=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/n/a/2005/03/09/financial/= f134322S27.DTL --------------------------------------------------------------------- Thursday, March 10, 2005 (AP) Boeing Facing Tests After CEO's Ouster By DAVE CARPENTER, AP Business Writer (03-10) 01:38 PST Chicago (AP) -- The sudden ouster of its chief executive for questionable behavior leaves Boeing Co. facing several short-term challenges in both defense contracting and its commercial airplane business. In the aftermath of the shocking announcement that Harry Stonecipher had been sent back into retirement for exercising "poor judgment" when he had an affair with a female executive at the company, analysts and Boeing officials praise his performance during 15 months on the job. Observers say Stonecipher's absence, and Boeing's decision to forgo nami= ng an immediate successor, weakens the company at the top level and puts it under extra pressure to select a permanent CEO who can remain at the helm for years. "Near-term, it's going to make it a little more difficult for them becau= se Harry was doing a very good job," said Cai von Rumohr, an analyst for SG Cowen Securities in Seattle. "I think it will especially affect them in commercial (airplane) marketing, where Harry was a good salesman." The transition comes while numerous key issues are pending. Boeing is locked in a tight struggle with Airbus SAS for supremacy in passenger jet sales as the airline industry shows signs of recovering — a battle featuring its planned new fuel-efficient 787 against its rival's A380 "superjumbo." Complicating matters, Airbus has said it will try to sell a direct rival to the 787, and Boeing is considering whether to offer a new version of its jumbo 747. Stonecipher was an enthusiastic and outspoken advocate of Boeing's planes and took a prominent role in the dispute with Airbus over government subsidies that is now being negotiated by U.S. and European officials. He also had said a decision would come by midyear on whether to halt production of the 767; demand for it has been sagging. Boeing had been hoping the Pentagon would issue a verdict by then on reviving the controversial contract to have Boeing convert 767s into refueling tankers for the Air Force. Even while those decisions are hanging, Boeing still needs to reduce lingering tensions with the Pentagon and Capitol Hill — a top Stonecipher priority — after its recent contract scandals if it hopes to avoid losing the next tanker contract or other big deals. "While Harry Stonecipher had been doing a terrific job and got this company really far along in repairing relationships with defense customers, there's still a lot of work that needs to be done," said analyst Peter Jacobs of Seattle-based Ragen MacKenzie, who foresees "a period of uncertainty" for Boeing. Former Pentagon official Lawrence Korb thinks Boeing's influence could be weakened without its veteran CEO's presence. "The real problem is that Stonecipher was so well-connected and thought = of in Washington," said Korb, now a senior fellow at the Center for American Progress, a Washington research group. Analysts also said the scandals that have claimed three top executives since 2003 — Stonecipher, predecessor Phil Condit and jailed ex-chief financial officer Mike Sears — may shadow Boeing's CEO search and force it to choose either an outsider or an ultra-safe candidate in order to avoid a recurrence. Boeing spokesman John Dern said the company is confident it is in good shape under the interim leadership of James Bell, who worked closely with Stonecipher as chief financial officer. "Certainly there are some challenges out there," he said. But "under Har= ry Stonecipher, the company performed extremely well and we're extremely optimistic about the future going forward." Boeing's stock declined for a third straight day since the announcement, closing down 40 cents to $57.75 a share Wednesday after hitting a 3 1/2-year high last week. ___ On the Net: www.boeing.com ---------------------------------------------------------------------- Copyright 2005 AP