| Boeing & Aerospace Business Economy |
New CEO McAllister pushes Boeing to be ‘faster, nimbler’ as decision looms with new jet
Originally published November 27, 2017 at 6:00 am
Kevin McAllister, CEO of Boeing Commercial Airplanes, on the factory floor of a 737 production line in Renton on November 6, 2017.
A year into the job as chief executive at Boeing Commercial Airplanes, Kevin McAllister has had big sales successes. Ahead, he has a pivotal choice to make about Boeing’s next all-new airplane
Seattle Times aerospace reporter
Kevin McAllister was plucked from the executive ranks at GE a year ago to become the first outsider to lead Boeing Commercial Airplanes.
He has in his hands the industrial future of the Puget Sound region: As CEO he will take the lead on when, how and where to build Boeing’s next all-new jet.
Within 18 months, Boeing may launch the plane that will become the 797. With a fresh design and a new manufacturing system, it could be built anywhere.
McAllister knows the stakes for this region.
Boeing 787 Dreamliner first flight (1:38)
He grew up in Bethlehem, Pennsylvania, a blue-collar steel town that suffered a massive industrial decline due to overseas competition.
In his first one-on-one press interview since taking over, he cited Bethlehem’s former steel mills, now replaced by casinos and a retail and entertainment complex, as a reminder that “if you don’t reinvest in your future, good things don’t happen.”
Laying out a familiar CEO-style list of Boeing priorities, McAllister said he wants “a faster, nimbler Boeing.” It must deliver airplanes on time, rolling out existing jets and developing new models. It must be a leader in technology.
And it must continue the long-standing drive to squeeze out costs, from Boeing’s own operations and those of its suppliers.
“We have to fund our future,” McAllister said.
If that all works out, Boeing will be positioned to launch the all-new airplane program.
But will it be here?
McAllister brings a new emphasis on reaping after-sales revenue through selling parts. That shift could prompt Boeing to build more of the next airplane itself rather than go for the wholesale outsourcing of parts that characterized the 787 Dreamliner.
In the interview, McAllister offered no guarantees on jobs or future work here.
Yet he said he feels privileged to be “standing on the shoulders of giants, the people that built the 100-year heritage of Boeing.”
And he spoke of Boeing’s investment here — several billion dollars’ worth of new facilities and equipment in recent years — as stamping an almost indelible footprint in the region’s landscape that will extend for decades.
Early years overseas
Though he grew up in the shadow of Bethlehem Steel, McAllister is not a blue-collar guy. He’s the son of two professors, mathematicians who taught at separate universities in Bethlehem.
His Italian-born mother studied at the University of Rome and met his father when both were doing postdoctoral work at the University of California at Berkeley.
Kevin McAllister, CEO of Boeing Commercial Airplanes, visits the factory floor of a 737 production line in Renton this month. He’s kept production humming on the line in the year since he took over. (Mike Siegel/The Seattle Times)
While Kevin was in grade school, the family moved to Florence, Italy, where his mother taught for a couple of years. Thrown into a local school, Kevin quickly picked up the Italian language.
He’s still fluent in Italian and has since added Spanish and some Russian, linguistic abilities that serve him well in the international world of jet airplane sales.
Excelling in science, back in the U.S. he earned a bachelor’s degree in materials engineering. His first job was as a materials engineer at Howmet Corporation, which made metal parts for engines.
In 1989, he joined GE Aviation as a metallurgist. During 28 years there he graduated from that white- lab-coat job to various engineering, technology, operations and management positions.
He ended his GE career as head of Aviation Services, a $9 billion business that maintains and repairs the more than 34,000 GE commercial jet engines in service worldwide.
Joining Boeing, McAllister took a daunting step up to lead the $60 billion Commercial Airplanes enterprise.
Jim Albaugh, the Commercial Airplanes CEO from 2009 to 2012, said McAllister comes in “well respected in the industry.”
“It’s a bigger organization than he’s run before, with new products, and probably more complex than he’s used to,” said Albaugh. “But he’s a smart guy. He’ll figure it out pretty quickly.”
Two senior executives in the aviation world who know McAllister described his personal style as markedly different from that of his predecessor Ray Conner, who is a charismatic people person.
One, a former Boeing executive who talks often with company insiders, said McAllister in contrast is “a math guy.”
“He was known for that at GE,” the executive said. “He’s all about the numbers.”
The second executive, a Boeing customer, summed McAllister up similarly as “a numbers guy, not a relationship guy.”
Both these executives, who asked not to be identified to maintain relations with Boeing, said the social side of the job comes less easily to McAllister and that schmoozing with airline customers over lavish dinners produced a few awkward moments this year.
McAllister speaks with Sam Young, who works in Final Assembly Manufacturing Operations in Renton. The new CEO has offered no guarantees on jobs or future work here. (Mike Siegel/The Seattle Times)
Besides style, there’s a change in emphasis too. McAllister’s sales calculus includes a strong focus on getting more than just the one-time revenue from an airplane sale.
He wants to add contracts for maintenance and parts that will bring Boeing more money over the life of the airplane.
His experience in doing that at GE, with aftermarket sales of engine services, may be a key reason Boeing chief executive Dennis Muilenburg hired him.
“Kevin is going to change the way Boeing is run,” said the customer executive.
So far, McAllister’s had a successful run.
In the year since he took over — while rival Airbus has stumbled, falling behind in both jet sales and deliveries — McAllister has kept production humming on the key 787 and 737 assembly lines.
And even if his personal style is different, he’s maintained the ultracompetitive approach to sales contests that Conner introduced.
