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The abrupt resignation of Boeing Co. (BA
) Chairman and CEO Philip M. Condit on Dec. 1 may have been sparked by the current scandals over stolen documents and the hiring of a government procurement officer. But his seven-year reign was marked by a flawed strategy, questionable acquisitions, manufacturing controversies, and the ethical lapses at the company that jeopardized important contracts with the government.
Condit, 62, was at his best envisioning new airplane designs or pinpointing trends in the aerospace industry, and at his worst executing on his strategy. As a result, Boeing's stock fell 6.5% under Condit, even as the Standard & Poor's 500-stock index climbed 61.8%. "Boeing overpromised and underdelivered," says Richard Turgeon, research director for Victory Capital Management, which owns more than 2 million shares.
Condit's troubles began less than a year into his watch. He led Boeing into a manufacturing crisis in its commercial airplane factories that ultimately cost $2.6 billion in write-downs. While his merger with defense-oriented McDonnell Douglas Corp. won kudos, his foray into space and information services sure didn't. He overpaid for both Hughes Electronics Corp. (GMH
)'s Space & Communications Division and Jeppesen-Sanderson Inc., resulting in an additional $1 billion in write-downs this year. What's more, Condit, an engineer who joined Boeing in 1965, underestimated the threat posed by European rival Airbus, which for the first time in 2003 should deliver more airplanes than Boeing.
If Boeing's board could ignore such strategic and operational blunders, it couldn't overlook snowballing ethics scandals with its biggest customer -- the U.S. government. A week before his resignation, Condit fired Chief Financial Officer Michael M. Sears for allegedly offering an Air Force procurement officer a job during negotiations over an $18 billion airplane tanker deal. In July, the Pentagon punished Boeing for possessing 35,000 pages of stolen documents from rival Lockheed Martin Corp. (LMT
) that helped win rocket contracts. Boeing has been banned from bidding on military satellite launches, and the Pentagon has transferred contracts worth $1 billion to Lockheed.
As if that weren't enough, Boeing is in the midst of a class action accusing it of underpaying female employees and denying them promotions.
Between Boeing's ethics problems and Condit's managerial shortcomings, the board could take no more and accepted his resignation. It replaced him as CEO with director Harry C. Stone-cipher, 67. He likely wouldn't have been Condit's choice -- they were often rivals for control of the company.