’s public debt — a point rejected by BPCE and Generali.

“I understand that a government pays close attention to its financial sovereignty, but I’m convinced that our project reinforces the financial sovereignty of Italy, France and Europe,” added Namias, who declined to comment further on discussions with the Italian government.

BPCE, which was formed in 2009 from the combination of Banque Populaire and Caisse d’Epargne, is the second-largest lender in France and derives around 80 per cent of its revenue there.

The deal spree offers few synergies but will help the bank reduce its reliance on the French economy, which left it exposed when domestic regulation curbed its ability to pass on higher interest rates to borrowers when the European Central Bank started raising rates.

While Novo Banco’s contribution to BPCE’s earnings will be small, it would increase its portfolio of variable-rate loans, diversifying its balance sheet.

Namias dismissed concerns about weak growth in France and Europe hurting BPCE. Speaking shortly after the deal between the US and European Union that will impose 15 per cent tariffs on most European exports to the US, he added: “Regional sovereignty is taking on even more importance than it has had before”.

He also declined to comment on what BPCE would do if it failed to complete the Generali joint venture. “Talking about plan B means giving up on plan A.”

FT : Germany’s biggest sports retailer considers moving production into China

Germany’s biggest sports retailer considers moving production into China
Intersport eyes spare Chinese manufacturing capacity as Nike and Adidas back away from the country amid trade war

One of the world’s largest sporting goods retailers is considering shifting production into China, just as brands including Nike and Adidas move production out of the country in response to US tariffs.

Intersport International’s new chief executive Tom Foley told the Financial Times that the group is considering sourcing a greater proportion of its private label goods — which accounted for about €1.4bn of revenues last year — from China.

The deliberations come as US sports brands shift production away from China to countries in south-east Asia, where tariff rates are lower. Chinese manufacturing activity contracted for the fourth straight month in July.

The moves away from the country, Foley added, “might put pressure on production capacities in markets that ordinarily would not have that”.

Intersport — which operates 5,500 stores across 42 countries — is a Switzerland-based co-operative owned and managed by national organisations. It is particularly prevalent in Europe and is the largest sports retailer in Germany.

The group, which generated €14bn revenue last year, sells its own private label goods as well as those made by brands including Nike and Adidas. The company does not disclose its profits.

It is now encountering increased competition for factory space in countries such as Vietnam and Bangladesh, even as surplus capacity remains available in China.

“It’s not a situation now that we have to move from Bangladesh to China — but we could do it,” said Foley, who took over as chief executive in July. Intersport’s main sourcing markets include China, Bangladesh, Vietnam and Cambodia.

Long running US-China trade tensions have spurred sporting goods brands to move production out of China in recent years.

Adidas sourced 27 per cent of its products from Vietnam last year, 19 per cent from Indonesia and only 16 per cent from China — primarily for its sales in the country itself.

Meanwhile, Nike currently produces 16 per cent of its footwear in China and told analysts in June that it wants to reduce that to a high single-digit percentage within the next 12 months.

Foley said the balance of power in the industry more broadly was shifting from the likes of Nike and Adidas back towards retailers like Intersport.

“Certainly their dependency on us . . . has increased,” he said, noting that many major brands had failed to scale their direct-to-consumer businesses to the levels they had hoped for. The power dynamics “have shifted back to where they were eight or nine years ago,” he added.

Foley wants sales of Intersport’s private label products to comprise as much as 20 per cent of the group’s annual revenue within five years, up from 10 per cent today, with the ultimate goal of boosting profitability. “For a strong and sustainable business, we need a higher margin,” he said.

FT : Luxury brands hit by drop in tourist spending in Europe and Japan

Luxury brands hit by drop in tourist spending in Europe and Japan
Currency swings sap spending power of American and Chinese travellers overseas

Sharp declines in tourist spending on luxury goods in Japan and Europe are dragging on industry sales, adding to the challenges for a sector grappling with the end of a multiyear boom and the fallout from US tariffs.

Second quarter sales at Bernard Arnault’s luxury goods powerhouse LVMH, as well as at Prada and Moncler, were hit by lower spending from American tourists in Europe and by Chinese tourists in Japan.

Last year, waning luxury sales were boosted by a springtime surge in demand in Japan after Chinese consumers flocked to the country to load up on designer bags and shoes, taking advantage of the weakness of the yen, which had fallen to its lowest level for over 30 years.

Meanwhile, American tourists were spending freely in European boutiques as a strong dollar bolstered their purchasing power abroad.

But those tailwinds have disappeared this year as the yen recovers and the dollar declines in value, in effect removing a cushion for the industry as it contends with subdued demand in the US and China — the twin engines of luxury growth.

LVMH chief financial officer Cécile Cabanis cited changes in tourist spending patterns as the main reason why sales at its key fashion and leather goods division declined by 9 per cent organically in the second quarter.

