Bucking Up Boeing, With Very Frank Talk
After taking over the helm of Boeing Co., Harry Stonecipher began making weekly trips to Washington. His goal: to convince lawmakers and defense officials that the company, in his words, isn’t run by a “bunch of crooks.”
By most accounts, the chief executive’s first-hand lobbying is succeeding, and the first payback could come within days. A tentative agreement has been reached to restore Boeing’s status as a rocket contractor, Stonecipher said in an interview, and if the Air Force does lift the suspension as he expects this week, Boeing will be able to compete with Lockheed Martin Corp. for a contract potentially worth $5 billion.
Air Force officials wouldn’t comment on the status of the suspension, imposed because of federal investigations of alleged ethical misconduct that helped spur the resignation of Boeing’s longtime CEO, Phil Condit, and brought Stonecipher out of retirement to replace him in December.
That’s when the 67-year-old Stonecipher started his Washington sojourns.
“It’s fairly common for defense industry CEOs to make the rounds on the Hill and at the Pentagon, but what’s different here is the amount of fence-mending that’s required,” said Loren Thompson, a defense policy analyst for the Lexington Institute. “Usually you’re just trying to maintain relations, but for Stonecipher, he needed to smooth ruffled feathers.”
At the top of his meet list was Sen. John McCain (R-Ariz). McCain was elusive, and weeks of requests for a meeting went unanswered. Then, Stonecipher spotted him at a private reception.
“I really need to see you and see how we can get out of the penalty box,” Stonecipher recalled telling the senator, a staunch critic of a suspended $20-billion Pentagon deal to lease and buy 100 aerial refueling tankers from Boeing.
The two met a few days later at McCain’s office on Capitol Hill. Stonecipher said the discussion was frank.
“The senator said to me point-blank, ‘I do not have a problem with you personally, Harry. I don’t have a problem with Boeing. I have a big problem with the Air Force,’ ” Stonecipher recounted. “He made it very clear he didn’t like the process” by which the government handled the contract.
Military contracts are crucial to Boeing’s future. Once the largest commercial aircraft maker, it now derives more than half of its $50.5 billion in annual revenue from defense-related work, a significant portion of which is based in Southern California.
Those contracts were put in jeopardy by two probes. One is being conducted by the Pentagon and Congress into whether former Boeing financial officer Michael Sears improperly offered a job to a Pentagon acquisition official as she was negotiating the deal to lease and buy the 100 Boeing planes. After the official, Darleen Druyun, retired from the Air Force, she was hired by Boeing. She was dismissed along with Sears in November.
The other probe is related to charges that two Boeing employees stole proprietary documents from rival Lockheed Martin to win a contract for a new generation of rockets. The Air Force subsequently suspended Boeing from seeking additional rocket contracts.
After becoming CEO, Stonecipher said his top priority was “to deal with this perception that we’re a bunch of crooks.”
“My communications people hate that I said that, but it’s served us very well,” Stonecipher said last week in his 36th-floor office overlooking downtown Chicago. “If you start talking about ethics and integrity, it’s kind of abstract to people. But if you say to someone, ‘Do you think I’m a crook?’ and they say, ‘No, I don’t think you are,’ it’s something that is very clear that you can latch on to.”
With a stack of names of defense officials and lawmakers “a quarter-inch thick,” he said he vowed to visit “anyone who is willing to talk to me.” So far he has met with White House officials and Capital Hill staffers, generals and lawmakers, including Sens. John W. Warner (R-Va.) and Daniel K. Inouye (D-Hawaii), as well as top Pentagon officials such as Gen. Richard B. Myers, chairman of the Joint Chiefs of Staff, and Air Force Undersecretary Peter B. Teets.
“The only way to restore the reputation ... is to get yourself to Washington and have a face-to-face with everyone who has a problem with us,” Stonecipher said. “As I’ve gone to see all these people, my answer has been that we’re going to fix it and here’s what we are doing to fix it.”
Wall Street seems satisfied.
Boeing stock tumbled to $25.70 a share amid the allegations of misconduct last spring but has climbed back, closing Friday at $41.35, down 41 cents for the day.
Stonecipher, the son of a Tennessee coal miner, appears to be winning over others.
“I feel very confident that Boeing now, under the leadership of Harry Stonecipher, is taking these ethics violations very seriously,” Teets said during a Senate Armed Services subcommittee hearing last month.
Stonecipher said he was waiting for the Pentagon and Congress to complete the investigation of the $20-billion air tanker contract, which he said he hoped would be resolved by May.
On Friday, the Pentagon’s inspector general said it shouldn’t go forward until significant changes are made to the contract, which he said could cost the government $4.5 billion more than necessary. Boeing’s European rival Airbus has offered to build a fleet of aerial tankers with mostly U.S.-made parts if the contract is opened up to a new bid.
Stonecipher, who was Sears’ mentor for years at Boeing, described how pained he was by the Sears-Druyun incident.
“I’ve known Darleen Druyun and Mike Sears for a long time, 10 years at least,” he said. “They are two of my favorite people, so when this came up, it made me ill. It really did. I was very disappointed.”
Stonecipher said Boeing’s board unanimously agreed to fire Druyun and Sears not only because of the conversations they had about a Boeing job but because they had tried to “cover it up.”
“You cannot have people at any level, particularly at this level
It wasn’t the first time Stonecipher had mopped up a mess. In the late 1980s, he was instrumental in getting Sundstrand Corp. back in good graces with the Pentagon after the company pleaded guilty to overcharging on defense contracts. Stonecipher had joined Sundstrand in 1987 as chief executive after 26 years working under Jack Welch, the legendary chief at General Electric Co.
In 1994, Stonecipher was named CEO of McDonnell Douglas as the company came under fire for cost overruns and production problems on its C-17 military transport plane.
When the Pentagon threatened to cancel the deal, Stonecipher went to Washington and convinced the military that the company could fix the problem and build the airplane on schedule. Two years later, the Pentagon tripled its orders for the plane. In 1997, McDonnell Douglas merged with Boeing.
Two years ago, Stonecipher retired from Boeing, where he had been president and chief operating officer, and intended to play a lot of golf in Florida. Then Condit resigned and Stonecipher stepped in.
“I’ve done this before,” Stonecipher said, “and that’s why I’m back.”
