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Boeing Still Struggling To Achieve Global Status Stonecipher Says Company Needs To Shed Arrogant Image

Sun., March 29, 1998

In a blunt assessment of the new Boeing Co., its president said last week the company is still struggling to shed its longtime image as unwieldy and arrogant and has not yet reached the “global status” it is striving for.

Harry Stonecipher also said he’s embarrassed by the company’s “dismal” 1997 financial performance and is determined to turn things around.

“We at Boeing are struggling to shake off vestiges of parochialism and insularity in the way we think,” Stonecipher said in a speech to the Rotary Club of Seattle. “We’ve been a very inwardly looking company. People like to call us global - we sell lots of products globally - but we haven’t yet achieved the global status that we seek.”

Since joining Boeing as the company’s No. 2 executive last August, Stonecipher has been on a mission to improve Boeing’s bottom line.

Known as a corporate “turnaround king,” the 60-year-old “Tennessee hillbilly” has had lots of practice.

Before becoming president and CEO of McDonnell Douglas, Stonecipher spent seven years turning around Sundstrand Corp., a maker of aerospace products that had faced scandals and criminal charges related to military contracts.

The key to profits, Stonecipher said, is to lower operating costs and be willing to change - areas Boeing still needs to work on.

And to reach global status, Boeing has to “embrace the world, engage the world” and be open to new ideas.

“The scariest thing that happened to me during a review one day was I had an engineering manager stand up to me and say, ‘let me tell you something: we have frozen a design and no one will change it!!’ I said, well …” Stonecipher’s message to that manager was “you have no chance to get costs down unless you are really willing to change.”

“Trying to do the same thing better is the hardest way in the world to save money - you have to do it different.”

Recalling the “Old Boeing,” Stonecipher shared a conversation he once had with former Boeing Chairman T. Wilson.

“I told him, Boeing is arrogant. He (Wilson) responded: ‘And rightly so!”’ “There’s a great difference between pride and arrogance,” Stonecipher told the business group. “And we are working on it every day.”

Stonecipher, who described himself as “profitability driven,” said for years he has defended the widely viewed perception that he is only interested in making money.

“After a while I just said, you’re right I am.”

He said that while Boeing’s name, reputation and market share matches such business giants as Coca Cola and General Electric, the company’s financial status doesn’t stack up.

“We have returns that can’t even see the bottom of Coca Cola - that is not acceptable,” Stonecipher said.

“The Boeing Co. is a great company with a tremendous future but it has a record of financial results that has ranged from a little better than average in recent years to absolutely dismal in 1997. That’s something we can and we will fix.”

Boeing’s lingering aircraft production problems have resulted in $2.6 billion in charges against earnings and contributed to a 1997 loss of $178 million, the company’s first annual loss in half a century.

“Quite frankly, I’m embarrassed that Boeing, which is the world’s biggest and most respected aerospace company, and is loaded with extremely bright and talented people, that we have a market capitalization (the total value of the company’s stock) that’s only about a quarter of that of Microsoft,” he said, noting that the Redmond-based software maker is only a fraction of the size of Boeing and has only been a public company since 1986.

He said he’s “further embarrassed” that GE - a company closer to Boeing’s size - “has a market capitalization that is five times that of The Boeing Co.”

Stonecipher said the best companies today are not only growing but “exceeding the expectations of their customers and ratcheting up earnings at the same time. It can be done.”

That’s the message he and Boeing Chairman Phil Condit are sending to the company’s highest-level executives.

“We don’t make excuses for where we are. We recognize where we are on a number of fronts and we intend to fix those.”

Stonecipher said the biggest threat to Boeing is the company itself.

“We have lots of competitors, but Airbus is not our problem, Lockheed Martin is not our problem, Japan is not a threat, China is not a threat … The biggest threat to The Boeing Co. is failure to execute inside. That’s what we are working on.”

Stonecipher, the same man who was described as the Gen. Dwight D. Eisenhower of McDonnell Douglas, says he is perfectly comfortable in his new role as Boeing’s No. 2 officer. (Boeing acquired McDonnell Douglas last year in a $16 billion deal.)

“I can stop a lot of spears for Condit and I can also throw a lot for him.”


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