Boeing has replaced Commercial Airplanes CEO Scott Carson with Jim Albaugh, head of the company's military unit, continuing a shift within the company toward leaders drawn from the defense division.
By replacing Commercial Airplanes CEO Scott Carson with Jim Albaugh, head of the company’s military unit, Boeing continues a shift within it toward leaders drawn from the defense division.
The new head of Seattle-based Boeing Commercial Airplanes, who takes over today, has no experience with airline customers or with the marketing side of the civilian aircraft business.
But the delays with the 787 Dreamliner are at the root of the appointment. Boeing’s trouble isn’t with selling the 787 — it’s with getting the pioneering plane built and delivered.
“There is a trend here of bulking up on engineering at Boeing Commercial Airplanes using defense-side people,” said aviation-industry analyst Richard Aboulafia, of the Teal Group.
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Aboulafia said the performance of the commercial unit over the past five years has been excellent in marketing and selling jets, but problematic in terms of engineering.
“Bringing an engineering culture back, this might be the way to start,” Aboulafia said.
Yet a leadership change alone won’t fix the problems with the 787. And another analyst, Cai Von Rumohr, of Cowen & Co., said Carson’s stepping aside suggests Boeing still has far to go.
“It doesn’t give one confidence,” von Rumohr said. “If you really thought you were over the hump, you’d wait around for the victory lap.”
Albaugh and Carson were not made available to the media. But in a conference call Monday, Boeing Chairman and CEO Jim McNerney said Albaugh was chosen because Boeing needs to focus on fixing the Dreamliner program’s technical problems.
“Albaugh represents the deepest and most varied experience we have in running programs, often very technically complex,” McNerney said. “Jim is a technical guy himself and has a deep appreciation for the kind of oversight we need to blend into our development efforts here.”
Carson will step down as of today and will retire from Boeing at the end of the year, the company said.
Reacting to the obvious suspicion that Carson was pushed out over the latest Dreamliner delay, McNerney referred several times Monday to “Carson’s decision to retire” and insisted Carson had asked to step down.
Carson, 63, in an internal message to employees Monday, said the revised timetable for the jet means “the new leader will have a clear path forward.”
The full Boeing board met last week in Everett and reviewed the new plan to fly the 787 by the end of the year. They also discussed Carson’s departure and approved his replacement.
McNerney said the board was “very confident in the direction that the new schedule represents and in the management change we are describing here today.”
Albaugh, 59, in his own message to commercial-airplane employees Monday, reached for an inspirational goal of restoring engineering leadership.
“In its soul, Boeing has always been and remains an engineering company,” the message read. “As an engineer, I look forward to learning from and working with you. The heart of this company is the skilled machinists, technicians and mechanics — true craftsmen and wizards — who deliver on their promises every day.
“Boeing is truly an iconic company, and I believe we have the opportunity to change the 21st century just as we have changed the last one,” Albaugh wrote. “The 787 is the starting point.”
A few years ago, the Integrated Defense Systems (IDS) unit — with Albaugh at the helm since 2002 — was in disarray after several military-procurement scandals, including one that lost Boeing the original Air Force tanker contract and led to a record $615 million fine in 2006
Boeing’s center of gravity shifted toward the successful commercial-airplane unit as the 787 Dreamliner’s sales skyrocketed.
But the supply chain and technical problems that have now delayed the 787 by more than two years have arrested that swing.
Albaugh’s appointment comes after the 2007 transfer of Pat Shanahan from Boeing’s Missile Defense to take over the 787 program. Last December, Shanahan was elevated to run all the commercial-airplane programs, and another IDS manager, Scott Fancher, came in as head of the 787.
Yet, some analysts questioned whether Albaugh is the man for the job.
Rob Stallard, an investment analyst with Macquarie Securities, cited “the less than perfect track record that IDS has had in program execution and wins over the last couple of years under [Albaugh's] leadership.”
On Stallard’s list of problems:
• The Wedgetail airborne early-warning aircraft, delayed more than two years at a cost of hundreds of millions of dollars;
• Repeated technical problems and delays on military-satellite programs, including the Air Force GPS system;
• Ballooning cost overruns on the Army’s high-tech tactical radio program;
• The loss of the initial Air Force refueling-tanker contract to a competing Northrop Grumman bid that used an Airbus jet.
On the other hand, some of the defense unit’s biggest current headaches can be blamed on shifting Defense Department requirements, von Rumohr said.
One example is the Pentagon’s reduction of Boeing’s role in the Army’s Future Combat Systems, a multibillion-dollar program to create a series of ground vehicles and weapons systems linked by a sophisticated communications and data network.
Aboulafia said that despite some exceptions such as Wedgetail, the defense unit under Albaugh has a record of executing most programs well, including its C-17 military cargo jet and F/A-18 jet fighter programs.
Dennis Muilenburg, 45, one of Albaugh’s key lieutenants in the defense division, will succeed Albaugh as president and CEO of Boeing’s IDS unit.
Albaugh was born in Richland and began his career as a project engineer for space-rocket developer Rocketdyne at the nearby Hanford nuclear reservation.
Although he is now based in St. Louis, the new boss of the division headquartered here stressed his Pacific Northwest roots Monday.
“Growing up in Eastern Washington, I remember watching the contrails from 707s and B-52s flying overhead. As I grew older, I recognized the great significance of these aircraft. To this day, I believe Boeing did more to change the 20th century than any other company on Earth,” Albaugh wrote. “Much of this was done in Puget Sound.”
In July, at the rollout of the P-8A Poseidon anti-submarine jet in Renton, Albaugh made a point of recognizing “the men and women of Puget Sound” who had built it, and even gave a special thanks to union leaders in the audience.
That elicited a welcome Monday from Machinist union district President Tom Wroblewski.
“We were encouraged by his comments,” Wroblewski said in a statement. “The Machinists union looks forward to building a strong relationship with Jim Albaugh.”
Dominic Gates: 206-464-2963 or email@example.com.