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Nice Flying. Here's Your Parachute


At a break during Boeing Co.'s (BA) annual investor conference in Seattle on May 17, two of Wall Street's top aerospace analysts -- Bear Stearns (BSC) & Co.'s Steven Binder and Lehman Brothers Inc.'s (LEH) Joseph Campbell -- cornered Boeing Chairman Lewis E. Platt. They quietly talked up the merits of interim Chief Executive James A. Bell and wanted to know why the board wasn't considering him as full-time chief of the world's largest aerospace company. Said Campbell: "Investors think James Bell is doing a great job and should be on the short list of internal candidates."

Platt didn't directly respond. But he clearly shares much of the enthusiasm for Bell. At the conference, Platt praised him as "a man for all seasons" and said he was doing a "terrific job" as CEO and CFO and had given the board the "luxury of time" to find a qualified candidate. Yet Platt also made it clear the board viewed Bell's leadership as temporary. "When we asked James to step in as interim CEO I told him we did not consider him to be a permanent candidate," Platt told investors. Neither Platt nor Bell would comment for this story, but Bell has said he's eager to go back to being CFO.

That's too bad, because a growing number of employees, investors, and analysts believe Bell, 56, has what it takes to lead Boeing, a company that faces a tough competitive landscape and is still recovering from a series of scandals. Moreover, two of the top external candidates for the job have taken themselves out of the running, while Boeing's two internal candidates, Commercial Airplane chief Alan R. Mulally and Integrated Defense Systems boss James F. Albaugh, have failed to impress investors despite overseeing healthy businesses. "It's going to be very hard to pick a top aerospace executive," says Binder of Bear Stearns.

So why has Bell won so many fans since taking the helm in March? An accountant by training, his grip on the numbers is widely admired. But they also point to Bell's mediating and negotiating skills. In April, Bell managed to accomplish in three days what his predecessors had failed to do for two years: persuade Boeing and Lockheed Martin Corp. (LMT) to mesh their rocket launch businesses into one. Sources for both companies say Bell was instrumental in getting the deal done, sidelining the lawyers who had failed to agree on a valuation for the joint venture and putting his finance guys out front. Lockheed CFO Christopher E. Kubasik, who led his company's negotiation, cited Bell's "strong and effective leadership."

HONEST REP

A key requirement for the CEO job, according to Platt, is the ability to mend frayed relations with Boeing's government customers. Bell, who worked closely with the Defense Dept. during a stint at Boeing's Space & Communications division in the 1990s, has much Beltway experience and a reputation for honesty. Such a mix would go a long way to putting Boeing's ethical scandals behind it and restoring the trust of its biggest customer. With defense accounting for slightly more than 50% of revenues in 2004, or $30 billion, the stakes are massive.

Finally, at a company hurt by scandal and riven by strife, picking an inspiring insider could catalyze a healthier culture. Many employees would prefer one of their own to run Boeing but are split on Mulally and Albaugh. "[Bell] is charismatic and he really knows his stuff," says one Boeing exec. "He can get down in the weeds with any of these guys."

Analysts concede Bell may not have the operating and manufacturing experience the board wants. But they argue that his strong financial background and knowledge of Boeing should offset that flaw. "I like the concept of having the technical-oriented leaders reporting to a finance guy," says Morgan Stanley (MWD) analyst Heidi Wood. "He's got such a good handle on the numbers." And this bean counter also has a sense of humor. When Bell was asked what it feels like to be an interim CEO, he told investors: "All CEOs are interim. Some just don't have the absolute benefit of knowing when their term will expire." Perhaps Bell shouldn't either.

By Stanley Holmes in Seattle


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