- The Washington Times - Thursday, June 30, 2005

CHICAGO (AP) — Boeing Co. turned to an aerospace veteran to help repair the company’s strained government relations and lead its market-share battle with rival Airbus SAS, naming 3M Co. Chief Executive Officer W. James McNerney Jr. its new CEO yesterday.

Mr. McNerney, 55, becomes the third chief executive of the airplane maker since December 2003, when former CEO Phil Condit resigned in the wake of a defense contracting scandal. His successor, Harry Stonecipher, was forced from his post in March after admitting he had an affair with a female Boeing executive.

Investors sent Boeing’s share price up $4.29, or 7 percent, to close at a four-year high of $65.96 yesterday on the New York Stock Exchange.

The appointment of Mr. McNerney — a Boeing director since 2001 who once ran General Electric Co.’s airplane engine business — bypassed two internal candidates who head Boeing’s largest business units.

Boeing had whittled its list of prospects to five or six earlier this month, including Alan Mulally, head of the commercial division, and Jim Albaugh, head of the company’s space and defense business.

Outgoing Boeing Chairman Lew Platt, who will remain a director, said both Mr. Mulally and Mr. Albaugh have “expressed … their personal commitment to the company and to working closely with Jim.”

Many analysts said the selection of Mr. McNerney was a surprise only because he had publicly tamped down rumors in April that he was a top prospect, saying he would stay at 3M.

“He was someone who everyone wanted to be the guy,” said J.B. Groh, an analyst at D.A. Davidson & Co. “He has a great aerospace background and experience on the leasing side, too.”

Mr. McNerney said yesterday he was sincere in rebuffing Boeing’s advances this spring to stay at 3M but began having second thoughts earlier this month.

“It was a difficult decision, a late change of heart,” Mr. McNerney told analysts and reporters on a conference call. He also was named board chairman and president.

Mr. McNerney inherits a company performing well financially and gaining momentum in its commercial airplane business but still struggling to resolve lingering tensions with the Pentagon and Capitol Hill.

Mr. Condit resigned in December 2003 as a result of defense contracting scandals that ultimately sent two Boeing executives to jail.

Mr. McNerney said he realizes Boeing has a “bit of a hole to climb out of in a few places” but stressed he would place a large emphasis on business ethics.

Despite the recent turmoil, Boeing’s defense sales rose nearly 10 percent annually in 2003 and 2004, its commercial airplane orders are surging and its stock price has doubled in two years.

The Chicago-based company is engaged in a high-stakes bout for supremacy in the passenger jet industry with Airbus, which surpassed Boeing in commercial airplane sales the past two years.

Boeing has pitted its new, fuel-efficient 787 Dreamliner against its rival’s A380 superjumbo carrier, betting that the airline industry eventually will favor long-distance, direct routes instead of the traditional hub-and-spoke model.

Mr. McNerney said he has no plans to tinker with Boeing’s commercial strategy, which has made big strides lately. Boeing has announced orders totaling 580 new airplanes already this year — in contrast with the 277 planes it sold last year.

He said Boeing is strong financially and its “strategy is in good shape,” indicating he will focus on executing Boeing’s business plan rather than implementing sweeping changes.


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