Spending by American tourists slowed down “very strongly”, Cabanis told the Financial Times last month, adding that increased spending from locals in Asia was not sufficient to offset the declines LVMH suffered in Japan.

In the second quarter of last year, sales in Japan jumped by 57 per cent at the group behind Louis Vuitton and Dior, and by 27 per cent at Gucci owner Kering.

At its earnings report last month Italian outerwear brand Moncler blamed a 2 per cent organic sales decline on weaker spending by Americans in Europe and by Chinese shoppers in Japan.

At Prada, where tourists contribute 30 per cent of sales globally, management also attributed a 2 per cent decline in first half sales at its namesake brand on the same factors.

The US dollar has fallen by more than 10 per cent against the euro in the first half of 2025 as concerns over inflation, related to US President Donald Trump’s tariffs, caused a sell-off of US assets.

That has diminished the incentive for US travellers to live out their ‘Emily in Paris’ fantasies with spending sprees in the continent’s luxury boutiques.

Analysts at Citi noted that even Switzerland-based Richemont, where jewellery sales at Cartier and Van Cleef & Arpels underpinned another quarter of double-digit revenue growth, will come under pressure from weaker tourist spending in Japan and Europe over the next year.

Tourist spending is slowing as prospects for local spending in luxury’s two most important markets remain uncertain. Chinese consumer confidence, shaken by a decline in local asset values in the wake of the pandemic, remains stuck at record lows.


And demand in the US, luxury’s biggest market by sales, appears fragile as Trump’s tariffs threaten to usher in another wave of price inflation on goods manufactured overseas.

Bernstein forecasts a 2 per cent decline in global luxury revenues in 2025, reversing its previous prediction of 5 per cent growth because of the increased likelihood of a global recession.

The decline in tourist shopping is linked to deeper questions facing the industry, which cashed in on years of buoyant demand by pushing through above inflation price increases, according to Bernstein analyst Luca Solca.

“Luxury consumers are still looking for value — Chinese tourists are not in Japan because they want to go see Mount Fuji,” said Solca. 

“This is an indirect indication that too many luxury brands pushed too many price increases, and that they need to do some homework in order to appeal to consumers — particularly middle classes — again.”

FT : Tax breaks could lead UK pensions into domestic stocks, says exchange chief

Tax breaks could lead UK pensions into domestic stocks, says exchange chief
The UK is struggling to attract companies to list on the London Stock Exchange, with fundraising from new listings falling to a 30-year low.

Part of the problem is the diminishing pool of capital in Britain, as pension funds have retreated over the past couple of decades. Some investors have clamoured to mandate UK pensions to invest in domestic stocks.

But forcing UK pensions is not the solution, according to David Schwimmer, chief executive of the London Stock Exchange Group. “We are not pushing for mandation,” he said.

Instead, he reckons tax breaks should be used to encourage domestic flows into UK public markets, writes Nikou Asgari.

“It’s very important to take a look at the fact that the pension funds get about £49bn a year in tax incentives,” he added. 

Making those tax benefits conditional on pension funds putting a minimum percentage of their assets into UK investments “would seem to be very, very reasonable”, Schwimmer said.

Although LSEG makes most of its revenues from its data and analytics business, the group remains at the heart of the City and is a barometer for the health of the UK’s capital markets. 

“The London market has had a number of very positive, healthy reforms over the last few years,” Schwimmer said, adding that multiple companies were lining up to float in London soon. 

Business bank Shawbrook is planning to list in the UK, while insurer CFC is also weighing an IPO.

But companies are still leaving or have been snapped up. Last week Brookfield struck a £2.4bn deal to acquire life insurer Just Group while Wise shareholders voted to shift the fintech’s primary listing from London to New York.

FT : The return of stockpicking hedge funds

The return of stockpicking hedge funds

The market turbulence of the past few months has rattled many investors, but it has been a boon for at least one cohort: stockpicking hedge funds, write Costas Mourselas and Amelia Pollard.

So-called equity long-short funds, which try to buy stocks they think will do well and bet against companies they think will underperform, took in $10bn from investors in the first half of the year, according to data from Hedge Fund Research.

This trend has marked a reversal of fortunes, as the sector had suffered more than $120bn of withdrawals since 2016.

Some of the industry’s biggest names did particularly well, with Chris Hohn’s TCI and John Armitage’s Egerton among them.

“The stock picker’s market is back,” said Zlata Gleason, partner and head of client advisory at Indus Capital. “If you look at the volatility underneath, it’s like a rollercoaster. And that’s where stockpickers can really benefit.”

As one of the oldest and best known sectors of the industry, long-short hedge funds have had a tough ride in recent years and been overshadowed by giant “multi-manager” funds, which spread clients’ money over a variety of strategies.

But stockpickers have come roaring back in the face of market volatility, stoked by US President Donald Trump’s “liberation day” tariff salvo in April. The long-short strategy has been among the best performers in the hedge fund industry so far this year, returning 3.5 per cent in June and 9.2 per cent in the first half of the year, according to data from PivotalPath.

