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Published: Tuesday, June 26, 2012, 7:34 p.m.

Albaugh to retire; Boeing commercial has new chief

Former mechanic Ray Conner is new president and CEO, effective immediately

  • Jim Albaugh

    Michael O'Leary / The Herald

    Jim Albaugh

  • Ray Conner, new president and CEO of Boeing commercial airplanes.

    Ray Conner, new president and CEO of Boeing commercial airplanes.

Jim Albaugh, the engineer who led Boeing Commercial Airplanes through three challenging years, will retire this fall. His younger successor, who began his own long Boeing career on a factory floor, has already taken charge.
Albaugh, 62, will retire Oct. 1. The announcement was a surprise.
Boeing CEO Jim McNerney on Tuesday said Ray Conner is president and CEO effective immediately. Conner, 57, who was first hired as a mechanic, has been with the company for 34 years. He most recently served as senior vice president of sales and customer support for commercial airplanes.
"Ray's breadth and depth of experience in commercial airplanes is unmatched in our industry," McNerney said in a statement issued after the stock market closed. "He has built airplanes, sold airplanes, serviced airplanes, managed our largest programs, knows our customers extremely well, and is respected by our employees."
Boeing Commercial Airplanes, with headquarters in Renton, is the Chicago-based company's biggest and most visible division. It builds jetliners in Everett, Renton and North Charleston, S.C., and employs 82,174 people worldwide, most of them in Washington.
Boeing has not picked a replacement for Conner in his role as head of sales. Before the announcement of executive changes Tuesday, Boeing stock closed down 12 cents at $70.93.
Unexpected retirement
Albaugh will leave the company before Boeing's mandatory retirement age of 65. That has analysts perplexed. Unlike his predecessor, Scott Carson, Albaugh was largely thought to be in good standing with corporate leaders in Chicago, said analyst Scott Hamilton of Issaquah-based Leeham Co.
Boeing spokesman John Dern said that Albaugh decided to leave after meeting his goals of landing a $35 billion Air Force tanker contract, getting the troubled 787 and 747-8 programs he inherited on track, and securing a labor accord with the Machinists union.
"Those things are done, the decks are cleared, and he felt like this was an appropriate time to announce his retirement," Dern said.
Both Hamilton and Teal Group analyst Richard Aboulafia noted that Albaugh had no likelihood of being promoted to McNerney's position of CEO. Boeing's board is set on hiring an outsider to lead Boeing when McNerney leaves, Aboulafia said.
"Maybe after 37 years of being a 24/7 Boeing guy, he's ready to pursue other interests outside the company," Hamilton said.
Aboulafia, however, questioned the timing of Albaugh's retirement announcement. The year's most important aerospace event, the Farnborough International Airshow, is just weeks away. At the air show, Boeing will work on finalizing orders for hundreds of the company's re-engined 737 MAX jets.
Conner's challenge
Well-rounded; that's how analysts, former co-workers and labor leaders most often describe Conner.
"He's got the technical and manufacturing background; he understands labor, and customers love him," said John Monroe of Economic Alliance Snohomish County. Conner was Monroe's last supervisor at Boeing before Monroe retired.
Monroe couldn't contain his enthusiasm about seeing Conner named to lead commercial airplanes, saying his former boss is a "great leader" who will bring stability to Boeing.
Conner joined Boeing in 1977 as a mechanic on the 727 program. He also has served as general manager of the 777 and 747 programs and vice president of sales for the Americas and the Asia-Pacific region. As vice president of supply chain management, Conner was responsible for thousands of global suppliers, as well as for the performance of the company's in-house manufacturing, quality, fabrication and propulsion divisions. He oversaw the development of Boeing's new production and assembly facilities in South Carolina.
Conner "is the natural next leader of our growing commercial airplanes business, and this move is consistent with our executive succession plan," McNerney said.
Boeing and McNerney credit Conner with playing a leading role last year in negotiating an early contract with local District 751 of the International Association of Machinists and Aerospace Workers. On Tuesday, local IAM president Tom Wroblewski said Conner, a former union member, played a vital role in those talks.
"We've had a good working relationship with him," Wroblewski said.
Both Wroblewski and Monroe emphasized that Conner's ties to the Puget Sound region will be good for the community.
"He's always shown a desire to keep aerospace in the area," Wroblewski said.
That could be handy. Conner will help oversee decisions, likely later this year, on pursuing an updated 777 and a stretched 787.
Albaugh's legacy
With a master's degree in civil engineering from Columbia University, Albaugh has been credited with returning the company's focus to engineering. Albaugh stepped into the role of president of commercial airplanes in 2009 as the company struggled to regain control of the 787 program, which was plagued with problems of engineering and production outsourcing.
"He came to straighten up the 747 and 787 mess," Hamilton said. "And largely, he accomplished that."
Albaugh also helped Boeing land the aerial-refueling tanker contract with the U.S. Air Force and oversaw the launch of the 737 MAX.
Gov. Chris Gregoire called Albaugh's departure "a huge loss to Boeing, and the men and women that make up the company."
While Boeing credits Conner with inking a new contract with the Machinists last year, it was Albaugh who guided the company back into better relations with both major unions, analyst Aboulafia said.
In an interview last week, Tom McCarty, president of the Society of Professional Engineering Employees in Aerospace, noted that there is an "honest respect" for Albaugh among the union's nearly 21,000 members in the Puget Sound region. The SPEEA contract expires Oct. 6.
"Boeing talks about returning to engineering excellence," McCarty said. "Albaugh is committed to it."
A Washington native like Conner, Albaugh began his 37-year career with Boeing in 1975 as a Rockwell project engineer at the Hanford Nuclear Reservation. Boeing acquired Rockwell in 1996. Before moving to commercial airplanes three years ago, Albaugh served as president of Rocketdyne Propulsion & Power, was CEO of Boeing Space and Communications and was president and CEO of Boeing Integrated Defense Systems.
Despite his lengthy career on the defense and space side, Albaugh will be remembered here in Washington for making the Dreamliner a reality.
"It's a high note to go out on: 787s are moving out the door and everyone is excited about them," Aboulafia said.
The Associated Press and Bloomberg News contributed to this report.

Michelle Dunlop: 425-339-3454; mdunlop@heraldnet.com.

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