Bad News Boeing

Over the seven years of Phil Condit's reign as chief executive officer of Boeing, I can't think of a time when there wasn't some sort of crisis under way, or some imminent challenge that was being compared to that of the late 1960s, when Boeing executives correctly bet the company on the potential success of the 747 a business decision and engineering accomplishment that set Boeing's gold standard of glory. This is not to say that Boeing never had problems before, but in the years since Condit was appointed CEO in 1996, negative or skeptical headlines have been numerous and glory has been elusive. If it wasn't a strike, it was a suspect plane crash or a dumpy stock price or poor manufacturing quality. A rocket blew up. Then the commercial-space market for launches and satellites, on which Boeing gambled, imploded. The company lost a bid to be lead contractor for the next generation of jet fightera prize worth billions and won by archenemy Lockheed Martin. A space shuttle burned up on re-entry, and while that was ultimately NASA's fault, Boeing decisions and engineering played a role in the disaster. The company won the nation's spy-satellite contract, which Lockheed had held for 40 years, but word has it that Boeing has blown that opportunity, too. And so on.

So Condit's legacy was certain even before the ethics scandal of 2003 prompted his resignation this week: Ambitious acquisition and diversification merely brought more and diverse problems. The CEO and chairman of the board was responsible for confronting all those problems and more, and in the end he fell on his sword. But the world isn't so simple. No single lapse was Condit's fault. In business, as in engineering, complexity and human nature often collide and confound any leader's best intentions, and in doubling the size of Boeing, Condit had created a monster.

The focus on growing and diversifying the business during Condit's leadership was so distracting that the company stumbled big-time in the one sector it already ruled. Boeing had amassed a record backlog of airplane orders in 1997, but the boom coincided with an efficiency campaign that had just reduced the number of experienced factory workers and parts suppliers. In the months it took to fully sort out the mess in the Everett and Renton plants, the Commercial Airplanes division was about as inefficient as can be. It had to shut down the 747 and 737 assembly lines for a month, and Boeing posted a loss that year of $178 million. Eventually, Boeing did streamline production, delivering 620 planes in 1999, a record. But then came 9/11 two years later. Today, with no end to the air-travel downturn in sight, Boeing expects to deliver only 280 planes in 2003, the fewest since 1996. As CEO, Condit lasted exactly one bust-boom-bust cycle in the predictably up-and-down airplane business. Same with Boeing's stock price, which is virtually the same today as when Condit took over.

IT'S AS IF NOTHING happened during the past seven years, yet so much did. Before Condit, Boeing did some military and space work, but until it acquired Rockwell in 1996 and merged with McDonnell Douglas in 1997, Boeing was primarily a commercial-airplane company. Commercial air travel is still one of life's nonessentials, so the health of the economy at any given moment dictates the revenue from passenger planes. The space and defense assets of Rockwell and McDonnell Douglas were supposed to diversify Boeing, to offset the cyclical airplane business, to smooth out the revenue stream. So was the company's foray into so-called aircraft services, like financing, refurbishment, air traffic control, and airborne Internet connectivity. And yet a chart of Boeing's stock price between then and now has many altitudesas high as $69 (2000) and as low as $25 (2003). Under Condit, as a diverse and global $50 billion-a-year aerospace behemoth, the company was as bipolar as ever. In contrast to the volatile dot-coms of the late 1990s, Boeing actually made stuff and actually made money doing it. It was supposed to be a slow but steadyand safeinvestment. It hasn't been. Boeing is merely bigger, which might be why a certain person couldn't successfully manage the company he created.

Condit, 62, began as a young engineer at 24 and worked on just about every airplane program except the 747. He earned his reputation of capability in managing complex projects through key roles in development of the 757 and 777. The Boeing he knew then, the company that nurtured him, was far different than the company he later created as CEO. It was focused on building jetliners, and it dominated that industry, cyclical though it was. If the rough period starting in 1997 was anomalous, one wonders what Boeing would be had it not ventured into other areas of aerospace. The commercial- airplane business today is profitable, while the defense and space businesses struggle. Condit has said it would have been folly to not expand the company, but I wonder.

While that expansion was under way, Airbus, the European commercial-airplane consortium, was grabbing market share. Airbus marketers taunted Boeing as they began to win over traditional Boeing customers. Boeing finally gave up complaining that Airbus, subsidized by its sponsoring governments, was competing unfairly, selling planes at little or no profit. Sometime during the Condit years, it ceased to matter whether Airbus played fair or not. Remember those bumper stickers, "If it's not Boeing, I'm not going"? It was the ultimate irrationality of Boeing engineers and mechanics during the rise of Airbus. No one outside three Western Washington counties cares what kind of plane they're on, if they can even identify it. The fact is Airbus planes are excellent products. While Boeing sought new frontiers in defense and space, its core competency, commercial transports, was eclipsed by European engineers, born of World War II, who had been liberated in part by B-17s Boeing built on East Marginal Way South.