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Tue, Dec 02, 2003

Condit's Legacy

By Shifting Boeing's Focus To Defense, Did Its Outgoing CEO Fumble?

Phil Condit had a vision back in 1996.

He believed the future of Boeing, which he'd just been tapped to lead as president and CEO, was not in commercial aviation, but in defense contracting. Condit surprised the aerospace world Monday by resigning, leaving his post to former Vice Chairman Harry Stonecipher. But what about the vision thing?

Condit's reasoning seemed a simple example of capitalism at its best. The average profit margin in building commercial aircraft, Boeing's most visible endeavor, was five percent. But the margin in defense contracting is about eight percent. When you're dealing in astronomical numbers as Boeing does, a difference of three percent amounts to a load of cash.

So Boeing got hawkish under Condit's command, changing the ratio of its overall business until the point where, today, commercial aircraft manufacturing accounts for only 44% of Boeing's revenue. Its main rival in that field is Airbus, which, next year, will overtake Boeing as the world leader in commercial aviation manufacturing.

The quest for higher profits brought ethical scandals to Boeing. In competing with the likes of Raytheon and Lockheed-Martin, Boeing executives found themselves under investigation for breaches like industrial espionage and unethical practices. Those allegations, involving the Evolved Expendable Launch Vehicle in 1997, the missile defense shield in 2002 and now the "supertanker" replacement for the USAF's KC-135s, hang like a sour cloud over the company.

So perhaps that's why Stonecipher appears headed back to Boeing's roots -- commercial aviation. In an interview with Fox News, along with outgoing CEO Condit, Stonecipher said he's personally backing the 7E7 project as it goes before the Boeing board of directors this month for the green light to manufacture.

"Oh, I think it is a great idea," he said.

"I think we need a new airplane program and I think the guys (developing the 7E7) have done a good job, a very thoughtful job and they’re going to be bringing it to the board. And I’m going to be right there beside them helping them present the thing to the board."



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