“Liberation day was a bit of a wake-up call for people,” said Charles Lemonides, the founder of hedge fund ValueWorks. “The volatility around that moment caught their attention . . . You don’t want to have just naked exposure to markets that swing that violently.”


WSJ : Microsoft Is an AI Darling, but Its Core Businesses Are Booming Too

Microsoft Is an AI Darling, but Its Core Businesses Are Booming Too
Company’s non-AI businesses, including productivity software and cloud computing, are going strong

Microsoft’s MSFT -1.76%decrease; red down pointing triangle blockbuster earnings last week cemented its status as one of the biggest winners of the artificial-intelligence boom. Investors should draw additional comfort from what is happening with less fanfare elsewhere in its business.

Outside the AI race, Microsoft is minting money from corporate customers spending on regular technology—long a sweet spot for the company.

Many companies are shifting from buying their own IT equipment to renting it from Microsoft through its cloud-computing service. They are also renting more standard-issue computing stuff—hard drives for data storage, for example—to support their AI efforts.

A large chunk of the recent strong growth in Microsoft’s cloud business, called Azure, stems from that. More than half of Azure’s 33% revenue jump in the company’s March quarter came from non-AI services. While the company didn’t give a comparable breakdown of the cloud unit’s 39% growth in its June quarter, it said the “core infrastructure business”—Microsoft lingo for its non-AI cloud business—was the driver.

And that isn’t the only non-AI area in which Microsoft is growing. The company’s Microsoft 365 Commercial cloud business, which houses remotely accessed versions of its Word, Excel and other productivity software for companies, grew 16% from a year earlier in the June quarter, an acceleration versus the previous period. Revenue from productivity software for consumers grew 20%, its best uptick in years.

In one sense, investors might prefer to see AI businesses driving growth. That, after all, is what has driven the company’s valuation through the roof. But tech companies’ stocks arguably hinge too much on AI; to the extent that they can keep increasing other revenue streams, they are on more solid financial ground.

Microsoft’s non-AI business also benefits from a symbiosis with its AI efforts. The company’s Copilot AI assistants for software products like Word and Excel brought in a record number of new users in the June quarter, Chief Executive Satya Nadella said Wednesday. Many of those users are likely to stick around and use its non-AI software even if Copilot turns out to be a dud.

There is another silver lining for Microsoft: non-AI sales can be substantially more lucrative than AI ones. Non-AI gross margins within Azure were around 73% in Microsoft’s March quarter, Bernstein Research analyst Mark Moerdler estimated. That compared with a 30% to 40% gross margin for AI, he estimated, because of the huge cost of setting up AI infrastructure.

Luckily for Microsoft, demand for lucrative non-AI services appears to be reasonably strong. Measures of broad IT spending were fairly muted at the start of the year as companies pondered the impact of President Trump’s tariffs and concerns bubbled about the health of the global economy. Attitudes appear to have improved somewhat in the second quarter, though.

A UBS survey of cloud-computing customers in July showed a “clear improvement in tone” about spending. Most were moving forward with efforts to migrate computing work to the cloud, it said, a reversal from an April survey that showed trepidation.

In the longer term, there is little question that cloud computing is going to grow in ways that play to Microsoft’s strengths. Its rivals—mainly Amazon.com and Google—are growing quickly too, but don’t have all of Microsoft’s broad corporate software offerings that enhance its cloud footprint, even outside AI. Amazon on Thursday said its cloud unit grew 17.5% in the June quarter, disappointing investors and forcing Chief Executive Andy Jassy to answer to Azure’s outperformance. Recent quarterly swings in Azure’s favor were “really just moments in time,” he said. The company’s stock fell around 8% on Friday.

The question for Microsoft’s investors, then, is less about its prospects than its valuation. The company’s stock is up nearly 40% since the beginning of April, pushing its forward price/earnings multiple above 33. That is a bit richer than Amazon and a large margin above Google’s parent, Alphabet GOOGL -1.44%decrease; red down pointing triangle, which is trading at a multiple of roughly 18 times forward earnings.

That should be easier for investors to digest because while Microsoft’s AI growth is real, it is far from the only thing going right at the software giant.

WSJ : Amphenol Nears Big Broadband Deal in AI Boom

Amphenol Nears Big Broadband Deal in AI Boom
Fiber-optic solutions provider is set to buy CommScope’s broadband connectivity and cable unit

Amphenol APH -2.07%decrease; red down pointing triangle is nearing a deal to buy CommScope Holding’s COMM -5.00%decrease; red down pointing triangle broadband connectivity and cable unit, according to people familiar with the matter. The deal would be valued at roughly $10.5 billion, including debt.

Amphenol is closing in on the business as it sees rampant demand for data centers that require its technologies and a big need for fiber-optic cables to power high-speed internet and data transmission.