In June, McAllister helped land a big jet order at the Paris Air Show. Then this month, he scored again at the Dubai Air Show, giving new sales momentum to the 787 Dreamliner and the 737 MAX, including significant deals on aftermarket services.
Helping him nail those contracts, McAllister has worked closely with Boeing’s urbane new head of sales, Ihssane Mounir.
The Paris order for 30 twin-aisle 787 Dreamliners was from Aercap, the world’s largest aircraft lessor, which now has more 787s on order than any other company.
“Without Kevin, the deal never would have got off the ground,” said Aercap chief executive Aengus Kelly, speaking by phone from Dublin this month.
Kelly said that while Boeing’s sales tactics once lacked the intensity shown by Airbus sales chief John Leahy, that changed dramatically over the past four or five years, beginning under Conner, who brought in Mounir to head sales.
That aggressive approach continues under McAllister, who realizes what it takes to close a key sale, said Kelly.
“No more committee decision-making that slowed up the process of making a deal,” he said. “Boeing is now nimble, aggressive, out there all the time. Kevin and Ihssane were the two drivers of that 787 deal.”
Alan Joyce, chief executive of Qantas Group, in August challenged both Airbus and Boeing to upgrade the performance of their longest-range jets so the Australian airline can fly nonstop on the ultra-long-range Sydney-London route.
He said McAllister shot back an email almost immediately declaring, “Alan, we’re up for it!”
“Aircraft manufacturing is incredibly competitive and as a customer, that kind of response is what you want,” said Joyce.
The Dubai Air Show this month brought Boeing more hot sales success as Emirates ordered 40 of the largest 787-10 Dreamliners and FlyDubai committed to a massive order for 225 737 MAXs.
In an illustration of the push to add services business, when Azerbaijan Airlines bought five Dreamliners in Dubai, it also committed to let Boeing overhaul, maintain and certify the landing gear during the life of its entire 787 fleet.
Even though Airbus landed an even more spectacular order in Dubai for 430 A320neo jets, the European jet maker had come into the show lagging so far behind that it still trails Boeing in total orders for the year.
Key airplane-sales campaigns lie ahead at Delta, British Airways and Japan Airlines. All will be keenly fought and will help define the success of McAllister’s tenure at the top.
Yet in Washington state, the next new airplane is the measure by which he’ll be judged.
Before the Boeing board in Chicago will commit the minimum of $5 billion to $10 billion needed to launch a new jet program, the Commercial Airplanes team must convince them of the business case.
They must design a plane the market wants, and then work out how to build it at a cost that will prime the sales pump.
Getting it right will be McAllister’s biggest decision.
It was 15 years ago that Boeing scarred the psyche of the Pacific Northwest by holding a 10-month-long, state-versus-state competition to choose the assembly site for its 787 Dreamliner, the first time Boeing had ever put an airplane out to bid.
Everett won, but ever since the region has been beset by recurrent anxiety. Every time a new airplane program has popped up, so has the question of where it will be built.
Albaugh, who grew up in Eastern Washington, was a vocal champion of Boeing’s local engineering prowess and the skills of its production workforce.
Albaugh picked Charleston, S.C., for the 787 Dreamliner’s second final assembly line in 2009. But he also signed a long-term contract agreement with the Machinists union in 2011 that secured the 737 MAX for Renton.
Then, Seattle-born Conner, who climbed through Boeing’s ranks from mechanic to succeed Albaugh as CEO, led the decision on where the 777X would be built.
In 2014, Everett won again. But this time the local success was darkened by an acrimonious struggle with the Machinists union, whose members were forced to give up their traditional pensions to win the prize.
Next up, McAllister.
An indication of a shift in thinking for the next new airplane was described by the customer executive who asked not to be named.
Early this year, McAllister asked for a presentation on what it had cost Boeing, in work hours and dollars, to support one of its 787 partners when that company ran into trouble supplying its part of the plane some years ago.
When the answer came back, it wasn’t far short of the total capital value of the supplier partner. McAllister’s response: Instead of putting all that money in, we could have bought that company.
If Boeing had done so, now that the 787 program is running smoothly, it would have reaped the benefit of providing spares for the parts of the airplane that are still supplied by that partner.
That way of thinking clearly provides an incentive for Boeing to keep more work in-house on future aircraft, rather than outsourcing.
Yet for now, McAllister keeps the plan for the next new airplane close and offers no guarantees.
After a steady decline in local Boeing employment, with more than 20,000 jobs cut in the last five years, he remains noncommittal on where employment here is headed in the near term.
“Employment will come out in some (work) areas, and go up in others,” he said.
McAllister is certainly impressed by the local workforce’s productivity efforts, which he said allow Boeing to sell more airplanes and so to add more jobs.
He marvels at the huge automation projects that have been completed on the 737 line in Renton without a pause in the accelerating production rates there, even as the new model 737 MAX was simultaneously introduced.
And though the latest robotic technology being introduced in Everett for the 777X has run into problems, he says engineers are fixing them as they go.
“We are going through the biggest industrial transformation in the company,” McAllister said. “When you take on things of that scale, you encounter tough challenges, and we’ve had them. But we’re getting through them.
“When we have issues, we swarm at them early,” he said.
He pointed to those enormous local investments, in the automation of production in Renton and especially the $1 billion-plus 777X wing fabrication center in Everett, by way of long-term reassurance.
“When we invest in a factory, it’s for an airplane with a 20-year life cycle. These are big-footprint investments in the future,” McAllister said. “We have invested more in the Puget Sound than anyplace else in the world.”
Dominic Gates: 206-464-2963 or firstname.lastname@example.org