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US: The Pentagon Clips Boeing's Wings

by William CederwellGuardian (London)
December 4th, 2003

A bad week got worse for Boeing on Tuesday when a $20bn (12bn) contract to supply the US air force with refuelling tankers was frozen, on Pentagon orders, following allegations of ethical misconduct at the troubled aerospace group.

The contract had become tainted by accusations that Boeing's chief financial officer, Mike Sears, had recruited a senior Boeing executive, Darleen Druyun, when she was still a Pentagon employee and a key negotiator for the contract on the US air force's behalf. The pair were sacked last week, but "the stench has just gotten a lot more pungent", according to the Washington Post. On Monday, Phil Condit, Boeing's chief executive, resigned, saying that "accountability begins at the top".

How ironic that Mr Condit also sits on the board of the Boy Scouts of America, observed Michael Harrison in the Independent: "In the past year, Boeing has behaved in anything but Baden-Powell fashion... In the post-Enron world of US corporate paranoia and ethical rectitude, Mr Condit could not last." The air force contract scandal is just the latest in a long history of questionable goings-on at the company. Boeing already stood accused of stealing "military secrets" from its leading rival Lockheed Martin, for instance, which had also led to defence contracts being revoked.

The Financial Times agreed that Mr Condit's position was "untenable" in the face of all the bad press. But Boeing's difficulties run far deeper than "ethical lapses", the paper said. "There were business problems, too. In spite of Mr Condit's achievement in building the defence business, Boeing had begun to drift." So much so, in fact, that the European aircraft consortium, Airbus, has now overtaken Boeing as "the world's leading civil-aircraft manufacturer". And there are lessons for those who believe that "unity of the board is the key to business success", the FT argued. "However much directors might feel like supporting one another, sometimes the top person has to go."

In the Times, Russell Hotten also pointed to Boeing's poor recent history. "Boeing has been struggling for years. Even before the September 11 attacks in America, Boeing was accused of being out-manoeuvred by its rivals and of not investing enough in new products." But while Mr Condit's departure may have been inevitable, the company has also lost the man "who was instrumental in devising and implementing the strategy to return Boeing to growth". Finding Condit's replacement "will not be easy", said Hotten. Outsiders might find running "a leviathan such as Boeing" too much of a handful. Insiders "might be tainted by the scandals".

Whatever the future leadership, it is clear that Mr Condit's seven-year reign was one of the worst ever for Boeing, said Chuck Taylor in the Seattle Weekly. "I cannot think of a time when there wasn't some crisis under way... since Mr Condit was appointed CEO in 1996... If it wasn't a strike, it was a suspect plane crash or a dumpy stock price or poor manufacturing quality ... Then the commercial-space market for launches and satellites, on which Boeing gambled, imploded."

Even without the latest scandals, Mr Condit's future at Boeing had hardly looked secure, as "ambitious acquisition and diversification merely brought more and diverse problems", said Taylor. In the end, though, "no single lapse was Mr Condit's fault. In business, as in engineering, complexity and human nature often collide and confound any leader's best intentions, and, in doubling the size of Boeing, Mr Condit had created a monster."

In the New York Times, Micheline Maynard warned of other dark clouds on the horizon. The future for Boeing ,"no matter its tumultuous present, rests in large part on the wings of its next-generation jet [the 7E7]". But while Boeing held a contest to name the new 7E7 aircraft ("Dreamliner" was the winner) and designed a "curvy, futuristic" fuselage, promising "greater fuel efficiency and passenger comfort", it still cannot decide whether to push ahead with manufacture. But, said Maynard, the decision to make new aircraft is vital, especially if it is to win back lost ground from Airbus.





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