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Does Chicago fit in Boeing’s flight plan?

Pressure for cost savings after years of scandals and catastrophes could cause the company to move its top executives closer to its manufacturing hubs.

Mayor Richard M. Daley and Gov. George Ryan greets Boeing’s delegation in 2001 at Midway Airport for the company’s announcement of its new headquarters.
Mayor Richard M. Daley and Gov. George Ryan greets Boeing’s delegation in 2001 at Midway Airport for the company’s announcement of its new headquarters.
Rich Hein/Sun-Times file

Can Boeing still afford to view itself as a global conglomerate?

That is, can it still afford its aspirations to be a GE-style multinational, free to charm Wall Street and to strategize and engage in different businesses without being beholden to any one of them, and with a corporate headquarters separate from the daily toil of its main operating units? Or must it retrench to keep a closer eye on the factory floors?

Chicago has a stake in the answer. Boeing’s headquarters has been here since 2001, although its heart has remained in the Seattle area, its real home since 1916. The company’s arrival here was a triumph of the detachment-is-best thinking. Political leaders and civic boosters here were elated.

Those heady days are ages ago. After the design catastrophe of its 737 Max, with its software implicated in two fatal crashes, and the pandemic’s crushing effect on aviation, Boeing must cut deeply to survive.

The company said it intends to reduce its global workforce by about 20%, or 30,000 jobs, by the end of next year. Its defense division is stable — the Pentagon always wants the latest flying machines — but the commercial airplanes unit is slashing production as carriers cancel orders.

There’s something else. On an earnings call Oct. 28 with analysts to discuss the third quarter results, Chief Financial Officer Greg Smith laid out plans to cut real estate costs by 30%.

“We’re reviewing every piece of real estate, every building, every lease, every warehouse, every site to look at how we can be more efficient, and we will share our decisions as we make them,” Smith said.

Is the Chicago headquarters now an extravagance, especially post-COVID-19? The company has declined opportunities to discuss its thoughts. Putting Chicago on the chopping block is arguably easy or a strategic error.

Paul O’Connor in 2001 was the founding executive director of World Business Chicago, the city’s business recruitment group, and a central figure in the push to get Boeing. He said Boeing had a data-driven mindset in its headquarters search, which it started quietly before publicly narrowing it to Chicago, Dallas-Fort Worth and Denver. At that point, it became a frenzied contest — Amazon of another era.

Boeing had four criteria for its choice, O’Connor said: cultural diversity, connections to global markets, a pro-business environment and easy access to major Boeing operations and customers.

“We avalanched them with all the data they wanted, and the other cities didn’t do that,” said O’Connor, who went on to work at Skidmore, Owings & Merrill and is now consulting independently.

He said the move turned out “spectacularly well” for both Chicago and Boeing. The company found it could grab talent from Quaker Oats, Motorola and others. “They saw they had been looking at the world in too narrow a framework.”

O’Connor said another advantage Boeing uncovered here was quick access to two big constituencies: Wall Street and the federal government. The executives could travel to New York or Washington and still be back in their own beds by evening.

Another civic leader who helped recruit Boeing, and who requested anonymity to speak freely, said he has little doubt that the company is re-evaluating Chicago. But he said that by being here, the company expanded its political clout by aligning itself with former mayors Richard M. Daley, who landed Boeing, and Rahm Emanuel, plus the Illinois congressional delegation.

However, a different group runs Boeing now. In 2001, Chairman Philip Condit took the bows for the headquarters move, boarding a corporate plane in Seattle one morning and disclosing Chicago as the winning city only when he ordered the pilot to fly to Midway Airport, where he literally got the red-carpet treatment.

But Condit was gone two years later, reportedly pushed out by his board because of a scandal involving a Pentagon contract that eventually cost two Boeing executives prison time.

Condit’s second-in-command in 2001 was Harry Stonecipher, whom some thought was the real force behind Boeing coming to Chicago. But in 2005, he was gone, too, because of an affair with another Boeing executive .

With the product disasters of recent years — the 737 Max and a few years ago the flammable batteries in the 787 Dreamliner — a remote headquarters might have lost its appeal.

The financial pressure is intense. The Puget Sound Business Journal last week reported Boeing sold its yacht for $13 million. The company did not comment.

When the yacht gets sacrificed, is anything safe?

Boeing Chairman Philip Condit speaks in 2001 about the company’s move to 100 N. Riverside Plaza in Chicago. Behind him is Senior Vice President John Warner.
Boeing Chairman Philip Condit speaks in 2001 about the company’s move to 100 N. Riverside Plaza in Chicago. Behind him is Senior Vice President John Warner.
Sun-Times file