Chicago - Boeing named Chief Operating Officer Dennis Muilenburg to succeed Chief Executive Officer James McNerney, who is retiring after a decade that included the debut of the 787 Dreamliner and a pullback in US defence spending.
Muilenburg, 51, will move into the top spot at the world’s largest planemaker effective July 1, while McNerney, 65, remains chairman and will retire in February, Boeing said on Tuesday in a statement.
“This is all by design at a period when Dennis is ready,” McNerney said in an interview. “I want to remain around long enough to ensure that Dennis has any help he needs going forward. But not so long that I start to get in the way.”
Muilenburg’s promotion caps a transition that began 18 months ago when he was named COO and president after running Boeing Defence Systems, the smaller of Boeing’s two main units. Setting a course for the $60-billion commercial plane business and navigating complicated global marketplaces will among his greatest challenges as CEO, Muilenburg said.
“The key is we’re going to keep marching forward on the strategic path we’re on,” Muilenburg said in an interview. “We have great opportunities ahead as we ramp up commercial aircraft production and grow the defence business.”
Challenges ahead
He inherits some tough decisions, including whether to pare output for the 777, one of Boeing’s most-profitable models, ahead of the successor 777X next decade and whether to proceed on a replacement for its mid-sized, out-of-production 757, according to Rob Stallard, a New York-based aerospace analyst with RBC Capital Markets.
“These may be viewed as ‘negative’ in the short term, as they would likely dent the uber-bullish tale on cash generation and deployment,” Stallard in a note. “But longer term they are arguably the calls that need to be made, and in our view could be healthier for Boeing’s longer-term growth and success.”
Boeing fell 1 percent to $143.01 at 4.59pm in New York in extended trading. The stock’s 11 percent rally this year beat the 3.2 percent advance for the Standard & Poor’s 500 Index.
Muilenburg, an engineer by training and Iowan by upbringing, started at Chicago-based Boeing as an intern in 1985 and worked his way to the top. Among his successes at BDS were winning a contract to build the Air Force’s new refuelling tanker while drafting strategy to help the company weather US budget cuts.
‘Most dynamic’
“Dennis Muilenburg is the most dynamic executive that Boeing has produced in this generation,” said Loren Thompson, COO of consultant Lexington Institute, who has done work for Boeing. “His level of enthusiasm and energy is unusual for the aerospace sector.”
Widely seen as McNerney’s heir apparent, Muilenburg spent his time as COO working side by side with McNerney and meeting with customers as he learned Boeing’s commercial airplane business. The two executives both attended last week’s Paris Air Show, the industry’s oldest and largest trade event.
“I’m 66 this year, which doesn’t make me old,” McNerney said. “Dennis is 51. This is a big, long-cycle company that needs somebody running it for an extended period of time.”
Boeing waived its age-65 retirement rule for McNerney, who reached that milestone in 2014. He said he will play a role in celebrations marking the company’s 2016 centennial.
McNerney became CEO in 2005 after running 3M. His tenure spanned successes such as the decision to upgrade the 777, Boeing’s biggest twin-engine model. He presided over the decision to update the 737, Boeing’s cash-cow single-aisle jet, and oversaw the roller-coaster development of the Dreamliner.
After an initial delivery more than three years behind schedule in 2011, the world’s first jetliner built chiefly of composite materials won plaudits from airlines for its fuel-sipping performance - then was grounded by regulators for more than three months in 2013 after battery meltdowns on two planes.
McNerney made returning cash to shareholders a focus in recent years after the drain eased from development programs that included the 787 and the 747-8 jumbo jet. In 2013, the stock surged 81 percent as the Dreamliner recovered from its stumbles. Boeing’s annual performance beat the S&P 500 in four of the past six years.
McNerney was awarded $24.9-million in 2014, according to the Bloomberg Pay Index, a daily ranking of the highest-paid US executives, which values compensation as of a company’s fiscal year-end. That compares to $18.8-million in 2013, the index shows.
* With assistance from Laura Marcinek in New York
Bloomberg