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Friday, July 1, 2005 - Page updated at 12:00 AM

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CEO pick is Boeing's latest tribute to GE

Seattle Times business reporter

Boeing succeeded this week in snagging one of corporate America's most prized possessions: a General Electric veteran to run the show.

It named 3M boss and Boeing director James McNerney Jr. as its new chief executive. Before joining 3M, McNerney spent 18 years at GE, where he held numerous posts including head of GE Aircraft Engines.

That makes it two in a row for Boeing, whose previous CEO, Harry Stonecipher, spent 27 years at GE before leaving for Sundstrand, then McDonnell Douglas and Boeing.

Many U.S. manufacturers look to GE as a model for doing business. At Boeing, admiration for the gigantic, well-performing conglomerate turned into something bigger after Stonecipher became president in 1997 following Boeing's acquisition of McDonnell Douglas.

"It's borderline fetishistic," said Richard Aboulafia, an analyst with the Teal Group. "Certainly Stonecipher brought some of the gospel in, and even the fact that McNerney was on the board should speak volumes."

Wall Street and academics agree that mimicking GE is probably good for Boeing.

"You want to imitate the best, and they're one of the most admired companies in the world," said Suresh Kotha, professor of business strategy at the University of Washington Business School.

One of Boeing's most obvious homages to GE is its leadership center in St. Louis. Intended to develop managers within the company, it is modeled on GE's New York leadership center.

Although Boeing has not adopted Six Sigma, a complicated quality-improvement system used by GE, Stonecipher introduced some of its concepts at Boeing and "moved their manufacturing process one notch up," Kotha said.

Another hallmark of GE management is to locate company headquarters far from its operating units. Boeing adopted that approach, to the dismay of the Puget Sound area, when it chose Chicago as its new corporate headquarters in 2001.

Former GE chief Jack Welch was known for cutting through bureaucracy and having a small, remote headquarters helped, said James Schrager, clinical professor of entrepreneurship and strategy at the University of Chicago Graduate School of Business.

"One of the secrets of a really good headquarters office is to be away from the people who run the divisions so you won't fool with them," Schrager said.

Taking another page from GE's book, Boeing diversified its business with the acquisition of military-focused McDonnell Douglas. The mix is less varied than that of GE, which does everything from manufacturing to finance to entertainment, but the principle is the same — to make the company less susceptible to the cycles of a single business.

"Most of the advantage of having strong general managers accrues when there are many across the economic spectrum," he said. "Boeing still lives and dies with airplane sales."

Boeing also has strong commercial links to GE. McNerney's former GE Aircraft Engines unit is a major supplier of engines for Boeing's planes. And General Electric Commercial Aviation Services, which he ran earlier, is the world's top aircraft-leasing company and a huge Boeing customer.

In the aftermath of McNerney's arrival, there is one area where Boeing could stray from GE tradition. At GE, when executives are in the running for the top spot and don't get it, they often leave the company. McNerney departed after Jack Welch chose Jeff Immelt to succeed him at GE in 2000.

"I don't think you'll see the same thing at Boeing," said Paul Nisbet, an aerospace analyst with JSA Research.

Boeing's top two internal candidates for the CEO position — head of commercial airplanes Alan Mulally and defense chief Jim Albaugh — appear to be staying.

And with McNerney in charge, more GE ideas are bound to surface at Boeing, Nisbet said.

Given how successful GE has been, he said, "You could do a lot worse."

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Copyright © 2005 The Seattle Times Company

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