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Boeing CEO out
Condit follows CFO out the door a week after hiring scandal; top job split between two.
December 1, 2003: 8:29 PM EST

NEW YORK (CNN/Money) - Boeing Co. Chairman and CEO Phil Condit resigned Monday, a week after a hiring scandal led to the firing of its chief financial officer.

Boeing's new CEO Harry Stonecipher, left, shakes hands with outgoing CEO Phil Condit as the company's new chairman Lewis Platt looks on. Condit resigned Monday in the wake of a hiring scandal at the aircraft maker.  
Boeing's new CEO Harry Stonecipher, left, shakes hands with outgoing CEO Phil Condit as the company's new chairman Lewis Platt looks on. Condit resigned Monday in the wake of a hiring scandal at the aircraft maker.

Condit will be succeeded as CEO by former McDonnell Douglas CEO Harry C. Stonecipher, who retired from Boeing last year. He had been president and chief operating officer of Boeing following its 1997 purchase of McDonnell Douglas. Lewis Platt, a former chairman and CEO of Hewlett-Packard, will serve as Boeing's non-executive chairman of the board.

"The board appreciates that Phil acted with characteristic dignity and selflessness in recognizing that his resignation was for the good of the company," Platt said in a statement.

Condit acknowledged it was the recent controversies that led to his unexpected departure.

"Boeing is advancing on several of the most important programs in its history and I offered my resignation as a way to put the distractions and controversies of the past year behind us, and to place the focus on our performance," Condit said.

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Lou Dobbs talks to former Boeing Chairman and CEO Phil Condit and new CEO Harry Stonecipher.

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On Nov. 24, Boeing fired Chief Financial Officer Michael Sears, saying he had discussed the hiring of a senior Air Force procurement official with her while she was still considering Boeing contracts. That executive, Darleen Druyun, also was dismissed from Boeing at that time. U.S. Defense Secretary Donald Rumsfeld subsequently announced a delay in signing a key contract with Boeing for 767 refueling tankers that already had been under fire from some members of congress.

Stonecipher told reporters and analysts that he remains convinced that the tanker deal will be completed, but that he couldn't say how long Boeing could keep the 767 production line running if the deal was significantly delayed.

"The need for tankers is still there. It's a critical need," Stonecipher said. "This hiccup we've had will cause us to have to do a lot of reassuring with the government."

Condit and Platt told reporters and analysts during a conference call Monday that Condit made the offer to resign as the board held near daily meetings about the hiring scandal. Condit said he made the offer about a week and a half ago, or before the CFO's firing was announced. Platt said the board was convinced that Condit did not play a role in the questionable hiring discussions, but it reluctantly came to the decision that it was best for him to leave.

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"Phil made the offer to the board. This was not a question of the board coming to the Phil and saying, 'Phil, it's time,'" Platt said. "That was not an offer we jumped at. But over the course of many, many board discussions, we decided we would accept Phil's offer as a way to get this behind us."

This was not the only controversy involving Boeing and its defense contracts. In July, the U.S. Air Force suspended Boeing from competing for several launch contracts after it discovered Boeing had possession of 25,000 pages of Lockheed (LMT: up $0.38 to $46.32, Research, Estimates) documents during a 1998 contract competition. Boeing reportedly disciplined six employees in that scandal, although none reportedly was dismissed.

"Boeing is taking this whole corporate governance thing very seriously," Banc of America defense analyst Nick Fothergill told Reuters. "They're proving to their prime customer -- the government -- that they have really taken this [scandal] in the most serious way possible by firing the CFO and the CEO resigning."

But the defense scandal is not the only problem facing Boeing. The company this year lost its position as the world's largest maker of commercial jets to European consortium Airbus Industrie. On Monday, the company lost a $1.5 billion order for new jets being purchased by Australia's Qantas Airways Ltd., which has been a key Boeing customer in the past.

The company also has been hurt by the sharp drop in demand for new commercial aircraft following the Sept. 11 terrorist attack, particularly among U.S. airlines, most of which have seen staggering losses since that time.

Boeing essentially has been able to remain in the black during this period, reporting only one quarterly loss in the spring of 2002. But its earnings for this year are expected to be significantly lower for the second straight year, off more than 70 percent from 2001 earnings. And this summer Boeing lowered its guidance for 2004 earnings and aircraft deliveries.

Phil Condit
Chief Executive Officers
Harry C. Stonecipher

Stonecipher said he's convinced Boeing can return to the No. 1 position in commercial jet deliveries even before production starts on the newest generation jet, the 7E7. The Boeing board is set to consider whether to approve launch of that more efficient jet at its Dec. 15 meeting, and Stonecipher said he will be urging the board to do so.

Stonecipher, 67, said he had been living in Florida playing a lot of golf since his retirement from Boeing last year, but that he is not taking the job on any kind of short-term or transitional basis.

"We're not here on an interim basis. I have a lot of work to do before I start looking for a successor. I didn't come here to start looking for a successor," he said.

Shares of Boeing (BA: down $0.37 to $38.02, Research, Estimates), a component of the Dow Jones industrial average, opened about 2 percent lower Monday following the announcement, but were trading in positive territory at midday.

Shares closed Friday up 16.4 percent for the year, but that is slightly behind the 17.3 percent rise in the Dow during that period. Shares are off 11 percent from their close immediately before the Sept. 11 terrorist attack.  Top of page

Reuters contributed to this story

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