If Boeing’s planned merger of McDonnell Douglas wins approval this summer, the new $48 billion company most likely will have three main business units - with its military operations based in St. Louis, McDonnell Douglas chief Harry Stonecipher said last week.
He stressed, however, that definitive restructuring plans for what is being called “the new Boeing” still are being worked out and that no major decisions have been finalized.
The concept to create three business units first arose last December when Boeing Chairman Phil Condit and Stonecipher agreed to merge the two companies in a $14 billion stock deal.
Stonecipher, McDonnell’s chief executive officer and president, said another plan to keep Boeing’s defense and space operations together, as they are now, is still on the table but that the original concept makes good business sense.
“We envision a three-legged stool,” Stonecipher said during an interview at his corporate office overlooking Lambert Field.
The three “legs” are: Boeing’s commercial aircraft division, which would remain headquartered in Puget Sound; a newly created space business based in Southern California; and the military unit in St. Louis.
The restructuring plan, however, does not mean that Boeing’s Defense & Space operations in Kent, Wash., or its helicopter division in Philadelphia will change dramatically, Stonecipher cautioned.
He said it is possible to keep Boeing’s defense business, including the F-22 production work, in Washington state even if the military headquarters were in St. Louis.
Stonecipher, who is moving to the Seattle area to become president of the post-merger company, plans to meet with Condit in Seattle this week to continue discussions on the restructuring and other merger issues.
He said the “new Boeing” would not result in a significant reduction in the work force, and instead would have opportunities for growth in both the commercial and military sectors.
“It is not our objective to start moving people all over the place - that makes no sense at all,” Stonecipher said. “What we’ll try and do is locate similar processes where they need to be.”
He acknowledged that some people could be given new assignments and even asked to relocate, especially in the corporate offices of both companies where there is more duplication of duties.
But he added, the fewer people the company has to move, the better.
“We are not in the business of disrupting people’s lives, and besides that, it’s expensive as heck,” Stonecipher said.
Stonecipher said ongoing “transition team” meetings are progressing well and that the companies are still on track for an Aug. 1 completion of the merger, which would create the world’s largest aerospace company with more than 200,000 employees.
The deal still must get the blessing of shareholders, the Federal Trade Commission and the European Union’s commission on competition.
Stonecipher discounted recent concerns aired by European Commissioner Karl Van Miert as “posturing” to gain favor from European leaders.
Van Miert said earlier this month that the commission had serious doubts about the merger and most likely will oppose it.
“There is a lot of posturing and a lot of politics behind it,” Stonecipher said. “He’s making lots of noises, but in the final analysis he has to say what’s wrong with it.”
Stonecipher said the commissioner’s comments have been “very disturbing to us because of all the uncertainty. People hate uncertainty more than anything.”
He said he is confident that the deal will ultimately go through, even if the European Union opposes it.
“We could fight it through the courts,” Stonecipher said, adding, “it would be more than casually interesting if the Federal Trade Commission approved it and the European Union disapproved it.”
Despite reports that Stonecipher and Condit are like “oil and water,” Stonecipher said the two executives are a lot alike and share the same philosophy in how to lead the new company.
He last met with Condit April 11 in St. Louis to discuss merger organization and staffing issues.
The two executives are getting advice from two 17-member transition teams made up of top officials representing both companies.
Transition team leaders Jerry King, Boeing’s former Defense & Space Group president, and Jim Palmer, McDonnell’s chief financial officer, report frequently to Condit and Stonecipher on progress of the merger talks.
Stonecipher said the transition team has three main tasks, with the top priority “to get the deal done.”
That means satisfying the federal and foreign agencies that have to approve the merger, namely the FTC and the European Commission.
“We have to make this thing work first,” Stonecipher said.
The second priority is to ensure that the new company will be able to operate smoothly from day one.
The third, and possibly the most daunting job, is to map out what will happen after day one.
In addition to figuring out what will occur in the early days of the merger, executives from both companies are trying to determine what shape the new company will take in the next few years.
“We need to know what the company will look like in three to five years,” Stonecipher said.
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