Top Boeing official suddenly resigns amid jet scandal

CFO, another executive were fired last week over Pentagon deal

December 02, 2003|By NEW YORK TIMES NEWS SERVICE

Facing challenges from abroad and in Washington, the Boeing Co. announced yesterday that Phil Condit, the company's chairman and chief executive, had tendered his resignation, effective immediately.

A statement from the company offered the suggestion that Condit had been forced out. However, at a news conference, Boeing officials, including Condit, said that the board acted only after Condit had suggested himself that perhaps he should step aside.

In the statement, Boeing said that "after thorough deliberations," its board had "decided that a new structure for leadership is needed."

Condit, who is 62, will be succeeded by Harry C. Stonecipher, 67, as president and chief executive. Lewis E. Platt, 62, was named nonexecutive chairman.

Condit's resignation came less than a week after Boeing fired Michael M. Sears, the company's chief financial officer, and Darleen Druyun, another company executive, after determining that Sears had improperly met with Druyun at a time when she was the chief procurement officer for the Air Force.

The dismissals involved Boeing's conduct in its efforts to win $17 billion in contracts for aerial tankers, according to an internal investigation and a Pentagon inquiry. Boeing won the contracts after a heated competition with Airbus SAS.

Druyun went to work for Boeing as a program manager in January.

In announcing the firings last week, Boeing said that during its investigation it discovered that Sears and Druyun had attempted to conceal the meeting.

Sears, 56, had been widely viewed as a potential successor to Condit. Last week, he issued a statement denying wrongdoing.

Boeing's board held a number of meetings over the past few weeks to discuss the Sears matter and the company's relationship with the Pentagon.

At the news conference yesterday, Platt said that at one of those meetings, "Phil said to us, `If you think it would be useful for me to step aside, I would be willing to do that.' "

"That was not an offer we jumped at," the new chairman added. "But over the course of many board meetings, we decided to take him up on it."

Condit, who was at the press conference, said he extended the offer to resign "about a week and a half ago."

"I care very deeply about this company and the success of the company," Condit said. "I wanted to do what was best for the company."

Platt said that Condit's resignation was not connected to the investigation into Sears, Druyun and the tanker contract. "Accepting Phil's resignation has nothing to do with what happened there," he said.

Still, last week's dismissals and Condit's abrupt departure follow months of controversy over a plan for the Air Force to lease 100 Boeing 767 aircraft for use as aerial refueling tankers.

A defense appropriations bill signed last week by President Bush authorizes the Air Force to lease 20 tankers and buy 80.

Late last week, two Republican senators asked the Pentagon to reconsider the planned Boeing tanker deal. In a letter to Defense Secretary Donald H. Rumsfeld, the senators, John McCain of Arizona and Peter G. Fitzgerald of Illinois, said they "believe it is imperative" the Pentagon "determine what effect this apparent conflict of interest may have had."

At the news conference, Stonecipher said that, in spite of the controversy, "the tanker deal won't be scrapped. This hiccough we've had will force us to do a lot of reassuring with the government. We plan to address each and every concern they have."

The controversy over the tankers is only the most recent problem Boeing has encountered in Washington this year.

In July, the Pentagon punished the company for stealing trade secrets from rival Lockheed Martin Corp. to help win rocket contracts. Boeing has been indefinitely banned from bidding on military satellite-launching contracts; there have been seven launches since then, costing the company a potential $1 billion in revenue.

In addition to its difficulties in Washington, Boeing has been struggling to regain footing in the commercial aircraft business lost in the aftermath of the Sept. 11 terrorist attacks. Increasingly, the company has been fighting an uphill battle against Airbus. Since the attacks, Boeing's defense division has been bringing in more revenue than contracts for commercial airplanes. Boeing has expanded its space, communications and other businesses as well to try to make up for the commercial aircraft shortfall.

Just yesterday morning, Airbus announced that it had won a $1 billion-plus commercial jet contract with Qantas, the Australian airline. Airbus expects to pass Boeing this year as the world's largest commercial aircraft manufacturer.

Stonecipher, who retired from Boeing in 2002, is the former president and chief executive of aircraft maker McDonnell Douglas. Along with Condit, he helped to engineer the merger of McDonnell Douglas with Boeing in 1997. After the merger, Stonecipher became Boeing's president and chief operating officer.

Boeing's shares fell 37 cents to close at $38.02 in trading on the New York Stock Exchange.

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