Boeing’s Jim McNerney may seek a waiver to the mandatory retirement age of 65–he’s 64 this year–to continue as chairman and CEO.
As soon as the news was out, we got a call from one Wall Street analyst who opened the call by saying, “Short the stock.” We initially thought this was some solicitation call.
We’re not that pessimistic but we do have these observations:
- McNerney staying beyond 65 is good news for Charleston, where Boeing is increasing its presence at a rapid rate. McNerney has a clear affinity for South Carolina: its local, county and state governments seem to have an open check book for Boeing. And it’s non-union and has lower wages. As long as McNerney is CEO, Charleston will continue to grow rapidly.
- It’s bad news for the unions. He just doesn’t like them. We don’t really need to pontificate on this point. Boeing is cutting back on union jobs here and transferring the work to non-union locations.
- It’s generally bad news for Washington State. It’s pretty clear that McNerney isn’t a fan of this state, given it’s costly to do business here, wages are higher, environmental rules are stricter and the State hasn’t exactly been innovative when it comes to thinking up stuff with which to incentivize Boeing. Gov. Christine Gregoire, like Gary Locke before her, pretty much took Boeing for granted until the company used the proverbial 2×4 upside the head to get their attention. Gov. Jay Inslee, Gregoire’s successor, so far has offered up more of the same to “win” the 777X assembly: more workforce training, better infrastructure and faster permitting–all-in-all, not at all innovative or outside-the-box thinking.
- More blackmail for Washington: Boeing has always been good at prying concessions out of states and local jurisdictions. McNerney has elevated this to an art. Assemble the 737 MAX derivative in Renton? Of course, said Jim Albaugh, CEO of Boeing Commercial Airplanes. Not so fast, said McNerney, in a highly public and humiliating rebuke to Albaugh (who was gone within the year after this faux pas). Assemble the 777X derivative here? Don’t count on it, says McNerney. Assemble the 787-10 derivative here? Don’t bet on this, either. In the end, the MAX was located here, but we think that was payoff to labor (which also gave in return) in exchange for dropping the NLRB 787 lawsuit. Without this card, it’s up to the State to be blackmailed for more incentives (we really don’t think Inslee’s package is worth much on 777X).
We were pretty happy with McNerney’s ascension to chairman and CEO after the disastrous rule of Phil Condit and Harry Stonecipher. But McNerney’s performance throughout the 787 and 747-8 debacles was wanting, we (and many others) concluded. We think McNerney was slow to make changes in these programs, and he was on the Board of Directors who signed off on the McDonnell-Stonecipher-driven outsourcing approach on 787 that proved so disastrous. McNerney has been at war with the unions, who saved Boeing’s bacon during these programs. We certainly understand the need to control costs and we opined a lot on the medical and pension cost issues, generally coming down on the side of the company. But we can’t help but sense ingratitude from Chicago for all the hard and dedicated work performed here in Puget Sound.
Most significant, perhaps, is the thin bench there is to succeed McNerney. Shortly after he became CEO, McNerney said one thing that was his priority personally and professionally was to create a good succession plan. Who is there from within to possibly succeed McNerney in a year or 18 months? The answer is, at this point, nobody.
Ray Conner is well regarded, but he probably needs a couple of more years than a McNerney retirement timeline suggests. Pat Shanahan hasn’t any commercial sales experience. Dennis Muilenburg has no BCA experience.
McNerney may well have to get a waiver because so far he has utterly failed to have a succession path.