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Airbus 'Not in Compliance. . .' Says Boeing's Stonecipher
Boeing CEO Harry Stonecipher has fired another salvo in the long wars over Boeing's allegations that Airbus—which in 2003 became the first company in history to deliver more jet transports than Boeing—benefits from government subsidies. "This is not about U.S. dominance or European dominance," he tells Show News. "It's about an aerospace industry where there ought to be a level playing field. Everybody thinks its un-level and nobody's saying so."
For the first time, Stonecipher specifically charged Airbus with being out of compliance with the 1992 European Union-U.S. agreement on support for large civil aircraft. "I've been saying this for five years. If you're in compliance with the 1992 agreement and the 1994 agreement then you don't have anything to worry about, but if you're not then you ought to worry.
"They're not in compliance, because if you read that agreement it was supposed to have an ever-decreasing subsidy. The whole ideas was to get Airbus launched. They're launched. The reason the rhetoric has changed is that I read in every newspaper that comes in that Airbus has better margins than Boeing, lower costs than Boeing, bigger market share than Boeing and ships more airplanes. Then why do you need subsidies?"
Stonecipher says that he is looking for a negotiation—"any time you want to sit down across the table and talk about it, we'd be happy to"—not a World Trade Organization (WTO) showdown. "The launch aid will go away. It won't hurt Airbus; they'll do just fine. They're absolutely nuts if they let this go to the WTO over something that they don't need."
Boeing is still following the strategy set out by Stonecipher's predecessor, Phil Condit—to become a broad-based aerospace company rather than one dependent on commercial aviation.
Defense, he says, will still be the biggest part of the company in five years' time. "The defense business that we've booked already will make that business grow at more than 10% a year. It gets to be very big. Right now we've got a $30 billion business." Classified contracts may account for a lot of that growth. "An awful lot of our intelligence business is growing very rapidly. We've got a good foothold and folks are executing very well. It's FIA [Future Imagery Architecture, the next generation of reconnaissance spacecraft] and a number of other things."
Stonecipher is a convert when it comes to Connexions by Boeing, Condit's pet project and—currently—a money-loser. "I was very worried about Connexions. Getting these airplanes into service and getting them modified is not a cheap thing. But what finally turned the light on for me was my own personal practice." Stonecipher found that he would pick hotels based on whether they offered high-speed Internet connections, and that other travelers do the same. "It's the hotel business that gives me great hope and confidence that the guys really do have it right. And we have the staying power, we have the balance sheet, we have the technology, we have all the ingredients to make this thing happen."
Another weak sector of the company was Boeing Satellite Systems. In one early BSS presentation, Stonecipher recalls, "I got to about chart number three and everyone was ready to shoot them and bury them. They had some problems because of some stupid contracts taken on five years ago." (One of these, reportedly, was FIA.) "I said, take this year to fix the problems. You're going to lose $40, $50, $60 million this year. I don't care if it's $100 million. Coming out of it you'll double your business in 2005 to 2008 and you'll be doing well. Satellites will end up as one of the top-performing businesses we have in the portfolio. But it will be two-thirds military."
Stonecipher has pushed to change the Boeing culture in two ways. "I have raised the velocity of decision-making. I make sure I have access to the 11 people who run this place. All of our 155,000 people work for one of those 11 people, so that makes my job very easy. I generally can segregate their responsibilities very quickly, they know what they're responsible for, and I think they like it that way."
Gone is Condit's 28-member executive council: "When you do that you'd better be sure that you know who's going to do what when they walk out of the room. It can get a little confused. If there's a tough problem, everyone thinks everyone else is going to take care of it, and if it's an easy problem everybody tries to take care of it."
Efforts to break down barriers between divisions of Boeing have come "miles and miles and miles," says Stonecipher. "We would not have won MMA [Multi-mission Maritime Aircraft] without [defense and commercial CEOs] Jim Albaugh and Alan Mulally's teams coming together.
"I remember explaining the thing. We're not talking about a few surveillance aircraft, we're talking about a national and international market of $60 billion. That seems like it should excite all of us."
—Bill Sweetman
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