Boeing Crashes, CEO Burns

Boeing (NYSE: BA  ) just ousted the man who bungled the 787. I suppose I should be happy. I'm not.

As a Boeing shareholder myself, I've railed for months over the company's inexplicable (and indefensible) inability to come to a fair agreement with its workers. I've warned of the company's looming cash crisis. Criticized management's failure to execute. Blasted the firm for its failure to keep its promises. And now the man responsible for this mess -- Boeing Commercial Airplanes (BCA) CEO Scott Carson -- is getting the boot.

Good news, right? Well, maybe it is, in a sense. Over his 40-plus years at Boeing, Carson has had his share of successes and failures. He proved an incredible salesman, selling nearly 1000 Dreamliners to customers around the globe while heading up the sales force from 2004 to 2006.

But once charged with actually building the thing, Carson dropped the ball. Delta (NYSE: DAL  ) , Continental (NYSE: CAL  ) , AMR (NYSE: AMR  ) -- all these customers and more stepped up to the plate and offered to deliver Boeing a home run. Their reward has been two years of delays and excuses. Similarly, suppliers Honeywell (NYSE: HON  ) , United Tech (NYSE: UTX  ) , Spirit AeroSystems (NYSE: SPR  ) and others have been left twiddling their thumbs, waiting on Boeing, which failed to get its house in order.

And now Carson's gone. Allegedly, he left of his own accord (Boeing praised Carson for his "long record of accomplishment" and described the departure as a voluntary "retirement"). But as Fool member memoandstich quipped last night: "no one wants to retire before the most ambitious commercial project is completed ... unless you fear you'll never be able to retire."

I agree. Carson got the boot.

And we got  ...
... Boeing Integrated Defense Solutions boss Jim Albaugh, who will move over to run BCA in Carson's stead.

Now, you can argue that this is an improvement. Albaugh's defense unit has done a fine job navigating the new Pentagon world order in recent months. Faced with defense program cuts here at home, he's fought tooth and nail to shoehorn Boeing's F/A-18 Super Hornet into the Navy's budget, and helped open the Indian market to Boeing defense products as well.

Choose your babysitter wisely
But here at the Fool, our memories are longer than that. Albaugh headed Boeing IDS, and was allegedly involved (a charge he disputes) in Boeing's 2003 tanker-leasing scandal, which ended up costing the company millions in fines paid to the government -- and no leasing contract.

In Round 2 of the tanker saga, he came within a whisker of handing the KC-X contract to its archrival last year. Albaugh's fumble landed the company in the middle of an expensive PR war with Northrop Grumman, costing the company additional millions, achieving nothing more than a stalemate and ... so far, again resulting in no contract win.

Now, maybe Carson didn't do the best job raising the 787 from infancy to adulthood, but he's spent five years living, eating, and breathing this project. There's no one who knows it better. Yet now, Boeing's decided to take away Carson's baby and give it to Albaugh.

I have to admit, Fools, that while I agree a change was in order, I'm not sure this is the right one. Putting Albaugh in charge of the 787 is like hiring Octomom to watch your kids.

A better choice
But assuming Carson has to go -- that he's lost control of the program (and he has), and that investors have lost faith in him (which we have), then who is the right man for the job?

The short answer is: "I don't know." I don't have access to Boeing's HR records. I don't know who's in the lineup. But I'll tell you this, if it were up to me, I'd suggest Boeing hire somebody like Tom Buffenbarger to run the 787 program. The president of Boeing's International Association of Machinists and Aerospace Workers (IAM) has made a lot of noise about how, if Boeing would only let the union do its job, everything would go swimmingly at the 787 program.

So give someone like Buffenbarger a chance to put up or shut up. Pick a genius from the management ranks to serve as his lieutenant, identify the problems, and handle the actual work of fixing them. But give the union a figurehead to rally around and get the 787 done right.

Simply put, if Boeing wants to get the 787 program back on track, hiring Octomom shouldn't even be on the table. It's time to change the game. Is this scenario horribly unlikely? Sure, but it's time to swing for the fences.

Is now the time to take a gamble and buy Boeing? On Fool.com, we report, but at Motley Fool CAPS you decide. Click on over and tell us what you think.

Fool contributor Rich Smith owns shares of Boeing. Spirit AeroSystems Holdings is a Motley Fool Hidden Gems recommendation. The Motley Fool has a disclosure policy.


Read/Post Comments (11) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 01, 2009, at 4:15 PM, Mktintelanalyst wrote:

    I was a stockholder but not anymore.

    Great analysis but are you still a stockholder?

    When I comment on a stock - I do what I say.

    Its a shame the Fool doesn't hire an analyst that takes action.

  • Report this Comment On September 01, 2009, at 4:46 PM, TMFRhino wrote:

    Hi Mktintelanalyst,

    As a measure of protection for investors our analysts must abide by our disclosure policy which prevents authors from selling stocks they cover within 10 days of publishing an article on them. So, for someone like Rich who covers the aerospace industry regularly, it's sometimes hard to leave a position for a company that's in the news. Not to say, he's been planning on selling (I don't know), but that's a consideration.

