Boeing picks Muilenburg to succeed CEO McNerney, signals stability

SEATTLE (Reuters) - Boeing Co BA.N said Tuesday that President Dennis Muilenburg will take over as chief executive officer July 1, a transition that comes as the aerospace giant tries to keep pace with an historic boom in the commercial jet market and build its defense business amid tight military budgets.

Dennis Muilenburg speaks during the Reuters Aerospace and Defense Roundtable in Washington September 4, 2012.REUTERS/Yuri Gripas

Muilenburg, 51, will succeed 65-year-old Jim McNerney, who picked Muilenburg as heir apparent in 2013.

Though the transition was expected, it comes as the world’s largest plane maker is grappling with record demand for jetliners and weak military sales. It is speeding up its jetliner factories to unprecedented levels while introducing new jet models and overhauling production methods. It also is shuttering some military plane production, trying to keep other lines running and bidding for new arms contracts, notably a new long-range strike bomber.

Muilenburg, in an interview, signaled no new direction, and did not discuss defense as a challenge.

“The challenges we see are ramping up our production system on the commercial airplane side and doing that profitably,” Muilenburg said.

After 18 months working with McNerney and commercial airplanes Chief Executive Officer Ray Conner, he said, “our path forward is one of consistency. You’re going to see stability in our strategy and our execution.”

But among the issues Muilenburg faces are how to continue squeezing margin out of suppliers while ensuring they can keep pace with increasing jet output, expected to top 750 this year.

Boeing is increasing production of its best-selling 737 jetliner to 52 a month in 2018 from 42 a month currently, while introducing the new 737 MAX.

At the same time, it has committed to delivering a successor to its popular 777 wide-body plane, dubbed the 777X, by the end of the decade. It is erecting a massive new building to house autoclaves that will bake the new carbon-composite wings of the 777X, even before it has firmly configured the jet’s design.

With hundreds of airlines relying on aircraft from Boeing’s eight-year order backlog, any slip up could be very costly.

Analysts said they expected continuity for awhile, and then expect Muilenburg to confront such thorny issues as the likely slowdown in 777 production as Boeing introduced the 777X; and development of a new plane to replace the 757, a gap in Boeing’s

product line that rival Airbus has adroitly exploited.

“They are arguably the calls that need to be made” to help Boeing’s longer-term growth, analyst Robert Stallard wrote in a note to clients, adding Muilenburg might also change McNerney’s combative tone.

McNerney presided over a near doubling of revenue to $90.8 billion in 10 years as CEO. He drove hard bargains with Boeing’s unions, embittering many workers, and moved some 787 production to South Carolina, an anti-union state. He also lifted Boeing’s profit margins by pressing suppliers to cut prices. Two-third of Boeing’s revenue now comes from commercial jetliners. Asked why Conner was not chosen to head the company, both men praised Conner’s skill. But McNerney said Conner was closer to him in age, while Muilenburg, is “a new generation.”

He said CEOs need a “long run” to make decisions that will not affect the business for five to 10 years. The transition was made “with that in mind.”

McNerney had been expected to stay on for Boeing’s 100th anniversary next year. He will remain on the payroll through February to smooth the transition, and as chairman afterward.

“I will remain as chairman working with Dennis well into next year, so I’ll be around for the party,” he said. “As soon as I start to get in the way, I’ll fade away.”

Additional reporting by Sweta Singh in Bengaluru; Editing by Leslie Adler and Lisa Shumaker