Boeing 787's grounding puts pressure on CEO Jim McNerney
BY CAROL HYMOWITZ & THOMAS BLACK Bloomberg News
Wednesday, January 23, 2013
1/23/13 at 3:32 AM
Boeing Co. CEO Jim McNerney has thrown himself into the investigation of the company's grounded 787 Dreamliner, conferring at least twice a day with a half-dozen top executives.
"He wants to know in real time everything that's happening" with the probe by Boeing employees and government agencies, said Tom Downey, the planemaker's senior vice president of communications, who attends the meetings.
The stakes are high for the 63-year-old McNerney. His job may depend on whether and how soon he can resolve questions about the Dreamliner's safety and win government approval for airlines to start flying the plane again.
The Dreamliner crisis is the biggest predicament McNerney has faced in his career, which has included running General Electric Co.'s aircraft engines business and almost five years in charge of 3M Co. Boeing directors who named him CEO in 2005 considered him a prize who would restore the company's reputation after a series of scandals and get the Dreamliner launched in a disciplined, cost-efficient way.
While investigators are focusing on the batteries and electrical system, they have yet to zero in on a cause of a Jan. 7 fire on a Japan Airlines Co. 787 in Boston or the battery-fault warning that led to a Jan. 16 emergency landing in Japan.
"This is a leadership test for McNerney," said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. "Even if no one has been hurt on a 787, who wants to get on a plane that may go on fire? It's never good for a company when you question its basic product, so now McNerney has to convince customers and investors that the Dreamliner is OK."
Chicago-based Boeing declined to make McNerney or board members available to comment on this story.
Boeing and the Federal Aviation Administration, working with accident investigators in the U.S. and Japan, are trying to determine what prompted charring and the release of fumes from the battery packs, a person familiar with the deliberations who wasn't authorized to speak about them said last week.
Getting the Dreamliner cleared to fly again and keeping credibility with investors and customers is a "huge job" for McNerney, said Michael Useem, director of the Center for Leadership and Change Management at the University of Pennsylvania's Wharton School.
A graduate of Yale University, where he played varsity baseball with future U.S. President George W. Bush, and Harvard Business School, McNerney worked briefly at Procter & Gamble Co. and McKinsey & Co. before joining GE. During his 19 years there, he rose to become head of its lighting unit and later the aircraft engines business, and he was a finalist to succeed mentor Jack Welch as CEO. He lost that contest to Jeffrey Immelt in November 2000 and was quickly snatched by 3M to become its first outside CEO.
McNerney, more reserved than Welch, often followed his former boss's management playbook. At 3M, he intensified performance reviews, cut about 11 percent of the workforce and reined in spending. He also imported GE's Six Sigma program, a series of techniques designed to decrease production defects and increase efficiency. The plan had results: McNerney raised 3M's operating profit margins to 23 percent from 17 percent. He won praise for bringing more order to the maker of Scotch tape, abrasives and thousands of other products in a period that 3M's current CEO Inge Thulin in November said was highlighted by "efficiency, productivity and processes."
McNerney's successor at 3M, George Buckley, didn't entirely agree. He dialed back McNerney's emphasis on Six Sigma, arguing that while the program identified issues in processes and helped cut defects, it also sometimes squelched creativity.
Boeing already had begun work on the 787 when McNerney took charge. The idea was to produce a fuel-efficient jet using composite materials. To reduce costs, Boeing also devised a new manufacturing plan with 70 percent of the Dreamliner designed and built by suppliers around the world.
That gave Boeing less control than it traditionally had had when making new planes, and it contributed to seven delays in the Dreamliner program between 2007 and 2011. Intent on finding out for himself what was causing the bottlenecks, McNerney visited the factories of every major supplier around the world in late 2007 and early 2008, Downey said.
He also kept replacing executives in charge of the Dreamliner. Boeing has had four different heads of its commercial plane division since McNerney became CEO and four managers of the 787 program.
Boeing currently has 800 unfilled orders for the plane, whose list price starts at about $207 million.
McNerney's focus on details and uncovering where problems have occurred and who's responsible for them is shown in his current round of meetings. Because of his knowledge of planes and electrical systems, "he asks a lot of very specific questions," Downey said.
When McNerney learned on Jan. 7 that a battery fire had occurred on a Japan Airlines 787 in Boston, he told his chief technology officer to supplement information coming from directors of the 787 program, Downey said.
Since then, scores of Boeing managers and engineers from across the company have been assigned to work on the Dreamliner, and McNerney also has kept in touch with directors and government officials.
An All Nippon Airways Co. 787 was forced to make an emergency landing in Japan on Jan. 16 after the pilots received a battery-fault warning.
Boeing has tried to persuade the FAA to end the groundings by proposing a variety of inspections and having pilots monitor electronic signals from the batteries to prevent fires. The FAA has been reluctant to approve those steps without a clear idea of what caused the defects and how they can be prevented.
Although McNerney is rarely quoted in Boeing press releases, he issued two statements over the past two weeks as well as an internal message to all employees.
"We are confident that the 787 is safe," he said in a Jan. 16 statement. "Boeing is committed to supporting the FAA and finding the answers as quickly as possible. The company is working around the clock with its customers, the various regulatory and investigative authorities."
Original Print Headline: 787 issues put pressure on Boeing CEO
U.S. and Japanese safety inspectors gather Friday beside a Boeing 787 that made an emergency landing two days earlier in Takamatsu, Japan, after an auxiliary battery apparently overheated. Boeing Co. CEO Jim McNerney has become deeply involved in the safety investigation of the jet, which has been grounded worldwide. KYODO NEWS / AP