clock menu more-arrow no yes

Filed under:

Strike a challenge for new Boeing CEO

Analysts say he isn't likely to intervene any time soon, however

Julie Brecht, right, an engineer at Boeing in Renton, Wash., takes a break from work Tuesday and hands her daughter Katherine, 11, a sign from Brecht's union, Society of Professional Engineering Employees in Aerospace, supporting striking members of Inter
Julie Brecht, right, an engineer at Boeing in Renton, Wash., takes a break from work Tuesday and hands her daughter Katherine, 11, a sign from Brecht's union, Society of Professional Engineering Employees in Aerospace, supporting striking members of International Association of Machinists and Aerospace Workers.
Ted S. Warren, Associated Press

CHICAGO — The walkout by more than 18,000 airplane assembly workers at Boeing Co. presents new CEO W. James McNerney with a tough test in his first months on the job, even though analysts say he isn't likely to intervene any time soon.

The Boeing machinists' first strike in a decade reached Day 6 Wednesday with no negotiations scheduled, and industry observers said they don't expect a settlement for at least a month and perhaps closer to 90 days, based on industry precedents.

For the foreseeable future, McNerney is letting the head of Boeing's Seattle-based commercial airplane operations manage the dispute.

But ultimately the chief executive, president and board chairman may have to make the difficult call on how much Boeing must compromise in order to reactivate idled assembly lines, most of which are located in the Seattle area.

"Eventually the odds are that it'll percolate up to him," said Richard Aboulafia, an aerospace analyst for the Teal Group in Fairfax, Va. "Something will have to happen, even if it means sacrificing long-term profits. Strikes don't usually last longer than two to three months, because companies can't take that kind of damage."

The 56-year-old McNerney took over July 1 as Boeing's third CEO since December 2003, hired to restore stability at the top to a corporation shaken by the scandal-hastened departures of predecessors Phil Condit and Harry Stonecipher. McNerney inherited a company performing well financially and gaining momentum in its commercial airplane battle with Airbus.

He also walked into a labor standoff unlike anything he had experienced as chief executive of 3M Co., which does not have unions, or at General Electric Co., where he was CEO of GE Aircraft Engines and GE Lighting.

"For this to happen two months into his campaign is a lot to deal with," said analyst Chris Lozier of Chicago-based Morningstar Inc. "For the time being, the machinists have the upper hand in this row. And him being new, I think that also works in the machinists' favor."

Alfred Marcus, a professor of strategic management at the University of Minnesota's Carlson School of Management, said the changes McNerney made in tightening up 3M operations caused some internal discord, but it was not his style to antagonize people.

"I would think that McNerney is going to stay in the background and will let the internal company professionals handle this," he said. "And since he is new, he's going to want union goodwill — he doesn't want to antagonize the unions."

Analyst Cai von Rumohr of SG Cowen Securities said both McNerney's background in the industry — including running a Boeing customer in GE Aircraft Engines — and Boeing's recent history make it unlikely he will move quickly to give in to union demands.

"One reason the company moved the corporate headquarters to Chicago (in 2001) was to avoid going over the heads of the guys who were negotiating these agreements," von Rumohr said. "So I don't see McNerney coming in like a cowboy from the West, sitting down at the table to reach an agreement. That's not in his best interest."

The International Association of Machinists and Aerospace Workers says it hasn't seen any sign of McNerney's involvement in failed negotiations for a three-year contract. But it has made him an issue because of his hefty pay: a $1.75 million base salary, an annual cash bonus of as much as $4 million and stock options worth more than $25 million.

Spokeswoman Connie Kelliher of Machinists District Lodge 751 said the lucrative package helped spur members to demand a healthy increase in their own pension payouts — one of its key demands along with more benefits and job-security guarantees. The union went so far as to prepare a flyer detailing the top executive's retirement perks and saying it showed how much McNerney valued a good pension.


Contributing: Allison Linn