FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
2004
2004-09 - 1207.PDF
THE FLIGHT INTERVIEW STRATEGY GRAHAM WARWICK / CHICAGO Getting the balance right Boeing chief executive Harry Stonecipher believes the US giant has proved its mix of commercial and defence works Much has changed for the world's largest aero space company in the past year, and not all for the worse. The 757 has been axed, but the 7E7 has been launched. The US Air Force's 767 aerial- refuelling tanker is stalled, but the 737 will be the US Navy's next maritime- patrol aircraft. Two senior executives have been fired over ethics violations, but bluff Harry Stonecipher has replaced amiable Phil Condit as chief executive and is busy repairing the damage. The defence business is booming, the commercial business is recovering, and Boeing is back in favour with Wall Street. The biggest change over the past year, says Stonecipher, is that Boeing's strat egy of balancing its business between commercial and defence is working. "That wasn't very obvi ous a year ago. We could say the words, but I don't think many people believed it. When you take [Boeing] Integrated Defense Systems, which won over $50 bil lion in orders last year, it's quite remarkable. So we are finding that the strategy is working, the bal ance is there." The strategy was begun by Condit in 1996, but it was Stone cipher, then chief executive of Mc Donnell Douglas (MDC), who ne gotiated the 1997 merger that gave the transformation its momentum. He joined Boeing as president and chief operating officer, became vice-chairman in 2001 and retired in 2002, only to return as president and chief executive in December last year after Condit resigned in the wake of the ethics scandal involving two senior executives. Stonecipher is no stranger to restoring the reputation of scan dal-tainted companies. As chief executive of Sundstrand in the early 1990s, he repaired the com- Stonecipher: "Failure to execute is the biggest threat" pany's fraud-damaged relationship with the Department of Defense. Now he finds himself in a similar situation, working to restore the DoD's confidence in Boeing after ethics violations that resulted in the suspension of its launch vehi cle business and the firing of chief financial officer Mike Sears. Whatever progress Stonecipher has made, it has yet to bring a lift ing of the launch business suspen sion, which continues to delay the award of the next batch of US Air Force evolved expendable launch vehicle (EELV) contracts. The KC- 767 tanker deal remains stalled, tainted by Sears' illegal job talks with Darleen Druyun while she was still USAF acquisition chief, and is unlikely to be decided before 1 January at the earliest. "We did a lousy job of investigating the EELV thing five years ago," says Stonecipher. "And Mike Sears did the dumbest damn thing I've ever seen." While Druyun has pleaded guilty, Sears is still under investigation. "We have nothing to fear from this because it is quite open," he says. "If something else comes up, we will deal with it. Meanwhile, no one has come forward with any more 'go dos'." The last deal flagged up was Boeing's NATO E-3 AWACS upgrade con tract. "There's no evi dence of wrongdoing, but they didn't like the process and wanted to renegotiate," he says. High on Stonecipher's list of achievements since his return to Boeing is the April launch of the 7E7, with a 50-aircraft order from All Nippon Airways. "I'm one of the guys who loved the Sonic Cruiser, but this is about econom ics," he says. In the run-up to the launch, Stonecipher was portrayed as scep tical about the 7E7, partly because his 1993 decision as MDC chief executive not to launch the MD- 12 large airliner helped pave the way for the Boeing merger and dis appearance of the Douglas name. "I was never sceptical about the 7E7," says Stonecipher, describing himself as one of the aircraft's biggest proponents. "They say Harry's against commercial air- "The good news is we have the cash; the bad news is we don't have a good idea what to use it for" planes. But if I were against com. mercial airplanes, why would | ever merge with Boeing? That was the only attractive thing about merging with Boeing." Stonecipher attributes this repu tation to his tough words when Boeing Commercial Airplanes (BCA) met major delivery prob lems soon after the merger in 1997. "I was pretty blunt. Bui what I didn't like was the execu tion that was going on," he says. "Some say I'm totally different this time round, but I'm not - the situ ation is different. I'm very happy [with BCA]." With the air transport market showing signs of recovery, Boeing is coming under pressure to raise 737 and 747 delivery rates, but Stonecipher is not ready to "jump- start" production. "I hope there will be a very organised approach- to increasing volumes, as big steps in production rates cost you money," he says. When the recovery kicks in, Boeing will not chase market share despite the ground lost to Airbus in recent years, says Stonecipher. "Every time [a company] chases market share, it's a spiral to death. First you destroy margins, then you have problems delivering. So, no, we are not chasing market share - but I didn't say we are going to stay second to Airbus."1 That is good news for Boeing shareholders, who are "scared to death we'll take off chasing market share", he adds. Back in 1993, one reason foi Stonecipher's decision not to pro ceed with the MD-12 was the bil lions of dollars that would then have been needed to revamp MDC's entire airliner range. This time round, he has no similar con cerns about the 7E7's launch fuelling demand for the same cost- saving technology across Boeing's product range. "We are not limited at all [in launching new products]. We have the money, we have talent to do anything we want to, but the mar kets will decide the size of the air- 38 13-19 JULY 2004 FLIGHT INTERNATIONAL www.fliqtitinternational.com
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
