Boeing CEO gets first challenge

CHICAGO — The walkout by more than 18,000 airplane assembly workers at Boeing Co. presents new CEO W. James McNerney with a tough test in his first months on the job, even though analysts say he isn’t likely to intervene any time soon.

The Boeing Machinists’ first strike in a decade reached Day 5 Tuesday with no negotiations scheduled, and industry observers said they don’t expect a settlement for at least a month and perhaps closer to 90 days based on industry precedents.

For the foreseeable future, McNerney is letting the head of Boeing’s Seattle-based commercial airplane operations manage the dispute.

But ultimately the chief executive, president and board chairman may have to make the difficult call on how much Boeing must compromise in order to reactivate idled assembly lines, most of which are located in the Seattle area.

“Eventually the odds are that it’ll percolate up to him,” said Richard Aboulafia, an aerospace analyst for the Teal Group in Fairfax, Va. “Something will have to happen, even if it means sacrificing long-term profits. Strikes don’t usually last longer than two to three months because companies can’t take that kind of damage.”

The 56-year-old McNerney took over July 1 as Boeing’s third CEO since December 2003, hired to restore stability at the top to a corporation shaken by the scandal-hastened departures of predecessors Phil Condit and Harry Stonecipher. McNerney inherited a company performing well financially and gaining momentum in its commercial airplane battle with Airbus.

He also walked into a labor standoff unlike anything he had experienced as chief executive of 3M Co., which does not have unions, or at General Electric Co. where he was CEO of GE Aircraft Engines and GE Lighting.

“For this to happen two months into his campaign is a lot to deal with,” said analyst Chris Lozier of Chicago-based Morningstar Inc. “For the time being, the Machinists have the upper hand in this row. And him being new, I think that also works in the Machinists’ favor.”

Alfred Marcus, a professor of strategic management at the University of Minnesota’s Carlson School of Management, said the changes McNerney made in tightening up 3M operations caused some internal discord but it was not his style to antagonize people.

“I would think that McNerney is going to stay in the background and will let the internal company professionals handle this,” he said. “And since he is new he’s going to want union good will — he doesn’t want to antagonize the unions.”

Analyst Cai von Rumohr of SG Cowen Securities said both McNerney’s background in the industry and Boeing’s recent history make it unlikely he will move quickly to give in to union demands.