    Besides, I don't necessarily buy the argument, "if you don't like it, get out." An investor can still believe in the long term viability of a company, but disagree with its current direction, especially if its in regards to a limited strategic decision. I don't want to speak for Rich in these regards, but that's my .02 on the issue.

  • Report this Comment On September 01, 2009, at 10:42 PM, TMFDitty wrote:

    Mktintelanalyst,

    First, thanks for the kind words about the content of today's column. Second, TMFRhino summed up our trading restrictions in a nutshell.

    Third and finally... would you prefer to learn that an analyst has reservations about a stock before he sells out of it, or after? Personally, I admire writers like TMFCop and TMFOtter who subjugate their own desire to exit a bad investment to the need to warn other investors of the danger. And I try to follow their good example.

    Fool on!

    TMFDitty

  • Report this Comment On September 02, 2009, at 7:54 AM, flydcjets wrote:

    One needed to look no farther than Ford (aka the one that got away) Allen Mullally!

  • Report this Comment On September 02, 2009, at 8:03 AM, ifixit24u wrote:

    The problem with the 787 program is there is no "pride of ownership". After farming out the work to ump-teen supplers, who's baby is this? The strength of the chain depends on the weakest link and there are too many out there. The team is divided and changing the coach won't solve that proble.

  • Report this Comment On September 02, 2009, at 9:38 AM, 787dreamer wrote:

    I have to agree with flydcjets. It's not Carson that should go but they need to fire Mcnerney and bring bacK Mullaly. It is all of the outsiders from MIckey D, Rockwell that are destroying this company.

  • Report this Comment On September 02, 2009, at 10:08 AM, TMFDitty wrote:

    Hmm. Thanks for reminding me, guys:

    http://www.fool.com/investing/general/2009/06/24/boeings-nig...

    --TMFDitty

  • Report this Comment On September 02, 2009, at 8:32 PM, tdfry wrote:

    TMF Ditty,

    Your article actually showed up on Boeing's employee "newsclips" section and I couldn't help but at least skim your article with such a ridiculous title. I do not own Boeing stock, but I am a contracted employee working for IDS. (I do own stock in other companies.)

    Carson was not ousted at all. It was his decision to retire. He has stated publicly (see http://seattle.bizjournals.com/seattle/stories/2009/08/31/da... that his reason for retiring now is specifically because the new schedule came out that shows a clear path forward for resolving the wing joint issues, as well as any remaining testing up to first flight. If Boeing (i.e., his boss Jim McNerney, the CEO of Boeing) thought he was inept, they would have canned him right after the wing join problems showed up in the test in June.

    I'm not trying to defend Boeing's 787 program: I think they've screwed the pooch on trying to create a new supplier model and construction process. But that's business, and that's stocks. Buy more now, because most likely it'll go back up once the 787 does fly.

  • Report this Comment On September 02, 2009, at 8:33 PM, tdfry wrote:

    TMF Ditty,

    Your article actually showed up on Boeing's employee "newsclips" section and I couldn't help but at least skim your article with such a ridiculous title. I do not own Boeing stock, but I am a contracted employee working for IDS. (I do own stock in other companies.)

    Carson was not ousted at all. It was his decision to retire. He has stated publicly (see http://seattle.bizjournals.com/seattle/stories/2009/08/31/da... that his reason for retiring now is specifically because the new schedule came out that shows a clear path forward for resolving the wing joint issues, as well as any remaining testing up to first flight. If Boeing (i.e., his boss Jim McNerney, the CEO of Boeing) thought he was inept, they would have canned him right after the wing join problems showed up in the test in June.

    I'm not trying to defend Boeing's 787 program: I think they've screwed the pooch on trying to create a new supplier model and construction process. But that's business, and that's stocks. Buy more now, because most likely it'll go back up once the 787 does fly.

  • Report this Comment On September 03, 2009, at 11:29 PM, TMFDitty wrote:

    tdfry,

    I am both flattered, and a little embarrassed that actual Boeing insiders would think my ramblings worth reading. Thanks for chiming in.

    As far as Mr. Carson's public statement is concerned, however, I'll suggest the truism that it's exactly that -- a *statement* for *public consumption*. And I am not in the habit of taking such spin at face value. Both sides have an interest in making this look like a congenial parting of ways.

    Foolish best,

    TMFDitty

  • Report this Comment On October 20, 2009, at 9:21 PM, vanyah wrote:

    I was RIF'd from Boeing IDS on Oct 2 as result of Obama's cut of the European Capability of the GMD program and the reduction in deployed interceptors to Greely.

    Cynical, is the best way to describe my investment postition on Boeing right now, not Bearish or Bullish. Boeing is poised to go up to $70+ or down to $30- dollars per share based on how the Dreamliner performs in December. Invest accordingly Fools.

    Large corporations are in general not well managed, so I do lean Bearish on Boeing right now.

    I'm spending my days educating myself on Options trading. Unfortunatley, I missed the boat on the Motley Fool Options newsletter. Is there any way you could work me in? I want to learn how to write a Put.

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