The details
The transaction could be completed as soon as Monday, assuming no last-minute snags, the people said. A number of big strategics and private-equity firms had been pursuing the unit, known as CCS.

Amphenol, based in Connecticut, is a designer of so-called interconnect products, fiber-optic connectors, antennas, sensors and specialty cables. These are used across industries, from aerospace to information technology. Amphenol has a market value of about $125 billion.

North Carolina-based CommScope is a global infrastructure provider for communication, data-center and entertainment networks. The company had a market value of about $1.7 billion on Friday, after its share price has jumped about 50% year to date.

The CCS business provides fiber-optic and copper connectivity cables for cable television, residential broadband networks and data centers, among other things. It is CommScope’s biggest division by sales and operating income, bringing in $2.8 billion in net sales in 2024, according to an annual report.

The context
CommScope has been burdened by a heavy debt load and has used divestitures to help pay down liabilities. Waning customer demand for some of its offerings and other macroeconomic headwinds have also weighed on performance.

Earlier this year, it sold its mobile-networks businesses to Amphenol for more than $2 billion.

Last year, Amphenol bought the Carlisle Interconnect Technologies division of Carlisle Cos. for a little over $2 billion. CIT’s products are used primarily in the commercial air and defense markets.

A boom in artificial intelligence and heightened demand for data centers has boosted Amphenol’s business as more companies seek to use its products. The CCS deal would be Amphenol’s largest acquisition to date.

WSJ : China Is Choking Supply of Critical Minerals to Western Defense Companies

China Is Choking Supply of Critical Minerals to Western Defense Companies
Beijing’s tightened controls are a sign of the leverage it has over the U.S. military supply chain

  • China is restricting exports of critical minerals, causing delays and price increases for Western defense manufacturers.
  • Defense firms are struggling to find alternative sources, as China dominates critical mineral production for military applications.
  • The U.S. military’s reliance on China for its supply chain is giving Beijing leverage amid rising tensions.

China is limiting the flow of critical minerals to Western defense manufacturers, delaying production and forcing companies to scour the world for stockpiles of the minerals needed to make everything from bullets to jet fighters.

Earlier this year, as U.S.-China trade tensions soared, Beijing tightened the controls it places on the export of rare earths. While Beijing allowed them to start flowing after the Trump administration agreed in June to a series of trade concessions, China has maintained a lock on critical minerals for defense purposes. China supplies around 90% of the world’s rare earths and dominates the production of many other critical minerals.

As a result, one drone-parts manufacturer that supplies the U.S. military was forced to delay orders by up to two months while it searched for a non-Chinese source of magnets, which are assembled from rare earths.

Certain materials needed by the defense industry now go for five or more times what was typical before China’s recent mineral restrictions, according to industry traders. One company said it was recently offered samarium—an element needed to make magnets that can withstand the extreme temperatures of a jet-fighter engine—for 60 times the standard price. That is already driving the cost of defense systems higher, say suppliers and defense executives.

The squeeze on critical minerals highlights how dependent the U.S. military is on China for much of its supply chain—giving Beijing leverage at a time of rising tensions between the two powers and heated trade negotiations. Defense manufacturers supplying the U.S. military rely on minerals that are mainly produced in China for microelectronics, drone motors, night-vision goggles, missile-targeting systems and defense satellites.

While companies have tried to find alternative sources of these minerals in recent years, some of the elements are so niche that they can’t be economically produced in the West, say industry executives.

China’s Foreign Ministry didn’t respond to a request for comment.

In addition to the more recent export controls on rare earths, China has since December banned sales to the U.S. of germanium, gallium and antimony—which are used for things like hardening lead bullets and projectiles, and to allow soldiers to see at night.

Some companies now warn of looming production cuts if more minerals aren’t forthcoming.

On Wednesday, the chief executive of Leonardo DRS said the U.S.-based defense firm is down to its “safety stock” of germanium.

“In order to sustain timely product deliveries, material flow must improve in the second half” of 2025, CEO Bill Lynn said on a conference call. The company is the U.S. subsidiary of Italian defense giant Leonardo.

Germanium goes into the company’s infrared sensors, which are used in missiles and other equipment. Lynn said that the company is looking at diversifying its supply chain while also finding ways to replace it in its products.

The Pentagon is requiring defense contractors to stop buying rare-earth magnets that contain China-sourced minerals by 2027. As a result, some companies have sizable stockpiles of magnets. But suppliers and defense companies often hold less than a year’s worth—some just a few months—of many other critical mineral stockpiles.

Drone manufacturers are among the most vulnerable, because many are small startups and have very limited revenue or supply-chain savvy, and never got around to acquiring large stockpiles of rare-earth magnets and metals, say some in the defense industry.

“I can tell you…we talk about this daily and our companies talk about it daily,” said Dak Hardwick, vice president of international affairs at the Aerospace Industries Association, a U.S. defense and commercial aerospace trade group.

