New bottom line is retirement: Tough exec Harry Stonecipher retires today as Boeing's No. 2

CHICAGO — Boeing Chairman Phil Condit is losing his "bad cop."

Vice Chairman Harry Stonecipher, praised by investors for his focus on profits and direct style, retires today after almost five years as Condit's No. 2.

Stonecipher, often the more vocal of the two, gathered daily cash-flow reports and encouraged others at the engineering-dominated company to also pay more attention to financial data, leaving Condit more time to focus on strategy. Investors said his departure from the world's biggest planemaker will leave a void.

"Harry's a loss, and you can only hope that somebody emerges and takes the torch," said Rich Turgeon, an analyst at KeyCorp's Victory Capital Management, which owns 2 million Boeing shares. "Boeing has always been a great company filled with brilliant engineers, but they sometimes give the impression they don't care about the shareholder."

Stonecipher, 66, came to Boeing through its 1997 purchase of McDonnell Douglas, where he was chief executive. When Boeing stumbled after the merger, running up $3 billion in costs on airliner-production backlogs, Stonecipher helped lead the cleanup.

He also urged the replacement of top managers in the airliner unit and, in a 1998 speech, criticized Boeing's "arrogant" and "insular" culture. Bill Whitlow, manager of the Safeco Northwest Fund, called him the "bad cop" to Condit's "good cop."

While Stonecipher will remain on the board, his retirement makes Condit, who also is chief executive officer, the company's sole leader. The lack of a strong No. 2 worries some investors.

"If you have someone at the top who is a 100 percent, hard-nosed, got-to-make-a-profit kind of guy and insists on excellence below him, then they'll be fine," said Brian James of Loomis Sayles & Co., a Boeing shareholder. "I'm not sure Condit is that strong an individual."

Stonecipher's career 1936: Born in Scott County, Tenn., son of a coal miner. 1960: Awarded a bachelor's degree in physics from Tennessee Technological University, joins General Electric's Evendale Aircraft Engines operations, working for Gerhard "Herman the German" Neumann, an aviation pioneer legendary for his toughness. 1984: Takes leadership of GE's engine business. 1987: Tapped to turn around Sundstrand, a defense contractor caught in a Pentagon fraud scandal that began before Stonecipher's arrival. Stonecipher turns the company around financially and repairs relationships with the U.S. military. 1994: Takes another turnaround job — this time as president and CEO of McDonnell Douglas. Slashes jobs by the tens of thousands, fires managers and boosts the company's stock price, raising the value of his personal holdings by $18 million at one point. Meanwhile, the company's commercial-airplane business, with an aging product lineup, continues to lose market share to Boeing and Airbus. November 1996: McDonnell Douglas is eliminated from the competition to build the Joint Strike Fighter, which Stonecipher had called a "must win." The loss leads to questions about the company's long-term survival. December 1996: Boeing merger announced. By August 1997, when the merger is effective, Stonecipher is Boeing's president and chief operating officer. May 2001: Stonecipher, turning 65, is asked to stay on beyond Boeing's mandatory retirement age as vice chairman. — Seattle Times business staff

Condit addressed Stonecipher's departure in March, naming three executives to a new Office of the Chairman, including Chief Financial Officer Michael Sears, Chief Technology Officer David Swain and Chief Administration Officer Laurette Koellner.

James said he wants Stonecipher to be replaced by one person, possibly a non-aircraft engineer from outside Boeing. "They need that continued infusion of toughness," he said. "It takes years and years for it to permeate the culture of an organization."

The changes also didn't clarify the succession for Condit, who turns 61 in August and will likely have to retire at 65.

Employees have long viewed Sears or Alan Mulally, the head of the airliner unit, as the most likely candidates. Yet Sears will be 59, and Mulally 61 by the time Condit retires. Some investors speculate Condit may tap a younger outsider such as former United Technologies President Karl Krapek, or 3M CEO James McNerney, a Boeing board member.

Boeing spokesman John Dern declined to comment. He said the company will continue pushing for the business focus championed by Stonecipher, who wasn't available to comment for this article.

"The team will obviously look different, and will be structured differently, but the basic thrust will remain," Dern said.

For all of the plaudits investors give Stonecipher, he didn't improve the stock. Trading at about $58 when he joined Boeing, the stock rallied to $70 in December 2000 before slumping in the wake of Sept. 11. It closed at $42.65 yesterday.

Stonecipher also faced criticism from veteran Boeing workers who claimed he put short-term profits ahead of investment. When engineers struck in 2000, they labeled a portable toilet on the picket lines outside Boeing's headquarters as "Harry's Office."

Investors said they appreciated Stonecipher's directness, a style bred by a blue-collar background and 27 years at General Electric. "You pretty much always knew where Harry stood; Phil couches his comments a lot more," Turgeon said.

Stonecipher began work at age 11, making a dollar a day washing dishes at a restaurant.

"Bought myself a pair of special bluejeans with my first paycheck," he said last year. "Been working ever since."

No longer. In a company newsletter, Stonecipher said he'll spend much of his retirement seeing plays and golfing, starting with a vacation in Scotland.