February 21, 1998 in Nation/World

Caught Up In The Air War Boeing Ceo Philip Condit Faces The Challenge Of His Life

Laura Raun Bloomberg News
 

Philip Condit was a lucky guy when he took over as Boeing Co.’s chief executive in April 1996: Sales and profits were soaring, record plane orders were being booked and in his first 18 months on the job the stock reached an all-time high.

Then aircraft production bogged down amid parts and labor shortages. Delivery schedules slipped. Europe’s Airbus Industrie grabbed a big chunk of the world’s airline orders. By the end of 1997, Boeing had its first annual loss in 50 years.

Less than two years after rising to the top, Condit is fighting for his good name and maybe even his job.

He must fix assembly-line problems Boeing brought on itself, and turn out the kind of profits investors expect of the world’s No. 1 aerospace company.

“His watch will be judged by how much Boeing earns through this cycle,” said Robert Finch, a portfolio manager at Aeltus Investment Management, which owned 235,600 Boeing shares at the end of September after selling 798,000.

Condit, 56, a Boeing lifer, knows he must come through or face the consequences.

“My career hinges on the successful operation of the Boeing company, and the production problems are clearly part of that,” Condit said in a recent interview.

Condit’s woes are the result of too much of a good thing. In 1997, his first full year on the job, Boeing snared a record 559 plane orders as the world economy expanded and air travel surged.

To meet the demand, Boeing planned to double monthly production to 43 planes in just 18 months.

Before than happened, parts started running out. And Boeing couldn’t hire and train workers fast enough. By late 1997, production was running into bottlenecks, leading to a temporary shutdown of the 747 and 737 assembly lines.

Making matters worse, Boeing was digesting last summer’s $16.3 billion purchase of aircraft maker McDonnell Douglas Corp.

The bottom line: A $178 million loss last year, the first since 1947.

Just as Condit tackles one problem, new ones pop up. Now it’s economically battered Asia, the region that accounts for a third of Boeing’s $122 billion in orders. Last week, Condit met the head of Indonesia’s national airline to get a grasp on how many aircraft the carrier still is committed to buying. Meanwhile, Philippine Airlines yesterday said it delayed purchases of as many as six planes.

Condit also must quell speculation that he’s about to quit. Earlier this month, he sent an e-mail - verified as authentic by the company - that said, “I am not ‘stepping down.”’

This is a change for Condit, who’s known little but success. As one chronicler of Boeing’s history put it: “He’s the kind of guy you hated as a kid - Eagle Scout at 12, straight A student, class president, pilot’s license at 16” - plus degrees from Princeton University and Massachusetts Institute of Technology.

After joining Boeing in 1965, he held a series of engineering and marketing jobs, working on the 707, 727 and 737 projects. Acquaintances and colleagues say his talent for managing by consensus put him in line to succeed Boeing CEO Frank Shrontz.

Condit “can find one common value in a room and articulate that goal so everybody can see that it represents what they’re after,” said Susan Trapnell, managing director of A Contemporary Theater in Seattle, where Condit leads fund-raising drives.

He honed his style on the 777 jetliner, developed in the early 1990s. There, he championed a philosophy called “Working Together,” in which Boeing engineers, airline customers and suppliers collaborated in designing the aircraft.

The idea was to offer customers planes tailored to their needs. It was great salesmanship, analysts said, though bringing the necessary flexibility to the assembly line proved costlier than expected.

“They don’t yet have the manufacturing methodology that allows them to efficiently make those changes in aircraft,” said Peter Jacobs, an analyst at Ragen MacKenzie Inc., who has an “accumulate” ratings on the company.

Others wonder if Condit needs to bear down harder on his managers.

“New Age management may not be the right approach,” said Prudential Securities analyst Nick Heymann, who has a “hold” rating on Boeing.

Condit says he not yet ready to crack heads. “What I want out of this is that the people involved learn lessons,” he said.

Condit looks the part of a laid-back Pacific Northwest executive. At work, he sometimes wears khakis and a sweater over his shirt and tie. He’s stocky, with prominent ears, which, he jokes, make him a good listener.

In keeping with his ethic of managing by consensus, he sometimes heads to the assembly lines unaccompanied by other executives or aides to hear from the troops.

For now, many investors and analysts say Condit deserves the time to show that he can do the job.

“He will see this through,” said Pierre Chao, an analyst at Morgan Stanley Dean Witter, who has a “strong buy” on the stock. “Condit is the man for the job.”


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