Boeing trying to redefine itself

Associated Press

SEATTLE — It's not personal; it's business.

Boeing's chairman and chief executive, Phil Condit, says the headquarters move out of Seattle is not a personal decision. Associated Press

"What we're trying to do is build a business mentality all across the company," Condit said Thursday, a day after the aerospace giant said it was moving its headquarters to Chicago, Denver or Dallas.

"This is about how high can you go, and how well can you run your business, and what kind of return can you produce, and that's how we're running the company."

The move is part of Boeing's attempt to redefine itself, Boeing executives said at the opening of a two-day investor conference the company is holding in the city that won't be its hometown for long. The event was closed to the public, but audio was webcast from Boeing's Internet site.

Condit shook Seattle on Wednesday with the announcement that Boeing would move its headquarters from the city where it was founded in 1916. Only about 500 administrative people would move, however; Boeing's massive aircraft plants and other offices will remain.

Though Boeing has long been a major defense and space contractor, it primarily is known for its commercial jets, as much as Seattle was known as Boeing's company town. But in recent years, Boeing has expanded significantly, buying other aerospace companies and setting up its own operations for such projects as air traffic management and data delivery.

"Not only are we moving from a product focus to a business focus, but we're moving from a very successful airplane business to a broad aerospace company," Chief Financial Officer Mike Sears said Thursday in his speech to investors.

A broader focus will make the company less vulnerable to the economic roller coaster of the jetliner industry, Sears said.

Condit indicated Thursday that the company would continue to diversify, and did not rule out more acquisitions "to fill in some holes." He did not give specifics, although he said some might be related to Boeing Capital Corp., its new financial services arm.

Aerospace analyst Paul Nisbet of JSA Research Inc. said Boeing has been trying to focus more on profit margins since 1997, when it merged with longtime rival McDonnell Douglas. Once known locally as the "Lazy B" for what was perceived as a lackadaisical work force, Boeing has worked hard to change its image to that of a lean, profitable global leader.

"If you go back before the merger with McDonnell Douglas, they were a very clubby operation. They didn't talk too much about their finances and how they were doing," Nisbet said. "But it's changed very dramatically."

Acquisitions also have meant that Boeing's operations are now spread across the country. After acquiring operations including Rockwell's aerospace and defense units and Hughes Electronics Corp.'s satellite unit, Boeing now employs almost 200,000 people worldwide, with plants in 26 states.

But nearly 80,000 of those workers are in Seattle, and many of the company's investors and clients — not to mention employees — see it primarily as a commercial jet maker, said Edward Lawler, director of the Center for Effective Organization at the University of Southern California.

That can be a problem, Lawler said, when Boeing is trying to increase its emphasis on other projects, such as space, military aircraft and aviation services.

"I assume the logic was to say. 'Look, the only way we're going to become less Seattle-centric and be seen less as a commercial operation ... is to move,' " Lawler said.

But even though a move might help, Lawler said the company will still have to deal with how to make all its different companies with their separate histories fit together.

"They have a tremendous challenge in the next five years or so, and that is in integrating the various pieces that they've acquired," Lawler said. "They've got a bunch of cats and dogs."

In an effort to fix that problem, Condit on Wednesday promoted the heads of the company's three main business units. He said that as presidents and chief executive officers, they will have more autonomy to run their divisions.

Alan Mulally of Commercial Airplanes in Seattle, Jerry Daniels of Military Aircraft and Missile Systems in St. Louis and Jim Albaugh of Space and Communications at Seal Beach, Calif., were promoted.

Even with that reorganization, the integration will be a huge challenge on the corporate level, Lawler said.

"One argument would be that they've got enough on their plate with all that without managing a geographic move," Lawler said. "You've got to wonder if it's the best timing. Symbolically, it's the right time; practically, it may not be."

But it might just be symbolism that the company is after as it looks at big cities for the move, Nisbet said.

"It's a little bit more of an image thing as well, to be in some shiny office building someplace, like most corporate headquarters are, rather than right in the production area," he said.