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US: Boeing Chairman Resigns Following Ethics Questions

by Dave CarpenterAssociated Press
December 1st, 2003

CHICAGO -- Boeing Co. chairman and chief executive Phil Condit resigned unexpectedly only days after the huge aerospace manufacturer fired two other Boeing officials for an alleged ethics breach.

The company's board accepted Condit's resignation after deciding "a new structure for the leadership of the company is needed," according to a Boeing statement released Monday.

"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, 62, said in a statement.

Company spokesman John Dern insisted Condit was not fired and said the board accepted his voluntary resignation "with great sadness."

Boeing has been roiled for months by ethical controversies over the aggressive methods it used to obtain lucrative defense contracts.

The board named former Hewlett-Packard Co. president and chief executive Lewis E. Platt, 62, as non-executive chairman and former Boeing president and chief operating officer Harry C. Stonecipher, 67, as president and CEO, effective immediately.

The shake-up comes a week after Boeing unexpectedly fired its chief financial officer, Mike Sears, for unethical conduct, saying he negotiated the hiring of an Air Force missile defense expert while she was still working for the Pentagon and was in a position to influence Boeing contracts. Sears has denied any wrongdoing.

Sears was dismissed along with the former Air Force official, Darleen Druyun. She was hired earlier this year as vice president and deputy general manager of Boeing's Missile Defense Systems unit.

Boeing made no connection between Condit's departure and the firings in its Monday announcement. Dern said the board has been meeting for the past several days to discuss a course of action, but he declined to say when the resignation was made or accepted.

"To link it to any single event would be a mistake. But there have been distractions over the last year, and both Phil and the board agreed that this decision was a way to put these distractions behind the company," he said. "The board felt that changing leadership as well as the structure ... would help drive the company forward."

Condit had been with Boeing since 1965, when he joined the company as an aerodynamics engineer. He has been chief executive since 1996 and chairman since 1997, the company's seventh chairman since it was founded in 1916.

Platt praised Condit's "characteristic dignity and selflessness in recognizing that his resignation was for the good of the company" and said the board "is in unanimous agreement that the company has been pursuing the right transformation strategy and that Boeing is in excellent financial condition."

"We have the right strategy," Stonecipher added. "The task before us is to execute. ... Boeing is a great company with tremendous capabilities to define the future in each of our markets and deliver consistent, profitable growth."

For decades, Boeing was primarily an aircraft maker, earning most of its money from its jetliners. But in the aftermath of the Sept. 11, 2001, terror attacks, Boeing's defense division now brings in more revenue than commercial airplanes. Boeing has expanded its space, communications and other businesses as well.

Rival Airbus expects to eclipse Boeing this year as the world's largest commercial jet manufacturer.

Defense Department investigators are examining a newly approved deal to acquire 100 Boeing 767 planes for use as midair refueling tankers.

The deal was criticized this fall when documents revealed that Druyun, then the principal deputy assistant Air Force secretary for acquisition and management, told Boeing that Airbus had submitted a bid $5 million to $17 million less per plane than Boeing's offer.

Last Friday, two senators who have long criticized the plan - Republicans John McCain of Arizona and Peter Fitzgerald of Illinois - said in a letter to Defense Secretary Donald Rumsfeld that it would be "irresponsible" for the department to go ahead with the deal without a full review into the firings.

The agreement, in which the Air Force would lease 20 tankers and buy 80, was authorized as part of the defense appropriations bill signed Nov. 24 by President Bush.

In July, the Pentagon punished Boeing for stealing trade secrets from rival Lockheed Martin to help win rocket contracts. Boeing has been indefinitely banned from bidding on military satellite-launching contracts, which has already cost it seven launches worth about $1 billion.

A spokesman for the union representing engineering and technical workers at Boeing called Condit's departure "a real shock" and said there would be trepidation among the workers at Stonecipher's ascension to CEO.

"There was no love lost between Mr. Stonecipher and the SPEEA-represented employees three years ago when our union went on strike," said Bill Dugovich of the Society of Professional Engineering Employees in Aerospace.

Boeing's stock fell 13 cents, or 0.3 percent, to $38.26 in morning trading on the New York Stock Exchange.

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