Phil Condit: Taking Boeing's Controls -- New Chief Faces The Challenge Of Continuing `Work In Progress'

Philip Murray Condit has a confession.

The man who will take over tomorrow as chief executive of The Boeing Co. plays host to presidents, dines with kings and huddles with the captains of global industry.

But when he enters his company's cavernous assembly plants to talk to the workers who build Boeing airplanes, Condit said he often feels shy.

"I get this feeling deep in my stomach," he said, "and don't know what to say."

The feeling doesn't last long because Condit, Boeing's president, has a reputation for being one of the most approachable and easy-to-talk-with executives on the planet. And he makes a habit of doing just that - on production lines, in offices, anywhere. He's just plain friendly.

It works both ways, too. He also is known by colleagues as an aggressive listener, hearing all sides before making a decision.

"As a boss, he makes you feel you can participate," said Alan Mulally, who worked with Condit on the 777 and now is a senior vice president of Boeing Commercial Airplane Group.

Mulally calls Condit a mentor for all at Boeing. "He's a champion for everybody. If you want to be a team player, you can count on Phil being there."

Neil Standal, who also worked closely with Condit on the 777, said, "He's a great idea person and is willing to try different ways."

Everyone calls him Phil. If they don't, he requests it.

At tomorrow's annual shareholders' meeting, the 54-year-old Condit, an engineer by training, will replace Frank Shrontz, Boeing's chairman, as chief executive officer. Shrontz is planning to retire after he turns 65 in December.

The challenge for a new CEO is stepping into "a work in progress" and shaping what is already there, Condit said last week. He believes he and the company need to keep learning new things and "make sure we're not stuck."

Some companies that have run into difficulty, he said, didn't see change coming or respond to it. "You have to think out of the box," he said.

Condit will need to do just that to address the challenges ahead during his tenure as chief executive. They include keeping Boeing's markets open in China despite political friction, finding new markets for commercial jets and space and defense products, and wisely investing Boeing's increasing profits.

The worst seems to be over for Boeing after a five-year downturn. Production is increasing in response to new orders. Changes in production processes are helping to cut costs. Morale is improving after a 69-day strike, hiring is under way, and Boeing's stock price has been trading at its highest levels ever.

Accelerating moves to cut costs and keeping the work force motivated are among the highest priorities for the company, said insiders and stock analysts. They think that it will be tempting for workers to let up on change as business improves and that Condit will have to find ways to keep the pressure on.

Focus on fundamentals

Looking ahead 20 years, Condit has already told Boeing managers his goals are based on four fundamentals: customer satisfaction, integrity, shareholder value and people working together.

To achieve these goals, Boeing will have to develop and refine what Condit calls the "core competencies" of detailed customer knowledge, large-scale systems integration and lean, efficient design and production.

But Condit will need to improve communications even more to change the mindset and culture of the 80-year-old company, said Bill Whitlow, analyst with Pacific Crest Securities in Seattle.

Richard Albrecht, an executive vice president of Boeing Commercial Airplane Group, said Condit will "have to make sure the company does change, but not in ways that endanger its leadership."

Despite improvements already achieved under the "working together" philosophy and process changes in the factory, Albrecht said Boeing is the kind of place where new ideas can be rejected.

On the other hand, Bob Toomey, analyst with Piper Jaffray in Seattle, believes Boeing employees are pumped up enough about change that they will continue to be motivated. He's more worried about marketing and market share in the future, particularly in Asia.

An immediate task for Condit will be to smooth relations with China so Boeing can continue to get a major share of its orders and of any new manufacturing partnership that is developed. China is expected to need 1,500 jets in the next 20 years, worth an estimated $118 billion. In recent months, China had been expected to place orders worth $4 billion with Boeing, but they're on hold because of rocky political relations with the U.S. government.

Being the biggest, most visible player in U.S.-China trade means Boeing is a target for political bashing. China placed orders with European rival Airbus Industrie and threatened to give a European group partnership in its project for a proposed 100-seat airplane being developed with South Korea. But Condit said he hasn't given up on the partnership opportunity, which earlier had seemed certain to go to Boeing.

Boeing will continue to support most-favored-nation trading status for China. Condit said trade with China is good for the United States. For every Boeing jetliner sold there, thousands of small Boeing suppliers benefit domestically, he said.

Analysts said cost competitiveness, quality and meeting customer needs will remain challenges for Boeing as Airbus strengthens its products. Boeing also faces potential competition from new aircraft producers in Asia and Russia.

New opportunities are developing for Boeing, meanwhile, in defense and space, including the Sea Launch satellite program; the space station, for which Boeing is general contractor and a supplier; and a contract for the new Joint Advanced Strike Technology (JAST) fighter, for which Boeing is competing.

Condit sees a lot of potential in commercial space work. "We're very good at complex systems and are looking at this market, which also includes a new bid to get into air-traffic control," he said.

A higher dividend?

When profits rise from increasing sales, Condit will have to decide how to handle them. Analysts predict Boeing's cash reserve could climb fourfold, from its current $3 billion to as much as $12 billion before the turn of the century.

Condit said the company is considering increasing its stock dividend, which has been at 25 cents a share since 1989. Other possibilities include buying back stock or acquiring another company. But when such actions might be taken is unclear.

"He's (Condit) not interested in buying some fancy defense business," said Nick Heymann at NatWest Securities, referring to reports that Boeing might buy McDonnell Douglas or other defense contractors. Condit gives the standard company response: Boeing always is looking but will buy only if it makes sense.