More than 80,000 parts that are used in Defense Department weapons systems are made with critical minerals now subject to Chinese export controls, according to data from defense software firm Govini. Nearly all of the supply chains for key critical minerals used by the Pentagon rely on at least one Chinese supplier, Govini said, meaning restrictions from Beijing can cause widespread disruptions.

Since stepping up export controls earlier this year, China has begun requiring companies to provide extensive documentation of how they will use the rare earths and magnets they import. Chinese regulators often demand sensitive information, such as product images and even photos of production lines, to ensure none of the materials go to military use, say Western buyers.

One Western company that supplies Chinese-made rare-earth magnets to both civilian and defense companies says its requests for imported magnets have recently been approved for many civilian purposes—but rejected or delayed for defense and aerospace.

In May, New Hampshire-based ePropelled, which makes propulsion motors for drones, received unsettling questions from its Chinese magnet supplier. The supplier sent Chinese government forms demanding drawings and pictures of ePropelled’s products and a list of buyers. It also asked for assurances that the rare-earth magnets China would supply ePropelled wouldn’t go toward military applications.

“Of course we are not going to provide the Chinese government with that information,” said Chris Thompson, vice president of global sales for ePropelled. The company has about 100 customers, including large American defense contractors and drone manufacturers in Ukraine.

So its Chinese suppliers paused shipping, and ePropelled had to delay some customer orders by one or two months—double the amount of time it usually takes to deliver its motors. The company sought alternative suppliers in the U.S., Europe and Asia, including buying magnets from vendors in Japan and Taiwan, although they too rely on rare earths from China.

The company also struck deals with startup magnet producers Vulcan Elements in North Carolina and Oklahoma-based USA Rare Earth. However, those startups won’t have supply ready for ePropelled until at least the end of this year and will need to build up alternative sources of Chinese-dominated minerals as they scale up production.

Metal traders say that because China demands to know the end user of rare-earth magnets and metals, it isn’t approving licenses for traders to stockpile.

The Department of Defense has awarded grants to expand production of niche materials, including $14 million in funding last year to a Canadian company to produce germanium substrates used in solar cells for defense satellites. In July, the Pentagon took an even bigger step when it agreed to pay $400 million for a stake in MP Materials, the operator of the largest rare-earths mine in the Americas, which is rapidly scaling up its magnet manufacturing capacity.

The Pentagon didn’t respond to a request for comment.

On an earnings call last month Lockheed Martin CEO James Taiclet called the MP Materials agreement groundbreaking and said it would help ensure the supply of magnets needed in its F-35 jet fighters and cruise missiles. But building up new supply will take time.

The Defense Department early last year established the Critical Minerals Forum, an effort in part to spur more mineral supply-chain projects in the U.S. and allied countries, including helping metals miners secure funding to increase their output of critical materials like antimony and germanium.

Defense companies that traditionally outsourced the purchase of critical minerals to sub-suppliers are now using their market heft to try to acquire sources of key materials themselves. Major defense companies “are starting to get more and more panicked as they go, because they recognize that they’re just not going to get the magnets, no matter what happens, unless they get involved,” said Nicholas Myers, the CEO of Phoenix Tailings, a Massachusetts startup that produces rare-earth metals.

Beijing is signaling that it takes its mineral export bans very seriously. Earlier this year, one U.S. defense supplier, the United States Antimony Corporation, tried to ship 55 metric tons of antimony mined in Australia to its smelter in Mexico. The load transited via the Chinese port city of Ningbo—until recently a routine practice.

But in April, while the shipment was being transloaded in Ningbo, China customs detained it for three months, prompting United States Antimony to ask the State Department and White House for help.

The Chinese released the shipment in July, on the condition that it be sent back to Australia and not to the U.S. When it arrived in Australia, United States Antimony learned that product seals had been broken. It is currently working out whether the antimony has been tampered with or contaminated.

“The shipping company, everyone who was involved, they’d never seen this happen before,” said company CEO Gary Evans.

Neither the White House, the Defense Department nor the State Department provided comment.

Corrections & Amplifications
In July, the Pentagon agreed to pay $400 million for preferred stock in MP Materials convertible to common stock. Also, it acquired a warrant permitting it to buy further MP Materials common stock. Together those provisions gave the Pentagon the ability to own 15% of MP Materials’ common stock. An earlier version of this article incorrectly said the Pentagon agreed to pay $400 million for 15% of MP Materials.

