The Boeing Company

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The Boeing Company

founded: 1916

Contact Information:

headquarters: 7755 e. marginal way s seattle, wa 98108 phone: (206)655-2121 fax: (206)655-7004 url: http://www.boeing.com

OVERVIEW

The Boeing company has been the leading aircraft manufacturer in the world for 30 consecutive years. It was also among the top three U.S. exporters for five consecutive years beginning in 1990. The company's primary businesses are commercial aircraft construction, defense and space, and computer services. The company successfully juggled the continuing need for commercial passenger airliners with its defense contracts, which account for an estimated 30 percent of its business as a result of the company's merger with McDonnell Douglas in 1997. Boeing works with companies such as Lockheed Martin, Sikorsky, and Bell Helicopter Textron, and is the leading contractor for NASA.

COMPANY FINANCES

Operating revenues for 1997 were $45.8 billion, compared with $35.5 billion in 1996 and $33.0 billion in 1995. The higher revenues for 1997 reflect increased deliveries in both the Commercial Aircraft and the Information, Space, and Defense Systems segments, as well as 1997 operations of the aerospace and defense units acquired from Rockwell International Corporation in December 1996. Of 1997 revenues, commercial aircraft generated $26.9 billion, or 59 percent of the company's total, compared to 56 percent ($19.9 billion) in 1996 and 53 percent ($17.5 billion) in 1995. Information, Space, and Defense Systems segments accounted for $18.1 billion in 1997 sales, compared to $14.9 billion in 1996 and $14.8 billion in 1995. Remaining sales were accounted for by Boeing's customer and commercial financing divisions among others.

Boeing stock was trading around $48.00 per share in mid-1998. The company's 52-week high was $60.50, and its 52-week low was $42.81. Boeing's five-year high was also $60.50, but its five-year low was $16.69. Boeing's earnings per share were down, at $.63 per share by year end 1997, compared to $1.92 in 1996.

ANALYSTS' OPINIONS

Analysts were divided over what rating to grant Boeing Company stock, some recommending shareholders simply hold onto what they own, an equal number recommending a "moderate buy" rating, and just as many recommending the company as a "strong buy." While the company realized net losses of $178 million in 1997, some of that loss was due to outlays needed to fund Boeing's acquisition of the McDonnell Douglas Long Beach commercial aircraft division, a venture not nearly as successful as its aerospace operations. Boeing also had to absorb $1.6 billion in losses as a result of production problems. Sales and operating revenues still rose by $10 billion, however, and the company was successfully addressing recent production issues.

HISTORY

Bill Boeing and Conrad Westervelt built an airplane at Seattle's Pacific Aero Products in 1916. The next year, the company became the Boeing Airplane Company. Throughout its history The Boeing Company has successfully provided air power for decades of defense contracts, beginning in World War I when the company built flight trainers for the United States Navy.

To bide its time between world wars, the company embarked on air mail service. It established the first international air mail route between Seattle and neighboring British Columbia. Other routes were developed starting in 1927. Boeing purchased several companies in the late 1920s, all in aviation-related businesses. Bill Boeing and Frederick Rentschler combined their businesses in 1929 into a firm called United Aircraft and Transport. The advent of regulations for air mail services led to the formation of United Airlines, and Boeing Airplane continued as an aircraft manufacturer.

Boeing has also seen American consumers through the birth and adolescence of commercial passenger airline travel. The company built many of the most popular commercial airliners between 1935 and 1965 including the PanAm 314 Clipper and the 747 Jumbo Jet. Boeing also brought the first pressurized cabin to market, the Model 307 Stratoliner.

The downsizing and consolidation within the modern aircraft industry has affected Boeing, which has integrated competitor companies into its operations. Boeing and Rockwell completed a merger of their defense and aerospace units in 1996, and Boeing completed its merger with McDonnell Douglas Corp. on August 1, 1997.

Boeing experienced some difficulties getting approval from Europe on its merger with McDonnell Douglas. The European Union was concerned about Airbus Industrie, a French consortium and Boeing's only major competitor, and its continued viability if the merger went through. Boeing did finally get approval from the European Union Commission. However, the company had to sign nonexclusive contracts for the next decade in order to do so.

STRATEGY

One of Boeing's primary goals, according to its 1997 annual report, was to "build a position of leadership in information, space, and defense markets comparable to the one we have long held in commercial aircraft." The company went after that goal using substantial internal investment and through strategic acquisitions and mergers. During 1997, Boeing's Information, Space & Defense Systems Group (ISDS) accounted for 40 percent of total company sales, partially due to contributions of a full year of revenues from the aerospace and defense operations acquired from Rockwell International in December 1996.