Heymann said, "He wants shareholders to know he owns Boeing stock, too, and wants to level the value so share buyers don't have to worry about missing a cycle when they want to invest."

Condit said Boeing would have to balance demands for spending on new technology, including proposed new derivative models such as a larger 747, with shareholder value.

Some believe Boeing may become more aggressive under Condit because he is less reserved than lawyer-businessman Shrontz. There are countless stories about Condit's willingness and enthusiasm to get involved in everything from pickup basketball games to fund-raisers. He recently agreed to participate in a dunk-tank drive to raise money for United Way.

An up-close look

Condit's office overlooking Boeing Field, with a beige carpet and brown leather furniture, looks used. Files and papers are stacked on his big desk and on the floor. Decorations include a large sailboat model, a montage of photos of children taken by his mother, a photographer, and various plaques and pictures. He has only one airplane model there, a memento from the 777 team. Other models and keepsakes fill a large cabinet outside his door.

Condit and his wife, Jan, frequently invite employees to dinner at their new home along the Snoqualmie River near North Bend. Activities range from poetry readings to Camelot themes, featuring characters from legendary King Arthur days. Often there is music and entertainment, including Condit, a tenor.

It's been obvious for years that Condit was leadership material at Boeing because of his unusual ability to listen and cut through detail.

He was designated a star early on, said T.A. Wilson, retired Boeing chairman, who was one of those keeping an eye on him as he moved up. "He gets along well, is attractive to customers, and he's been an obvious leader," Wilson said.

It was no surprise when Condit was named Boeing president and a member of the board of directors in August 1992 after successfully directing the beginning of 777 development. Last year, his salary and bonuses totaled nearly $1 million. He also was eligible for an incentive bonus in the form of 125,000 stock options, priced at $40.56 each once the stock price topped $70 a share.

Condit joined Boeing in 1965 as an aerodynamics engineer on the supersonic transport program, turning down offers from Lockheed and McDonnell Douglas. As Boeing studies a possible SST for the next century, Condit jokes that "I came in on the SST, and I may go out on the SST."

An only child, he's a mechanical engineering graduate of the University of California at Berkeley and holds master's degrees in aeronautical engineering and management from Princeton and the Massachusetts Institute of Technology.

After his SST assignment at Boeing, Condit spent three years on the 747. Completing a Sloan Fellowship program at MIT in 1975, he returned to the company as manager of new program planning. From there, he directed program management for the 707, 727 and 737. In 1978, he became chief project engineer on the 757. He also held marketing, sales and other engineering management jobs.

In 1989, already an executive vice president of the Boeing Commercial Airplane Group, he was named general manager of the New Airplane Division that became the 777 Division with the 1990 launch of the jet.

Admired by many

Condit grew up in the San Francisco Bay Area and got interested in airplanes as a youngster when his grandfather, James Murray, took him to San Francisco International Airport to watch the action. He got a pilot's license at 16 and was president of his senior class in high school.

His mother, Bernice Condit, said he was a tinkerer as a child (and still is), taking apart clocks and other things to see how they worked. He also was good at home repairs. A prime attraction in his new home is a small train that circulates around four rooms.

Close friend Granville Frazier, director of engine programs in the Boeing commercial division, said Condit gives total concentration to whatever task is at hand, from business problems to leisure.

Don Krebs, an organizational psychologist who consults with Condit and first worked for Boeing when the 777 program was initiated, said the engineer recharges and does a lot of thinking at home.

"He ponders things through in the shower or driving to work" in his Ford Explorer, Krebs said. "He has a global view and can see things 10 to 15 years out. Shrontz is a hard act to follow, and Phil will take it slow and provide strong leadership."

He said Condit never shows anger and described him as a "unique man" because he has near-total recall of what he hears. A prime challenge as CEO, Krebs said, is that "he's got to avoid getting overloaded and stay true to who he is."

Outsiders see Condit as competent, decisive, tough and likable.

"There's no question he's highly regarded in the industry," said Brian Rowe, retired chairman of General Electric Aircraft Engines. Rowe cites Condit's drive to cut costs while continuing to improve production, the trust he generates with others, and the success of the 777.

Competitor Adam Brown, an Airbus vice president, said he was particularly impressed the first time he met Condit when they both participated in an industry program. At the pre-event dinner that lasted for hours, Condit stood up at 11 p.m. and announced, "OK, all you Boeing folks, it's time to get to work."

Herb Kelleher, chairman, president and CEO of Southwest Airlines, calls Condit a visionary and a great business leader. They also enjoy each other's company. Kelleher said, "I always razz him about being a terrible cribbage player - even though he's an excellent one."

Union leaders also like Condit. "Phil is committed to employee empowerment and enlightened management, one of involvement, accountability and results from the top down," said Charles Bofferding, executive director of the Seattle Professional Engineering Employees Association, with which Condit was affiliated in earlier days.

William Johnson, president of District Lodge 561 of the International Association of Machinists and Aerospace Workers, praised his willingness to meet with workers in the factory to discuss problems.

Condit likes sailing and the arts and serves on the board of directors of A Contemporary Theatre and a number of local companies, including Fluke and Nordstrom.

He also is interested in education and has worked with scientists and engineers at the UW and elsewhere to promote improvements.

Condit has two daughters in their 20s, Nicole and Megan, from a previous marriage.