Fortune : How Boeing is quietly betting on a ‘brilliant’ 39-year old engineer—an

How Boeing is quietly betting on a ‘brilliant’ 39-year old engineer—and setting the stage for a turnaround

As an aeronautics grad student at MIT in the 2010s, Brian Yutko was obsessed. He’d work deep into the night mining “black box” data and destination codes buried in antiquated computer languages like Fortran for obscure flight stats. He wowed his thesis advisor with his work on fuel efficiency. Among Yutko’s findings: Airlines could reduce pollution by 7% by flying planes at slightly slower speeds, and by 33% by mothballing old models sooner. But Yutko didn’t just study planes—he loved flying them. Yutko, his advisor, and fellow PhD students relished zipping up and down the East Coast on rented Cessna 170s that they would take turns piloting to conferences and blithe sojourns for picnic lunches in the country.

Fast-forward a decade and suddenly Yutko has a much bigger fleet at his disposal. In May Boeing named Yutko, 39, chief of commercial airplanes product development, the arm tasked with incorporating engineering advances that improve today’s models, and taking a leading role in designing and bringing to market all-new aircraft at Boeing Commercial Airplanes (BCA), the company’s largest division. With this year’s revenues clocking at an annualized rate of around $45 billion, if measured on its own, that unit would rank around 100th on the Fortune 500.

Though Boeing’s litany of safety concerns and union turmoil have dominated the headlines for several years, behind the scenes there are glimmers that things are changing one year into new CEO Kelly Ortberg’s tenure. Ortberg secured a hard-won contract with the machinists’ union following a 54-day strike; reached a deal with the DOJ to avoid criminal prosecution for the crashes in 2018 and 2019 that killed 346 passengers and crew; won a contract initially valued at $20 billion over Lockheed to develop the Air Force’s next-gen fighter jet; and worked closely alongside the FAA to gradually raise production of the 737 Max, the bestseller whose production the regulator severely constrained since the notorious door-plug blowout over Portland early last year. He also avoided big risks by raising $21 billion in fresh capital, ensuring that Boeing harbored the cash reserves for weathering the tough times. But it’s the appointment of Yutko, though it has gone largely unnoticed, that may speak eloquently about where Boeing is headed.

“I’m biased, but my take is that Brian’s appointment is a real indication that Boeing is returning to prioritizing engineering and product innovation,” R. John Hansman, Yutko’s PhD advisor and director of the MIT International Center for Air Transportation, told Fortune. (Boeing declined to make Yutko or other managers available for this story. Yutko, however, sent a message that read in part: “Because I’m just getting my feet wet in this new role and drinking from a firehose a bit, I’ll follow the comms team lead on this one.”) Adds Gary Gysin, the founding CEO of Wisk, where Yutko served on the board before taking the helm: “One guy won’t fix everything, but he’ll help attract more like-minded younger people who will be more aggressive on the tech front.” Several sources I spoke to said that Yutko’s leadership and technical skills could take him a long way at Boeing.

Of course, that will certainly depend on how Yutko helps Boeing navigate the flight ahead—a period in which the company is in the early stages of exploring what could be a $25 billion bet on a brand-new plane, something that the aerospace giant only does once every few decades. Legendary aerospace analyst Richard Safran summarizes the promise and peril Yutko’s facing as this: “He’s a classic MIT, somewhat brilliant guy. Who hasn’t demonstrated he knows how to make money yet.”


Boeing at a crossroads
Boeing is at a critical juncture. The seeds of its current problems date back to the late 1990s following its acquisition of rival McDonnell Douglas. Before that giant tie-up, Boeing had boasted a culture dominated by engineering excellence that elevated product quality and safety far above profit-making. Though Boeing remained a wellspring of innovation, the McDonnell ethos took over, and was accelerated by a parade of CEOs who seemed to prioritize shareholder value above all. From 2010 to 2018, Boeing radically reduced headcount and R&D as a share of sales, and returned over 100% of its cash flow to shareholders via buybacks and dividends. Over those eight years, its stock delivered annual returns of nearly 30%, beating the likes of Apple and Microsoft.

But the fatal Lion Air and Ethiopian Airlines crashes in late 2018 and early 2019 exposed how far Boeing had veered from the quality obsession and production safeguards that were hallmarks of its storied past. (You can read this author’s cover story on Boeing’s descent here.)

Now Ortberg’s plan to gradually raise the severely depressed production of its cash cow Max is showing green shoots, but to ensure dominance in the next decade, Boeing’s top chance at besting Airbus is designing and successfully commercializing a totally new and disruptive 737 successor. “Boeing’s not in a good place from a product portfolio standpoint,” says a former executive at a large Boeing supplier. “They haven’t been for four to six years. The new plane can’t be a me-too. When you’re behind, you need to be aggressive. They have to come up with something that’s a real crowd-pleaser for the airlines. And they have to develop the new plane right on schedule to restore their credibility after the delays on the 787,” the last all-new plane that arrived three years late in 2011.

