The Boeing board of directors has elected Dennis A. Muilenburg the company's 10th CEO, succeeding W. James (Jim) McNerney, Jr., who held the position for the past decade.
Muilenburg, who has served as Boeing president and chief operating officer since 2013, will take his position of president and CEO on July 1.
To ensure a smooth transition of his Boeing CEO responsibilities to Muilenburg, McNerney, who joined the company’s board of directors in 2001, will continue continues as its chairman and a Boeing employee until he retires at the end of February 2016.
McNerney will then continue advocating on issues important to Boeing’s US and global customers, partners and stakeholders, including ongoing Washington, D.C., engagement.
“Dennis is an extremely capable, experienced and respected leader with an immense passion for our company, our people, and our products and services,” said McNerney, who made priorities of succession planning and leadership development at the outset of his tenure.
“As CEO, Dennis will bring a rich combination of management skills, customer focus, business and engineering acumen, a can-do spirit and the will to win. With a deep appreciation of our past accomplishments, and the energy and skill to drive those to come, he is well suited to lead our very talented Boeing team into its second century,” he added.
Muilenburg, 51, is a 30-year company veteran. Along with Boeing Commercial Airplanes President and CEO Raymond L. Conner, he also has served since 2013 as company vice chairman. Conner, 60, remains in charge of the $60bn Commercial Airplanes unit and will serve as sole company vice chairman, where he will continue working closely with Muilenburg on key corporate processes and integrating cross-enterprise strategies and efficiencies.
Muilenburg joined Boeing’s engineering ranks as an intern in Seattle in 1985. He earned a bachelor’s degree in aerospace engineering from Iowa State University and a master’s in aeronautics and astronautics from the University of Washington. He held numerous program management and engineering positions of increasing responsibility early in his career, including on the company’s High Speed Civil Transport, F-22, Airborne Laser and Condor reconnaissance aircraft.
“The opportunity to lead the people of Boeing in service to our commercial and government customers is a tremendous honor and responsibility,” said Muilenburg. “Our company is financially strong and well positioned in our markets. As we continue to drive the benefits of integrating our enterprise skills, capabilities and experience – what we call operating as ‘One Boeing’ – we will find new and better ways to engage and inspire employees, deliver innovation that drives customer success, and produce results to fuel future growth and prosperity for all our stakeholders.”
McNerney’s legacy at Boeing
McNerney, 65, was elected chairman, president and Boeing CEO in 2005.
During his tenure, the company recaptured the global lead in commercial airplane deliveries with steady increases in production and a comprehensive update of its product line; maintained a strong position in defense markets despite a downturn in US military spending; restored Boeing’s historic leadership in human spaceflight with major new program wins; and expanded its engineering and manufacturing footprint inside and outside the United States.
Also, with a relentless focus on internal productivity to fund investments in innovation and growth, Boeing’s financial performance steadily improved under McNerney, with revenue rising 73% to a record $90.8bn last year from $52.5bn in 2004, the year before he became CEO. Backlog and earnings per share tripled over the period, also to record levels.
From December 2005 until today, Boeing’s share price more than doubled from $69 to $142, although at the height of the Global Financial Crisis in March 2009, and amidst difficulties with the 787 programme, the share price receded to as low as $30.10.
Despite increases in revenue, under McNerney, Boeing has accrued billions in losses from its 787 programme. These recurring production losses (Boeing loses tens of millions of dollars on every 787 it builds) stood at over $26bn in January this year.
‘This terrible drag on profitability would have been partly avoided if Boeing management had taken a different approach to labor. Rather than the McNerney formula of eliminating pensions, cutting wages, and shifting production to new facilities, the company could have proposed a partnership with their workers. After all, productivity improvements often come from the shop floor. That means getting the people who build aircraft to figure out ways to reduce scrap, improve work flow, and eliminate defects.
‘To encourage the process improvements that happen in a factory, a workforce should be incentivized with profit sharing or other compensation. At a minimum, machinists and engineers need to feel that their work is valued. Taking away pensions at a time of record sales is a terrible way to motivate workers to go the extra mile.’
Unions welcome the appointment
Over the last few years under McNerney, the dealings between Boeing’s management and the unions were tumultuous. The relationship was summarised succinctly by McNerney himself when, during a conference call with Wall Street analysts in July 2014, McNerney said he would not retire when he turned 65 because: “The heart will still be beating, the employees will still be cowering (laughing). I’ll be working hard; there’s no end in sight.”
At the time, Jon Holden, president of the International Association of Machinists (IAM) District 751, described the comments as “a new low” in relations between Boeing and its workers.
McNerney’s later apologised for the remarks and said he was “simply trying to make light of my age and tenure at the company on a question that I have been asked at least a dozen times over the past several weeks alone … There was no intent to slight anyone but myself, and the last thing on my mind was to characterize my relationship with Boeing employees in any negative way… I should have used different words, and I apologize for them. I will definitely be more careful going forward.”
But according to some analysts, his comments were indicative of his approach towards workers which included the use of threats of mass layoffs and shifting production from the company’s main facilities in Seattle to lower-wages and extract concessions from workers.
In 2013, IAM members voted down a new contract proposal that would have guaranteed the Boeing 777 X be built in the Seattle but which would have frozen the workers’ pension program, raised the cost of health care and created an adjusted wage scale for new hires, among other compromises.
Manufacture of the plane went ahead anyway at the company’s Everett plant, just north of Seattle.
In April, 2015, Boeing fended off the first real organised challenge at its South Carolina non-union manufacturing plant, whenthe IAM cancelled a vote aimed at unionizing the plants 3,175 employees.
The IAM, claimed Boeing used underhanded tactics to suppress support for the vote, but Boeing dismissed those claims.
Following the announcement of Muilenburg’s appointment as new Boeing CEO, The IAM issued a brief statement that underscored the bitterness of its relationship with McNerney.
“CEOs come and CEOs go,” began the two-sentence note from District 751 President Jon Holden. It continued, “We welcome Boeing’s announcement that Dennis Muilenburg is taking over as CEO, and encourage him to invest in the workforce and recognize the value of each and every employee at the Boeing Co.”
Muilenburg has so far not revealed his position regarding organised labor, however, an IAM spokesman told Charleston, South Carolina’s The Post and Courier that indications “point to a continuation rather than a departure from Boeing’s current policies regarding workers’ organizing rights.“