Boeing has new heir apparent

SEATTLE — Boeing Co. on Wednesday promoted defense division head Dennis Muilenburg to a position that makes him the clear favorite to succeed Jim McNerney as chief executive of the whole company.

Muilenburg, 49, was named Boeing vice chairman, president and chief operating officer, effective Dec. 31.

He will join the corporate team in Chicago and will share oversight with McNerney of the day-to-day business operations of the company.

Boeing said he will “focus on specific growth enablers, including important global relationships and development program performance.”

Boeing Commercial Airplanes Chief Executive Ray Conner, 58, who until now had equal standing with Muilenburg, is given a new title of corporate vice chairman but will remain in his current role with no added responsibility.

Rob Stallard, an industry analyst with RBC Capital Markets, said that despite the elevation of both men to vice chairman, Muilenburg is now clearly favored in the succession plan.

“Today’s promotions signal to us that Muilenburg is the anointed heir apparent — though it could be a couple of years before he actually gets promoted to the top slot,” Stallard wrote in a note to clients.

Likewise, defense analyst Loren Thompson of the Lexington Institute said the moves position Muilenburg as “the leading internal candidate” to succeed McNerney.

“Selecting an executive from the defense side of the house to oversee an enterprise where commercial transports increasingly dominate the business mix will come as a surprise to some observers,” Thompson wrote in a column for Forbes.

McNerney, 64, has been chairman and chief executive of Boeing since 2005.

In June at the Paris Air Show, he hinted that he may not retire at 65, as is company practice.

McNerney said there is nothing mandatory about the retirement date.

“There’s no official time that I have to depart. There is a practice,” McNerney said. “There are rules that are easily waived. They have been in the past.”

Stallard said the elevation of Muilenburg means the head of the commercial airplanes division “has again been potentially passed over for the CEO spot at Boeing,” as happened when the board chose McNerney over Alan Mulally.

With any further ambitions at Boeing ended, Mulally left the company to take over at Ford the following year.

But Mulally had been in line for the top spot much longer than Conner, who has headed the commercial jet division only since June 2012.

Muilenburg first joined Boeing’s military aircraft division in Seattle in 1985.

He made his mark heading the defense division by slashing costs while maintaining steady revenues even as the U.S. military budget has been drastically cut.

He succeeded Jim Albaugh as head of that division in August 2009. Since then, Boeing’s defense-side workforce has shrunk through layoffs and attrition by almost 14,000 people.

Muilenburg oversaw almost 72,000 employees when he took over. Today the defense side has less than 58,000 employees.

In that same period, the balance of financial performance between the commercial jet division and the defense division has tilted dramatically toward the commercial side.

When Muilenburg took over defense, that unit contributed slightly more than half of all Boeing’s revenue: $8.7 billion in the third quarter of 2009 versus $7.9 billion brought in by the commercial unit.

In the third quarter of this year, the defense division brought in revenue of $8 billion versus $14 billion for the commercial unit.

Muilenburg’s replacement as chief executive of the St. Louis, Mo.-based defense unit is Chris Chadwick, 53, currently president of Boeing military aircraft.

Shelley Lavender will replace Chadwick as leader of Boeing military aircraft. She currently serves as head of integrated logistics for the global services &support unit of the defense division.

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