Much of this will fall to Yutko. To say it’s a tall order is an understatement, but as interviews with colleagues, peers, and friends show, he has again and again surprised those around him. His unlikely rise to the Fortune 500 began in Northeastern Pennsylvania coal country. His hometown’s the tiny village of Buck Mountain nestled near the foothills of Locust Mountain, a hikers’ favorite roamed by white-tailed deer and black bears. Decades ago, one of the biggest draws for this corner of Appalachians was its rowdy annual beer fest. This region comprising historic Schuylkill County holds the world’s largest deposits of anthracite black carbon, but the industry’s decline decimated the local economy. Since the 1930s, Schuylkill has lost around a third of its population, and its often-crumbling homes at a median of $165,000 rank among the nation’s cheapest. Less than 20 miles from Yutko’s alma mater, Mahanoy City High School—where in 2022 he delivered the keynote address to the graduating class of 49, the smallest in its history—sits a virtual ghost town where a coal seam fire has been burning for over 60 years. Brian’s ancestors migrated over a century ago from Eastern Europe to the area’s then-bustling company towns, and generations of Yutkos have worked in the coal trade.

Yutko’s dad ran a shop that changed springs for coal mining trucks, and Brian worked alongside him as a kid. “When Brian got his master’s at MIT, I invited his parents to dinner,” remembers his mentor Hansman. “It was the first time his father had ever been out of the state, and the first time his mother had left the county.”


Yutko and his two brothers were the first in the family to attend college—the younger a project engineer at a large power and metals company who also volunteers as a high school wrestling coach in the area, as does the youngest—all three honed clinches and armlocks on the mats at Mahanoy. At Penn State, where Yutko graduated in 2004, he majored in aerospace engineering and developed a love for jerry-rigging airborne vehicles from everyday materials. In a recent Reddit post, he recalled joining “a project that designs and builds a sailplane” and getting assigned to “weld out metal chromoly tube fuselage … because I knew how to weld.” Yutko didn’t mention whether he learned the metal-bending skills at the family workplace, but jested: “I’m positive my welding wouldn’t pass proper inspection.”

At MIT, Hansman demanded that his PhD candidates pursue work that wasn’t just theoretical, but would improve the way airplanes fly and operate so that the next wave would show big strides in curbing emissions and lowering noise. “You think of MIT as teaching heavy math, nerdy kinds of things,” says a fellow program member. “But Hansman was very applied and practical.” Hansman was also a super-tough taskmaster who, as this Yutko classmate avows, “didn’t suffer fools gladly” and would put his doctoral candidates through “a tear down and rebuild mill.” Glancing at a piece of research, he’d charge, “This is wrong” or “This is BS,” mainly as a test for prompting students to vigorously push back. Once the presenter on the griddle “defended their position to the death,” they could often persuade their revered leader.

For years, in addition to their Cessna-piloting adventures, Yutko joined Hansman and Yutko’s best friend, NASA astronaut and engineer Woody Hoburg, on motorcycle sojourns on their rented BMW 1200 rigs between Christmas and New Year’s to exotic corners of the globe, from the deserts of Morocco to the valleys of Peru. During COVID, Yutko and Hoburg, a former rescue climber in Yosemite, camped in Red Rock Canyon near Las Vegas to practice their technical skills deploying lines and harnesses. On foot, Yutko has braved the race to the summit of Pikes Peak, a grueling contest that scales 7,800 vertical feet.

A slim six-footer, his brown hair close-cropped, Yutko in his Wisk incarnation favored T-shirts and jeans. At work, he can be intense and demanding. “He and I are both ‘A’ types, and we had quite a few battles,” says ex–Wisk boss Gysin, who adds that Yutko “would really dig in on an issue” and relentlessly hammer home his position, a stance he learned in the Hansman crucible at MIT. “I have a number of non-consensus views on a number of topics,” Yutko admitted in a recent podcast. Yet Gysin says that despite their dustups, he and Yutko “are friends to this day.”

According to fellow students and colleagues, Yutko’s as likable as he is doggedly determined. Marvels Hansman, “We’d go to a bar on the Moroccan coast on our motorcycle trips, and Brian would make friends with all the guys in the bar,” says Hansman. “He’s just magnetic.”


Lishuai Li, a fellow PhD student under Hansman and now a professor at City University of Hong Kong, attests to Yutko’s gift for putting people at ease. “As an international student, I sometimes feel hesitant in social settings, so I’d sometimes be quiet. But Brian had a natural way of making everyone feel included.” Yutko is married, and he and his wife, who holds an MBA from Dartmouth’s Tuck School of Business and previously worked as a White House advance aid, recently welcomed a son.

And Yutko’s funny. In interviews, he lampoons his own wonkish credentials by uncorking such quips as, “I’ll do a little systems engineering on your question.” As a PhD student, he coauthored a semi-satirical editorial that echoes 18th-century essayist Jonathan Swift’s tongue-in-cheek “A Modest Proposal.” The piece soberly calculates the dollars airlines could save if “they could provide incentives for passengers to go the restroom before getting on a flight.” The authors also get serious, extolling the fuel economies garnered by ditching such items as water bottles handed out by flight attendants, and replacing “flight bags” carrying heavy paper manuals, charts, and checklists with versions loaded on computerized tablets. The writing is so clever that, for this judge, it could have been penned by a professional pundit.

