Wednesday, October 17, 2007
More Failure Among GE's Spawn: McNerney's Troubles at Boeing
Last year, in June, I wrote this piece regarding Boeing CEO, James McNerney. Arriving in 2005 from GE, via a brief, undistinguished stop at 3M, McNerney was heralded as the savior of Boeing, post-Harry Stonecipher's departure amidst messy and embarrassing circumstances.
In that post, I wrote,
"All in all, an ironic track record for McNerney. It appears that under his leadership, 3M's stock price path remained pretty consistent, suggesting that investors didn't really see much difference with McNerney running the company. The only significant changes were bad ones- the dips in price in this decade.
What is not evident in the McNerney era of 3M is a break with its own past stock price path. It failed to noticeably ignite sufficient investor confidence or interest to move its stock price trajectory above the long term path it has been on for 30 years. That is, until recently when it has uncharacteristically flattened.
Does this portend anything for Boeing? From where does McNerney's credibility come, if this is his recent post-GE track record? Surely Boeing's recent stock price performance doesn't yet reflect McNerney's actions. For the record, it hasn't really changed, either, in several years.I know of nothing negative about Jim McNerney. The comments attributed to him in the WSJ piece seem promising. However, that's about all there seems to be on file to suggest he will lead Boeing where it has not been before this. If 3M is any indicator, I'm not sure I expect Boeing to show any signs of unusually better performance than before McNerney arrived."
Then, last Thursday's Wall Street Journal carried a page-one article discussing Boeing's official admission that delivery of its breakthrough plane, the 787 Dreamliner, will be delayed some six-seven months, arriving in December of 2008.
Indirectly, then, it's been a tough year for ex-GE Chairman Jack Welch. Welch's hand picked successor, Jeff Immelt, as Welch's replacement at the diversified industrial firm, has failed to beat the S&P500 over his tenure. "Iron Mike" Zafirovski, the CEO of Nortel, another former GE star, is struggling. Bob Nardelli was cashiered from Home Depot, becoming the rather inexplicable choice to become Chrysler CEO.
Maybe Jack's way wasn't so good. The only really good performer among companies headed by ex-Welch lieutenants is Boeing.
But McNerney got there after Alan Mulally, now Ford CEO, had put the company back on track to success. The firm McNerney left GE to head, 3M, hasn't exactly set the world on fire.
And now, after McNerney's been at Boeing long enough to make an impression, the company falters. As the Yahoo-sourced price chart nearby reveals, Boeing's performance since late 2005 has begun to stall, as the S&P closes in on it.
Could it be that McNerney is Boeing's "Chuck Prince?" Recall that he came in and extricated the airplane maker from some sordid messes involving bribery on government contracts, as well as simply not being Harry Stonecipher, the disgraced departing CEO.
However, McNerney didn't get the nod at GE. He didn't make a positive impact at 3M. Now, Boeing begins to buckle more than two years after McNerney takes the top post.
The Dreamliner's delay is the highest profile, potentially most damaging setback the firm has had since Alan Mulally left for Ford.
Perhaps McNerney isn't cut out to be an operating CEO. Maybe he's better at various 'softer' tasks, rather than driving significant corporate performance that leads to consistently superior shareholder returns?
People gave Chuck Prince of Citigroup quite a few years after he cleaned up the regulatory mess left by his predecessor, Sandy Weill, before realizing he wasn't cut out to make the financial giant perform.
I guess the next year or so will tell us whether McNerney has similar traits. Or whether he can lead Boeing to better peformance, both fundamentally on the financial statements, and in shareholder returns.