By Jon Ostrower And Doug Cameron
Dennis Muilenburg, Boeing Co.'s incoming chief executive, spent
years working in the company's defense unit managing programs that
often didn't come to fruition.
But people who follow his career say his experience brings two
skills that could be critical to running the aerospace giant that
is increasingly focused on the commercial jet business: an
engineer's feel for tackling tricky design problems and a proven
record for keeping costs down.
Mr. Muilenburg, 51 years old, takes over on Wednesday from Jim
McNerney, 65, who has helmed Boeing since 2005 and will stay on as
chairman indefinitely. Both men in an interview this week
emphasized continuity in the transition, and analysts don't expect
any immediate or sharp departures in strategy.
Still, Mr. Muilenburg has a very different background from his
predecessor that is likely to shape how Boeing deals with big
challenges in coming years, including sustaining its defense unit,
profitably delivering a half-trillion dollars of jetliners that its
customers have ordered, and possibly developing an all-new jet
model.
Mr. McNerney, who graduated from Yale University and earned a
master's in business administration from Harvard, worked at
McKinsey & Co., Procter & Gamble Co., and bulk of his
career at General Electric Co. before becoming CEO of 3M Co. He
joined Boeing's board of directors in 2001.
Mr. Muilenburg holds a bachelor's degree in aerospace
engineering from Iowa State University and a master's in
aeronautics and astronautics from the University of Washington. He
started at Boeing as an engineering intern in 1985, and returned
after completing his senior year.
Since December 2013 he has served as president and chief
operating officer, helping lead Boeing's push to use automation to
cut the costs of developing and building commercial jets and weapon
systems. People briefed on Boeing's decision-making say he also has
been focused on addressing the looming challenge from China, viewed
as a major long-term threat to Boeing's commercial-jet business as
well as a key factor for its defense arm as the Pentagon focuses
more resources on forces in Asia.
"First of all, he's an engineer," said Jim Albaugh, a retired
chief executive of both of Boeing's commercial and defense and
space businesses. "He likes to gather all the facts and data and to
the extent that he can get a consensus he'll go for that. But at
the end of the day he understands he's got to make the tough
call."
Mr. Muilenburg, say those who have worked with him, has enormous
energy. The Iowa-born engineer-turned-executive is known for
guzzling fluorescent yellow Diet Mountain Dew in lieu of coffee and
rides his bike 120 miles each week around Chicago. Mr. Muilenburg
said recently that he is on pace for riding 6,000 miles this
year.
Prior to becoming president and chief operating officer, he
headed Boeing Defense, Space & Security--a job he inherited
from Mr. Albaugh in 2009. That division's share of Boeing's revenue
declined to about 34% last year from roughly half five years ago,
amid dwindling defense budgets and the phasing out of some of its
big products like the C-17 military transport jet.
But Mr. Muilenburg is credited with increasing the unit's
operating margin to 10.8% in 2013 from 9% in 2009. He did so, in
large part, by cutting jobs--9,000 staff, or 15% of the unit's
workforce, in his first two years--and closing facilities, but he
also maintained higher research spending that drove efficiency
gains.
"Dennis showed that he could take cost out of the business, hold
margins through declining rates," said Byron Callan, an analyst
with Capital Alpha Partners LLC.
Those financial skills are essential for Boeing's commercial
business, which is under pressure to bring down the cost of its
flagship 787 and the rest of its products amid intense competition
with Airbus Group SE for sales to global airlines that have become
acutely price-conscious.
At the same time, Mr. Muilenburg demonstrated a willingness to
take some risks during his years in Boeing's engineering ranks.
Mr. Albaugh said Mr. Muilenburg first came to his attention
during work on the planned Joint Strike Fighter. The young engineer
held various positions organizing Boeing's bid for the Defense
Department's biggest-ever acquisition project, in which the company
faced off against Lockheed Martin Corp., which ultimately won the
bid.
Mr. Muilenburg was featured prominently in a documentary by the
public television program NOVA on Boeing's fight against Lockheed,
which showed him in his mid-30s having a bit of swagger.
"When I daydream, I see it hovering; I see it taking off from
airfields; I see it operating around a ship," said Mr. Muilenburg
of Boeing's design for the fighter. "And sometimes I even see it
shooting down the Lockheed airplane."
Mr. Muilenburg presided over one of the Boeing program's crucial
design decisions, about whether the planned fighter should include
a new design for its tail that some engineers thought could make it
harder to detect but others argued might not be practical to build.
Taking the pulse of the assembled engineers in one scene in the
documentary, Mr. Muilenburg was the tiebreaking vote in favor of
the new design.
"We're nervous about some things, so let's go figure out how to
make it work," Mr. Muilenburg said in the scene. His decision was
overruled by more senior executives in the program, who chose the
more conventional, less-risky approach. But his effort had made an
impression on senior leaders, recalled Jerry King, former head of
Boeing's defense business. Mr. King said in an interview that Mr.
Muilenburg was acutely aware of the big picture, while balancing
all the competing requirements for the advanced jet.
Boeing frequently moves its most-promising younger executives
from project to project, exposing them to different areas of the
company. After 14 years designing jets and military systems in
Seattle, Mr. Muilenburg was pulled from the fighter team to lead a
new unit near Washington, D.C., selling air-traffic management
services.
He drove across the country with his young family and seven
pets. Ten days after he arrived, the terrorist attacks of Sept. 11,
2001 delivered a crushing blow to air travel, leading Boeing to
sharply scale back the fledgling unit.
A month later, Boeing lost the fighter contest to Lockheed,
leaving Boeing out of the world's largest military program. Such
misses aren't uncommon in the high-stakes defense business. Mr.
Muilenburg later said the move from Seattle actually helped his
career.
"Looking back on that time period I probably grew more as a
leader during that year than any other time in my career," Mr.
Muilenburg said at a conference in 2012. "And it was something
that, originally, I didn't even want to do."
Mr. Albaugh promoted Mr. Muilenburg to head the Future Combat
Systems project, a sprawling $160 billion effort to modernize the
U.S. Army's ground vehicles.
The project didn't succeed. It was canceled in 2009 after
projected costs spiraled, and the fallout has been largely limited
to the Army's changing requirements rather than missteps by
Boeing.
"He's been groomed well, enjoyed successes and confronted
lackluster outcomes as well," said one former military leader who
worked closely with Mr. Muilenburg.
Mr. Muilenburg faces a tightrope walk between competing
interests, being a shareholder darling while carrying the banner
for American innovation.
"It's what their shareholders want, generate a lot of cash,
don't take big risks," said Mr. Callan. "It's different from the
Boeing of old, it's different from the aerospace industry of
old."
Write to Jon Ostrower at jon.ostrower@wsj.com and Doug Cameron
at doug.cameron@wsj.com
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