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Boeing tactics remain under scrutiny after condit resignation Original Source Link: (May no longer be active)
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Posted on Tue, Dec. 02, 2003
Boeing tactics remain under scrutiny after Condit resignation
DAVE CARPENTER
Associated Press
CHICAGO - Boeing Co. is under new leadership following the sudden resignation of Phil Condit, but the company still faces the same tough questions about the methods it used to secure a lucrative tanker contract from the Pentagon.
New CEO Harry Stonecipher, who was rushed back from retirement in Florida to restore order to the embattled aerospace manufacturer, said Monday that answering those questions - and fixing Boeing's dented reputation - will be his chief objective.
At risk is the fate of the controversial $17 billion contract Boeing won this fall to have the government acquire 100 of its 767 jets for refueling tankers, as well as other contracts in its huge defense business.
"Getting the tanker program going and reassuring the government that we are not only compliant but an exemplary supplier is one of the first, foremost and immediate tasks that I have," said Stonecipher, who had retired last year. "This hiccup we've had will cause us to have to do a lot of reassuring with the government."
The 67-year-old former president of the company was asked to return by Boeing's board, where he has served as a director since joining Boeing from McDonnell Douglas when the two companies merged in 1997. Also, former Hewlett-Packard Co. CEO Lewis Platt, who serves on Boeing's board, was named as non-executive chairman as the company split Condit's former duties in two.
The legislation authorizing Boeing's tanker contract with the Pentagon was signed by President Bush last week after it won approval in Congress, but it could be delayed from being carried out if Congress calls for additional hearings.
Two critics of the deal - Republican Sens. John McCain of Arizona and Peter Fitzgerald of Illinois - already called last Friday for Defense Secretary Donald Rumsfeld to postpone the deal in light of the recent firings of two Boeing executives.
Those dismissals were made Nov. 24 after Boeing said it learned in an internal inquiry that chief financial officer Mike Sears had negotiated to hire Air Force procurement official Darleen Druyun at a time when she was in a position to influence military contracts involving the company.
The Pentagon's Office of the Inspector General is looking into allegations that Druyun acted improperly in giving Boeing financial information about a competing bid by Airbus.
Platt stressed that "nothing whatsoever" had been found implicating Condit in the ethical issues that resulted in the firings.
But the tanker dispute isn't the only controversy to have marred Condit's tenure.
Most recently, the Pentagon punished Boeing for stealing trade secrets from rival Lockheed Martin to help win rocket contracts. Boeing has been indefinitely banned from bidding on military satellite-launching contracts, which has already cost it seven launches worth about $1 billion.
Seven months before that, the General Accounting Office found that Boeing had obtained and misused proprietary information from rival Raytheon as they competed for a missile-defense contract.
Condit, 62, said he ended his 38-year career with the company to try to prevent it from getting "bogged down" after a year of upheaval.
"In the end, I concluded that the controversies and distractions of the past year were obscuring the great accomplishments and performance of this company," he said on a conference call.
While the defense business has prospered, however, Condit also has been criticized in some quarters for ceding the market-share lead in commercial airplane manufacturing to Europe's Airbus while failing to see a single new airplane program launched at Boeing during seven-plus years at the helm.
The focus on defense helped cushion the blow from the aviation slump that followed the Sept. 11, 2001, attacks but leaves Boeing facing an uncertain future in commercial jets, even if it goes ahead with the mid-range 7E7 jet that the board is close to signing off on.
"Once the commercial airplane market recovers and some of these controversies around the space and defense business subside, I think the epitaph for Phil Condit will be one that is positive," said analyst Peter Jacobs, who follows the company for Ragen MacKenzie.
"The only chink in Phil's armor is that there are a slew of controversies about ethical behavior that happened on his watch, and there's really no excuse for that," Jacobs said.
Even Boeing backers in Washington are hesitant to say the company's troubles in the tanker controversy are over.
"I hope this is the end of it," said Rep. Norm Dicks, D-Wash., a senior member of the House Appropriations Defense Subcommittee and leading proponent of the tanker deal. "But I don't know. There are still other investigations by the IG (inspector general) and internally by Boeing that are under way. We'll have to wait and see how that turns out."
Wall Street observers said the naming of Stonecipher, known as a no-nonsense executive who keeps close tabs on costs, should help Boeing improve its battered image in Washington, where suspicions that cronyism and insider deals are rife in the defense-contracting business have only increased in recent months.
As part of the reshuffling of duties, Stonecipher plans to reduce his executive council - those who will directly report to him - to 12, down from the 29 who reported to Condit.
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AP Business Writer Helen Jung in Seattle contributed to this report.
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