Guest columnist
Once great Boeing has drifted far off course

By Steven Pearlstein
The Washington Post

	MIKE SIEGEL / THE SEATTLE TIMES, 2002 A Boeing 747 is put together at Everett's Boeing plant. In recent years the company has surrendered its position as industry leader to Airbus.
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Now, however, this great company has drifted off course — strategically, operationally, financially, ethically.

In the world of commercial aviation, Boeing has surrendered its position as industry leader to Europe's Airbus — not just in terms of market share, but also in terms of the quality of its planes and the ambition of its development programs. While Airbus pushes ahead boldly with a 555-seat jumbo jet, Boeing launched and then canceled plans for a sub-sonic airliner. It now pins its future on a replacement for the aging 757, the 767 and possibly, the workhorse 737.

Operationally, the company has been a disaster since 1996, when a boom in airplane orders so overwhelmed its production system that it was forced to miss delivery deadlines and take a $2.6 billion write-off. Several years of turmoil followed as Boeing tried to incorporate the even more dysfunctional operations of McDonnell Douglas, which it acquired in 1997. By the time that was digested, the economic cycle had turned, Sept. 11 happened and Boeing was plunged into survival mode, laying off 30,000 workers and closing production lines.

Nor are things any better in Boeing's space and defense units.

With the collapse of the telecom sector, the flood of new orders Boeing expected when it purchased the Hughes aircraft satellite division never materialized. Even worse, Hughes' production turned out to be so sloppy that virtually every satellite then in process had to be reworked. In the end, Boeing was forced to write off two-thirds of the $3.75 billion Hughes purchase price.

And then there's the super-secret program to provide the Pentagon with its next generation of spy satellites. The Defense Science Board eventually concluded that Boeing had badly underbid to win the contract with designs that were "technically flawed" and "not executable." The government has had to pour in an extra $4 billion to get the program back on track.

Most disturbing, however, has been Boeing's rise to the top of the Pentagon's ethics watch list.

Earlier this year, the company's space division lost $1 billion in satellite launch business and was prevented from bidding for new contracts, after it "discovered" that some of its employees possessed thousands of documents stolen from rival rocket maker Lockheed Martin.

Then last week, Boeing revealed that its chief financial officer had recruited the Air Force's top acquisition official at the same time they were negotiating details of a controversial tanker leasing arrangement.

Not only does the revelation threaten a crucial $18 billion piece of business, but I can assure you it won't soon be forgotten by the Pentagon officials and congressional leaders who staked reputations and political capital defending the contract and contractor.

In both cases, Boeing continued to deny there was anything wrong months after allegations surfaced publicly. And this instinct to stonewall is hardly unusual.

Just last year, for example, the company paid $92.5 million to quietly settle a lawsuit — backed by internal company memos — alleging that top officials deliberately withheld information from shareholders about the sorry state of Boeing's production lines back in 1997 until after the McDonnell merger had been approved.

And over the past two years, as the rest of the corporate world rushed to embrace candor and transparency, Boeing's filings and statements continued to ignore or gloss over unpleasant realities.

All of this has happened on the watch of Phil Condit, Boeing's chairman and chief executive.

With Boeing's stock price depressed, its profit margins alternating between meager and nonexistent, and a full recovery now at least a year away, is it not fair to ask whether it's time for Condit to go?

Steven Pearlstein is a columnist for the business section of The Washington Post. He can be reached at pearlsteins@washingtonpost.com

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