3M CEO McNerney to lead Boeing

Boeing named W. James McNerney Jr. as its new chief executive today.

McNerney was CEO of 3M, and has been a member of the Boeing board since 2001. He previously headed General Electric's aircraft-engine division.

Boeing Chairman Lewis Platt made clear at an investors conference last month that the board might pass over internal candidates, including Alan Mulally, head of the locally based commercial-airplanes unit, and instead go for an outsider to help repair the damage done by a series of scandals.

Last night, industry analysts hailed McNerney's selection as one that could accelerate Boeing's recent resurgence.

"It's a splendid choice," said Adam Pilarski, an analyst with Avitas. "It's good news. He was the number one choice for a long time.

"He's exactly what Boeing needs, someone who knows the business but is an outsider," said Pilarski. "He's not polluted by the internal malaise they had."

When former CEO Phil Condit resigned in December 2003, the board reportedly asked McNerney to take the job — but he turned it down because he hadn't had enough time at the helm of 3M.

So when Harry Stonecipher was ousted in March after an affair with an executive, McNerney was considered the likeliest candidate to replace him.

In April, however, McNerney issued a statement indicating he had again turned down the position.

"As I've said before, I am very happy at 3M and believe strongly in the company's future," McNerney said in the statement. "I have no plans to leave in any foreseeable time frame. Rumors notwithstanding, I am not a candidate for any other job, including Boeing."

Just over two months later, the Boeing board changed his mind.

"Apparently they came to some kind of sweetening of the deal that moved him in the right direction," said Pilarski. "Also, Boeing seems re-energized. That could be another factor that enticed him. They seem to be turning the corner and this is a good time to take over."

Richard Aboulafia, an analyst with the Teal Group, said that McNerney's GE heritage is his strongest asset.

"Anyone from GE has a lot of prestige in this industry," he said. "He's going to be taken very seriously. In terms of satisfying investors, developing new products, and gaining market share, it's tough to beat the GE legacy."

Aboulafia said McNerney's track record on the Boeing board was forward-looking: He favored investments for the future and specifically championed development of the new 787, the success of which has played a large part in the Boeing revival.

"He'll be a strong friend of the commercial-aircraft unit," Aboulafia added.

But where does the new appointment leave Mulally, the head of that unit who also aspired to the top job?

Pilarski said McNerney may be the one choice Mulally would find acceptable. Rather than Mulally being passed over for a rank outsider, which might have triggered Mulally's resignation, the job will go to someone always considered the favorite.

In an interview at this month's Paris Air Show, Mulally indicated he would not resign if he didn't get the top spot.

"I treasure my relationships with employees at Boeing," Mulally said then. "It makes me feel bad for employees at Boeing when (the media) speaks about me leaving."