In order to meet incredibly high demand from the industry (which more than doubled), Boeing also had to create and maintain a focus on work process improvements and the flow of parts and materials. The company was building a major initiative to vastly simplify the aircraft configuration process for customer specifications. Its new system was also designed to simplify processes used to schedule and order parts and manage inventory.

INFLUENCES

Competitive pressures and lower fares for personal travel caused a long-term downward trend in passenger revenue yields worldwide. And in Asia, recessionary economies, reduced business travel, and devalued currency contributed to sharply reduced revenues. One example occurred in Indonesia, where three Boeing 737s built for Garuda Indonesia Airlines remained grounded in the United States until the Indonesian government could pay for them. As a result of these factors, and price pressure on the Boeing products, the company needed major productivity gains to ensure a favorable market position.

Another factor influencing Boeing's performance in 1997-1998 was the sudden increase in demand for Boeing commercial jets, just as Boeing executives were concentrating instead on the company's expansion of its aerospace division, and its related acquisitions of Rockwell and McDonnell Douglas. The problem was so bad, that as it was stated in the Wichita Business Journal, "The Boeing Co. has so many manufacturing orders, that if each airplane were built one at a time, the last would be completed by people not yet born." Not only were Boeing's production methods an area for needed improvement, but parts shortages were as well. To rectify the problem, Boeing began working with vendors on improved production processes, helping to alleviate further shortages.

In May of 1998, Boeing was experiencing additional difficulties, this time as a result of damaged wiring in its 737s. According to The New York Times, half of all Boeing 737s inspected on May 11 alone showed wear in the fuel pump wiring. The identified flaw not only resulted in grounded planes pending inspection, but opened up the possibility of investigation of Boeing's role in the explosion of a Philippine Airlines aircraft on a Manila runway in 1990, and TWA Flight 800 as well. The TWA flight, however, was on a 747, and the identified flaws were found only on Boeing's 737s.

CURRENT TRENDS

Boeing's direction for the late 1990s and into the next millennium was greater diversifaction as a company. What has helped the company to do this is improved balance between aerospace products. Prior to the McDonnell Douglas merger, Boeing had a 3-to-1 ratio between commercial jetliners and all of its other products in revenue generation. In 1997, that ratio became 3-to-2. Boeing equates this better balance with "greater stability and agility." When one market is down, the company could somewhat rely on another to be up. This gave Boeing more latitude to deploy people from one sector to another, wherever the need arose.

FAST FACTS: About The Boeing Company

Ownership: Boeing is a publicly owned company traded chiefly on the New York Stock Exchange. Additional U.S. exchanges that trade Boeing stock are the Boston, Chicago, Cincinnati, Pacific, and Philadelphia Stock Exchanges. Boeing common stock is also listed on the Amsterdam, Brussels, London, Swiss, and Tokyo stock exchanges.

Ticker symbol: BA

Officers: Philip M. Condit, Chmn. & CEO, 57; Harry C. Stonecipher, Pres. & COO, 61; Theodore J. Collins, Sr. VP, Gen. Counsel, & Secretary, 61; Boyd E. Givan, Sr. VP & CFO, 61

Employees: 238,000

Chief Competitors: Boeing is a manufacturer of commercial jetliners and military aircraft and is one of the largest aerospace companies in the world. Its primary competitors include: Airbus; Bombardier; Daimler-Benz; Lockheed Martin; Raytheon; Rockwell International; and Thiokol.

Boeing identified "fast growth" as its new motto in the commercial aircraft business, as a result of strong growth in airline traffic, record airline profits, and the need to replace aging aircraft. The outlook for military aircraft and missiles business also looked promising, and Boeing hoped to capitalize on development of next-generation aircraft and missile programs for the U.S. military agencies.

PRODUCTS

The Boeing Company has a line of planes designed for customer and cargo uses ranging from the 737 to the 777—the best selling jetliner of this line was the Boeing 737. The company also manufacturers defense and space aircraft such as the CH-47 Chinook helicopter and the F-22 fighter (built with Lockheed Martin) and the V-22 Osprey tilt-rotor aircraft (built with Bell Helicopter Textron). It also provides information systems and management services. Other aerospace products Boeing builds include electronic and defense systems, missiles, rocket engines, launch vehicles, and advanced information and communication systems.

CORPORATE CITIZENSHIP

The Boeing Company feels strongly about corporate citizenship, and focuses its efforts on education, health and human services, the arts, and civic participation. 1997 company contributions totaled $51.3 million. Including contributions from Boeing employees, total contributions were more than $90 million. Boeing employees also donated time and service to local communities.

