Boeing prepares for takeoff
In 2006 there were 1,834 net new orders for 100-plus-passenger commercial jets; in 2005 there were 2,057. Those numbers are unprecedented -- several times larger than in previous years. What's behind that, and what's the meaning for the larger economy?
What's different this time is who's leading the up cycle. It's not the full-fare domestic carriers and not the traditional European carriers. It's new markets -- China, India, Japan, a lot of places in the Middle East.
To me that's good news for the world economy. The traditional economies have been slow to recover, but the other economies have picked up speed.
Air travel -- and the airplane business -- is one of those factors that will drive the rest of the economy, because as people are able to travel, that's a stimulus. So I think it bodes very well for the economy.
What are the odds of a significant Chinese competitor to Boeing arising in the next 15 years?
The odds are pretty good that you're going to see another airplane provider. It could very well be in China, but I don't know that it will be a global supplier -- it'll probably supply the region -- and it'll probably be a single-aisle airplane.
To be a global player takes more than just building an airplane. You also have to have the global supply chain. You have to have the support around the world, because an airplane is a 30-year asset, and people aren't going to buy it if it can't be supported over its operating life.
So I don't think you'll see, in the time frame you're talking about, another real global competitor, but I think you'll see it on a regional basis.
More than half of Boeing's business comes from defense. What's your view on the U.S. defense budget?
It'll grow probably in the low single digits. But even if it stays flat, it's an awfully large market, and I think we'll be able to get our fair share of business out of it. We think we'll continue our business at about $32 billion a year, and it'll grow very gradually. But defense produces good double-digit operating margins that we think will also continue, regardless of what the budget does.
The average tenure of today's chief financial officers is now less than four years. Why do you think that is?
The job is very, very challenging, particularly if you don't grow up in it to become CFO [as Bell did]. I probably wouldn't leave our company for another CFO role. There's just too much risk associated with it, and it would be that much more difficult to make a network. I just think it's a very, very demanding position, so four years is probably about right.
The CFO of Bank of America (Charts, Fortune 500), Alvaro de Molina, quit last year after only 16 months in the job, saying, "The CFO of a well-run company gets all of the guts but none of the glory." What did you think when you read that?
It sure as heck ain't a lot of fun. I work for a great company that does great things for people around the world, so that's part of the attraction, but it is a much more difficult and much different role than it was five or ten years ago.
It's not just about the numbers, the financial performance, the balance sheet. You have to get engaged with the businesses to help them perform at higher levels. To be a good CFO you have to understand on a very detailed level the business the company is in, and your finance team has to understand the business. It used to be that at the end of the quarter you produced the numbers and then you had a lull. Now there is none.
In terms of regulations and compliance, have things gone too far?
It's over-rotated because of issues like WorldCom and Enron. Now I think things are rotating back to something that is more reasonable. Over the past five years we've seen more changes in accounting standards and regulatory guidance than we've seen in the history of the industry.
Under Sarbanes-Oxley, as CFO, you must personally sign a statement attesting to the financial reports. Has this changed the way you do your job?
No, it hasn't. I've always done my job the same way, and I have always felt the same accountability and responsibility for the numbers being accurate and being portrayed appropriately. I felt our statements always met this new [Sarbanes-Oxley] standard; it wasn't a departure.
It obviously put more rigor in it, and by clearly signing the certificate you can't say what executives at Enron and WorldCom did -- that you didn't know. The certification says you do know and should know.
What strikes you about the young people who come to you?
They really think they should have bigger jobs from day one than we did when we came out of school. That's something corporate America is going to have to address. I don't think you have to be in a role ten years in order to get a major assignment; it needs to be based on what a person demonstrates rather than just on tenure.
From the June 11, 2007 issue