Hansman praises Yutko’s willingness to take chances when the potential payoff is big. “This is a guy who listens, who thinks things through, who assesses risk, but doesn’t have fear,” he observes.

Extra lift
After getting his PhD in 2014, Yutko split his time between MIT and Aurora Flight Sciences, an engineering firm that primarily created prototypes of unmanned, electric, and other next-gen planes, helicopters, and drones for the Department of Defense. At Aurora, he participated in a NASA design competition for a revolutionary, highly efficient commercial aircraft configuration called the D8. Boeing teams were competing on other models. Traditional aircraft design features a pressured tube for the passengers flanked by wings. But the D8 put two tubes side by side, which made the fuselage wider, enabling it to, in effect, become part of the wing and add to the lift. The design also placed the engines in the tail, which reduced turbulence from the fuselage. The D8 looked a bit like a shark, and won the moniker “Double Bubble.” Its edge: It could carry wings smaller and lighter than those of regular planes because of the extra lift provided by the reshaped fuselage. Those characteristics lowered drag big-time. The D8 was also originally conceived to fly at slightly lower than normal speeds, a key to saving fuel that Yutko had identified in his doctoral work.

Yutko tested D8 forerunners in a new wind tunnel donated to MIT by Boeing. The D8’s stupendous goal: lowering fuel consumption by 70%. The tech incorporated in the D8 is still a contender for the new wave of narrow-bodies, and the program would prove Yutko’s ticket to Boeing.

Yutko had caught the eye of then–Boeing CEO Dave Calhoun, who picked the rising star for personal mentorship as part of a Boeing program where top executives nurture future leaders. By early 2023 Yutko was ready for a new challenge, which presented itself when autonomous flying-taxi startup Wisk, (founded by Google cofounder Larry Page but majority owned by Boeing) needed a new CEO. Yutko moved to Silicon Valley for the job.

The Wisk rises like a helicopter; then six of its forward rotors tilt outward, and it flies like a plane. Yutko foresaw a network of “vertiports” at airports, topping highways and mounted on rooftops ferrying passengers up to 100 miles in what he widely praised as possibly “the next big leap in aviation.” Given the resistance of pilots’ unions and traffic controllers, and skepticism from regulators, for autonomous flight, it’s unclear when or if Wisk will reach the market. Still, Yutko continued to advance autonomous technology and added AI applications to simulate flight planning and patterns. Those improvements could potentially improve safety and testing on commercial planes.

Boeing’s next big bet
Of course, any decision on a new plane will fall to Ortberg and the Boeing board. Once they approve takeoff, the aircraft-maker typically taps two leaders to head a greenfield project, according to an executive who worked for a Boeing supplier: a program manager, and a lead project engineer. The program manager is tasked with hitting key milestones for schedule and costs, and reports to the business side. The lead project engineer is responsible for working with the supply base to optimize the plane’s design and development, and bring it to market. That person is part of the engineering team that, it appears, would work closely with Yutko as chief of commercial airplane development. “You can’t BS Brian on the engineering side,” noted one of his former colleagues.

What’s this airborne breakthrough likely to look like? The advantage to the super avant-garde models Yutko knows so well is that the airframes themselves promise tremendous gains in fuel efficiency and CO2 reductions. The D8 “Double Bubble” technology that Yutko labored on featuring the bulbous fuselage is still a leading candidate. Another potential winner is the so-called X-66, also known as the jawbreaker transonic truss-braced wing or TTBW. Conceived in-house at Boeing, and long supported by grants from NASA, the X-66 features extra-long, thin wings supported by diagonal struts, so that from the nose you’re looking at two triangles.

In April, Boeing scrapped pursuit of an X-66 demonstrator in partnership with NASA, but pledged to keep working on thin-wing technology. It’s not clear if the TTBW or another model will prove the winner, but Yutko has expressed openness to new aircraft configurations. “It’s really an open book,” says Hansman. Yutko will be leading the evaluation of all the technical and design options, including the use of alternative fuels and new engine technologies, as well as automation.


In October of 2024, Yutko gathered with many of Hansman’s former students to salute their beloved teacher’s 70th birthday with a series of lectures. Yutko took the stage for a presentation reviewing 210 years of aviation history. He started by recapping the first primitive, butterfly-shaped gliders, reminding the audience, “[I’m] as you all know … a future-thinker,” then spotlighted the “opportunity for new airplane shapes” and lauded the “Double Bubble … that came out of MIT” and “that I’m so passionate about.”

Boeing watchers may similarly hope that the storied company is entering a new era, too. And Boeing finally has what it needs, a visionary engineer who can pilot this lagging colossus towards winning the big one, the contest for the aircraft of the future.