Boeing's & McNerney's Continuing Bad "Dream"

Today's Wall Street Journal reported the story which broke on cable news networks yesterday. Boeing announced more delays for the Dreamliner, its newest jet. It seems that delays continue to plague this plane, whose delivery has now been pushed into 2009.

Is McNerney up to this job?

He arrived at Boeing in late 2005, as noted in this post on various former GE executives now heading other companies. As I wrote in that post, last September,

"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."

Somewhere in the Detroit area, Alan Mulally must be laughing. The nearby chart shows Boeing's and the S&P500 Index's prices for the past five years. Mulally's efforts on the commercial side of Boeing had contributed to its nicely-rising stock price from 2003 through when McNerney arrived. Passed over for the top job, Mulally was vulnerable to the offer to be Ford CEO.

Now that Mulally, a genuine airplane guy, is gone, Boeing seems to have gradually wound down, performance-wise.

The nearby two-year price chart for Boeing and the S&P shows that the former no longer steadily outpaces the index. Instead, the index has ended the last two years handsomely up, and positive, relative to Boeing's roughly 5% price decline.

For just the past 12 months, it's similar. Though the S&P is also negative, it still comfortably beats Boeing's loss of more than 10%.

It's tempting to conclude that Boeing simply moves with the index, but, judging from the first chart, I don't think that's necessarily the case. The company had a solid path of outperformance through the middle of this decade.

Now, that's clearly gone.

Maybe McNerney should be, too.

As I discussed this post with my business partner last night, I thought about the logic Boeing used to recruit McNerney from 3M, where he had a similarly-lackluster, though very brief, tenure, to Boeing.

I wrote this post in June of 2006 concerning 3M and McNerney. In it, 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."

3M's price trajectory hasn't really changed much since McNerney's departure in 2005. So he didn't appear to have markedly improved, or damaged the firm.

But in bringing McNerney to Boeing, the company's board cited his longtime experience heading GE's aircraft engine business.

On first blush, that sounds really relevant, doesn't it? That a guy who builds your engines can come run your company?

Then you stop and think....wait a minute!

That's sort of like saying the guy who runs Goodyear could run companies that used tires.

Or maybe Starbucks could be run by the guy, or woman, who heads up the paper cup supplier that the coffee maker uses.

Ford hired Mulally because they respected three things:

-his reinvigoration of Boeing's commercial plane marketing

-his leading the turnaround of that unit

-his long experience with a maker of complex large moving objects, i.e., airplanes.

I'm not sure that I see how Boeing's reasons for hiring McNerney were as valid.

As always, time will tell. But right now, I don't see McNerney having had a positive impact on keeping the Dreamliner and/or its program mangers performing up to expectations and promises.