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Boeing’s Next Airbus Dilemma?

DARTS & ROSESDART…KEVIN ROLLINS, newly appointed CEO of Dell. Nice move, Michael. Anyone who read our November cover story could …

DARTS & ROSES

DART…

  • KEVIN ROLLINS, newly appointed CEO of Dell. Nice move, Michael. Anyone who read our November cover story could have seen this one coming.

ROSE…

  • COCA-COLA’S BOARD, including Warren Buffett, for bungling a CEO succession. The master string-pullers picked Steve Heyer as heir apparent, but when it came time to say farewell to Doug Daft, they suddenly weren’t sure. No wonder the puppets can’t dance.

ROSE…

  • IBM’S SAM PALMISANO. For his new “premium price plan” covering stock options for his top execs. Shareholders have to gain before the top brass does. What a sensible way to align interests and repair trust. Who said Sam was just a pretty face?

DART…

  • DONALD TRUMP. His so-called reality show, “The Apprentice,” is complete fiction. This just isn’t the way the best CEOs do business. Memo to GE’s Jeff Immelt, owner of NBC: Send Trump back to his sandbox. Oh, and send his hairdresser along, too.

 

MANAGEMENT
Boeing’s Next Airbus Dilemma?
THE STORM FINALLY seemed to be clearing for Boeing last December when Harry Stonecipher replaced Phil Condit as CEO. That seemed to end one of the bumpiest chapters in the company’s history, including allegations of fraud in a deal to convert a hundred 767s into refueling tankers for the Air Force. The Pentagon suspended the $17-billion contract while it investigated. Three Boeing executives implicated in the affair left the company.

But Stonecipher may face a new complication on the tanker deal. When the Pentagon awarded Boeing the contract in 2002, the only competitor was the European Aeronautic Defence and Space Company, best known as the parent company of Airbus-and it was a long shot at best. Some of its technology was incompatible, and the likelihood of Congress sending major defense dollars to a European-owned company seemed remote.

But since then, EADS has been quietly building support in Congress for its proposal to convert Airbus A330 jetliners into Air Force tankers. Insiders say EADS is now poised to take a decisive step by teaming up with a major U.S. contractor such as Lockheed Martin or Northrop Grumman. A deal could be announced by the summer.

Such a team could ultimately create a rivalry as fierce as that for commercial jetliners, a battle in which Airbus has gained the upper hand. To overcome the foreign factor, EADS has adopted the conventional script for snagging a big contract from Congress: link it to American jobs and spread the wealth around key congressional districts. “We’ve listened to people on Wall Street and in Congress,” confides one company official, “and they’ve told us what we need to do: build factories here.”

EADS is already building a helicopter plant in Mississippi-home to Republican Sens. Trent Lott and Thad Cochran-and a microelectronics facility in Alaska, home to Republican Sen. Ted Stevens. Company officials have been hinting that if Congress were to send some business their way, they could build an A330 assembly line in Kansas.

EADS also has recruited American talent. Ralph Crosby, a former Northrop executive who helped shepherd the B-2 bomber through Congress, is running its North American subsidiary. For now, Crosby’s main focus is the investigation into whether Boeing got a sweetheart deal on the tankers, including, allegedly, access to proprietary information that EADS submitted to the Air Force. If the government sanctions Boeing, that could be a green light for EADS. A clean bill of health for Boeing, by contrast, could lead the Pentagon to reinstate the original deal. But that might still leave room for a second supplier.

-Rick Newman

FOLLOW-UP
DuPont’s Teflon Woes
DUPONT MAY NOT BE the Teflon company after all. A long-simmering class-action suit, brought by residents of the Ohio River Valley, where DuPont manufactures Teflon, may be coming to a head.

As we reported in November, the suit alleges that, for decades, DuPont knowingly discharged C-8, a chemical used to make Teflon, into the water, air and land around its Parkersburg, W.Va., plant, while concealing the discharges and health concerns from the public. C-8, a detergent-like substance, is a known animal carcinogen. It has been found in human blood samples across the country. DuPont maintains there is no evidence that C-8 is harmful to humans and that all of its Teflon products are safe.

Since the suit was filed in August 2001, it has been beset by legal maneuverings and delays. In December, DuPont claimed a small victory when the West Virginia Supreme Court granted its request to dismiss an earlier ruling by a lower court judge ordering the company to pay for blood tests for members of the class action. But the next month, the company lost its fight before the state Supreme Court to have the lower court judge removed from the case.

With those issues cleared up, a trial date has been set for Sept. 20, almost a year to the day later than it was originally scheduled to begin. The plaintiffs’ lawyers won a battle to depose DuPont CEO Charles O. (Chad) Holliday, Jr., who has tried to maintain a low profile in the case. Holliday’s deposition was scheduled for March 12 in Wilmington, Del., where the company is based.

Meanwhile, the Environmental Protection Agency is concluding a two-year investigation into C-8. The probe centers on whether or not C-8 poses a health threat to humans, how it has come to be widely present in the population, and whether DuPont violated federal reporting requirements. A preliminary EPA finding indicated “potential systematic toxicity and carcinogenicity.” The outcome could determine whether or not C-8 is regulated or phased out altogether.

The developments come as Holliday embarks on a major expansion of the Teflon business, upping production and extending into new markets. Teflon is most commonly associated with nonstick cookware, but its unique repellent characteristics have made it useful for a range of industrial and consumer products, from fast-food packaging to apparel.

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