Mulally’s challenge

Associated Press

RENTON — As the last of Boeing Co.’s corporate jets take off for Chicago this week, Alan Mulally is more excited about what’s staying behind.

The corporate move — announced at a news conference earlier this year — leaves Mulally with even more responsibility to keep the company’s commercial airplane division going strong and oversee the nearly 80,000 local employees who work there.

He’ll also be leading plans to build the Sonic Cruiser, an airplane that can fly at nearly the speed of sound and stands to change the face of commercial flying forever.

It’s no small challenge given a weakening economy that has prompted a strong decline in airplane orders and left the biggest U.S. airlines knee-deep in financial woes.

Shares in Boeing, once a darling of Wall Street, fell sharply at the all-important Paris Air Show when the company failed to secure many orders, and they haven’t risen significantly since.

Mulally concedes the company has had to reduce its airplane delivery forecasts for 2002, but says he is ready to deal with "business realities."

It’s not surprising. The 56-year-old has already dealt with worse.

Nearly three years after taking over a floundering commercial operation — then, as now, the financial backbone of the aerospace giant — Mulally has orchestrated a comeback that sent profits soaring like the airplanes Boeing builds.

"Alan’s done a great job," says Bob Toomey, an analyst with Dain Rauscher in Seattle who follows the company. "They’ve engineered, I think, a turnaround of historical proportion in U.S. history, given how bad things were."

Mulally says his hands-on background as an aerospace engineer who rose through Boeing ranks has given him confidence to manage the commercial operation on his own.

"In a way, it’s another design job," he says. "It’s about getting a design that works."

Case in point are Mulally’s mandatory Thursday meetings, a mix of touchy-feely inspiration and bottom-line economics.

Executives who attend are constantly reminded to keep up the "find a way" attitude and peppered with feel-good slogans such as "Profitable growth for all!"

Clapping is encouraged; droopy, "ain’t it awful?" attitudes are not.

Equally important, however, is a complete weekly update on the company’s metrics — the numbers behind the business operations — with an absolute focus on profitability.

"Data sets you free," Mulally says happily.

Such management, combined with major improvements to the airplane manufacturing process, were key to getting the company out of its mid-1990s slump.

Some predict Mulally may be able to weather the drifting economy even better now that the top brass are in Chicago.

"(Mulally) was controlling it anyway, but he just had a lot of eyes looking over his shoulder," says Paul Nisbet, an analyst with JSA Research in Newport, R.I. "Now he won’t have that, and I think that’s a good thing."

Mulally even gets high marks from the Society of Professional Engineering Employees in Aerospace, the white-collar union that went on strike under Mulally’s watch last year.

"We think there’s a lot more appreciation for the value of partnership in commercial than in corporate right now," says Charles Bofferding, SPEEA’s executive director.

Nisbet says Mulally’s personality has helped him make friends among management, employees, executives and investors.

"He’s about as bubbly as anybody I’ve ever seen," Nisbet says. "He’s a very, very optimistic person and it’s contagious."

Such an attitude also likely makes it easier when Mulally has to deliver bad news, Nisbet says.

Last month, Mulally was forced to lay off hundreds of employees at the company’s 717 plant in California. The decision, Mulally said then, was difficult from a personal standpoint but easy from the business standpoint. Demand for the airplane was slowing and unlikely to improve.

"This is what we needed to do," he said, adding the best way to do it was to "deal with it and move forward."

That’s the approach Mulally took when he abruptly decided to abandon the 747X, a planned super-jumbo jet that was receiving lukewarm response from airlines.

Mulally changed course, going instead with plan to build the Sonic Cruiser, a smaller airplane that can fly at nearly the speed of sound.

The move leaves the super-size airplane market to Boeing rival Airbus’s A380. But Mulally remains convinced it was the right decision — albeit one of the hardest of his career.

Although plans to build the plane are still years away, Mulally’s decisions are being watched closely. Mark Blondin, president of Machinists District Lodge 751, Boeing’s largest blue-collar union, is already considering the issue as the company prepares for a new round of contract negotiations next year.

Boeing’s sudden decision to move headquarters blindsided the union, and eroded trust. Blondin worries that Mulally hasn’t given enough credit to workers for the turnaround, and fears the company will move future production operations out of Seattle and cut jobs.

"There were no commitments made to us," he says, but the union is working to develop its relationship with Mulally and his staff.

Boeing has not yet said where the company will build the Sonic Cruiser, but he will say he’s committed to the Puget Sound area.

"Boeing’s really not leaving," Mulally says.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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