Can Boeing CEO survive Dreamliner turbulence?

Shares of the aerospace company have flatlined as safety concerns ground the new 787.

By Jonathan Berr Jan 22, 2013 1:37PM
File photo of James 'Jim' McNerney, CEO of Boeing Co., in March 2011 ( Andrew Harrer/Bloomberg via Getty Images)Boeing (BA) CEO James McNerney saw his compensation rise 34% in 2011 to $18.4 million as the company rewarded him for delivering the first 787 Dreamliner after nearly four years of delays. Now, his job may be in jeopardy.

Bloomberg News reported that McNerney's future with Boeing may depend on how quickly the company can get the 787, now grounded due to safety concerns, back in the air. That may be an understatement. 

McNerney, who rose to prominence as the head of General Electric's (GE) aircraft engines business and as CEO of 3M (MMM) before joining Boeing in 2005, is probably facing the toughest challenge of his career. 

Not only does McNerney have to win over regulators, he also has to calm the nerves of 787 customers who are demanding compensation for their troubles. He also has to keep the 800 or so customers who have ordered the ultra-modern jetliner from getting cold feet.

Then there's Wall Street, which has watched Boeing shares underperform the Standard & Poor's 500 ($INX) for the past five years (a decline of 5.5% versus an increase of 5.8%).   Investors are bound to start questioning whether McNerney, who oversaw the 787's difficult birth, is the right person to correct the safety defects which, though they haven't caused any serious injuries, have nonetheless proven to be hugely embarrasing for Boeing.

Boeing, which was developing the 787 when McNerney became CEO, gambled billions that carriers would pay top dollar -- $207 million or so -- for a state-of-the-art jetliner that was far more fuel efficient than more conventional aircraft. The company also decided to have about 70% of the plane designed and built by suppliers around the world, which, as Bloomberg noted, gave the Boeing less control over the Dreamliner than it would have had otherwise. The process didn't go smoothly.

"Boeing has had four different heads of its commercial plane division since McNerney became CEO and four managers of the 787 program," according to Bloomberg.

CEOs can only blame their subordinates for their companies' woes for so long. Eventually, the buck does stop with them.

--Jonathan Berr does not own shares of the listed stock. Follow him on Twitter @j
dberr.

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1Comment
Jan 22, 2013 5:00PM
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what do you expect from a plane built in a nonunion plant in a right to work state

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