Of company contributions, $16 million was given to promote education. Boeing works with educational institutions and students at all levels, and places special emphasis on enhancing engineering curricula at U.S. colleges and universities. Boeing also offers internships to students starting at the eleventh grade level.

Boeing is an environmentally conscious company. In 1997 it was testing alternative paint primers that did not contain toxic chemical compounds. And in September of 1997, the EPA honored Boeing with its Region IX Pollution Prevention Award for "reducing and eliminating the generation of pollutants at their source." Boeing also worked with the United Nations Environmental Programme, sponsoring a conference in India that focused on ozone-depleting gas emissions in the aviation industry.

CHRONOLOGY: Key Dates for The Boeing Company

1916:: Founded
1917:: Names the company the Boeing Airplane Company
1927:: Starts establishing air mail routes
1929:: Combines with another company to form United Aircraft and Transport
1933:: Introduces the first all metal airliner
1934:: Antitrust laws split company into United Air Lines, United Aircraft, and Boeing Airplane Company
1941:: First B-17s see combat
1945:: The Enola Gay, a B-29, drops the world's first atomic bomb on Hiroshima
1954:: Develops the Dash 80
1958:: First passenger jet, the 707, is introduced
1962:: Two 707 models begin to serve as "Air Force 1"
1967:: The first flight of the 737 takes place
1969:: The 747 flies for the first time
1970:: Establishes Boeing Computer Services
1987:: Buys some of ARGOSystems
1989:: First V-22 Osprey flies
1990:: Announces plans to build the 777
1993:: NASA choooses Boeing Defense & Space Group as a contractor for the Space Station
1994:: Boeing becomes number one U.S. aerospace firm in total sales; first flight of the 777
1995:: A 69-day labor strike is waged against Boeing
1996:: Acquires aerospace and defense units from Rockwell International
1997:: Merges with McDonnell Douglas

GLOBAL PRESENCE

The Boeing Company serves customers in 145 countries. The company has endured its share of criticism from its increase in outsourcing parts and assemblies to Chinese companies despite continued tension between the United States and China. Boeing operates one of the world's largest aircraft spare parts centers at Beijing Capital Airport. Comparable to Boeing facilities in London and in Singapore, they are able to ship urgent orders from among 35,000 parts in just 2 hours. According to Boeing's web site, "In addition to Boeing parts, the center stocks parts from 25 suppliers, provides support for component repair and overhaul, and provides logistics training for airlines." These policies, of course, have been de-cried by United States labor unions. However, Boeing sees China as a market with incredible growth potential. The Chinese economy has been growing more than twice as quickly as North America or Europe, and was expected to be the world's largest within 20 years. Air travel within China has also been growing rapidly, at a rate of approximately 20 percent each year. Given those numbers, Boeing foresees a market worth $124 billion (and for 1,900 commercial aircraft) over the next 20 years, and hopes to capitalize on that growth.

EMPLOYMENT

Boeing has had its share of labor problems, including a bitter strike that lasted 69 days in 1995, resulting in $2 billion in financial losses to the company as well as substantial trickle-down losses to the numerous sub-contractors and communities in which Boeing operates.

TO BOLDLY GO. . .

The Starship Enterprise must have been built by Boeing. Who else would Starfleet trust to build the vessels needed for "exploring strange new worlds" and "seeking out new life and new civilizations"? Who else has Boeing's track record of developing space systems? From almost the very beginnings of the American space program, Boeing has been there.

Boeing's involvement began in earnest in 1960 when its Delta II rocket was launched, carrying the Echo 1A satellite into orbit. Then in 1966 and 1967, the Boeing-built Lunar Orbiters circled the moon, photographing the surface in order to help NASA choose a safe landing site for the Apollo 11 astronauts. The astronauts reached the moon with the help of the 363-foot-tall Saturn V rocket. Its development was integrated by Boeing, which also made the first stage booster. It was 138 feet high and had 7.5 million pounds of thrust—the equivalent of 130 of today's most powerful jet engines. The Saturn V was used 13 times—not once failing.

But Boeing did not just help the astronauts get to the moon, it also helped them get around once they got there. The Lunar Roving Vehicles, built by Boeing in only 17 months, were used on the last three Apollo missions. The rovers looked like modified dune buggies and enabled the astronauts to travel more than 20 miles from the landing site. The vehicles operated without a problem in temperatures that ranged from minus 200 to plus 200 Fahrenheit degrees. To this day the rovers are still parked on the lunar surface.

Boeing's involvement in the lunar missions might have been its most spectacular moment, yet it remains heavily involved in the space program to this day. It continues to launch Delta rockets, and it has a large role to play in the Space Shuttle operations—Boeing processes all space suits and equipment, and McDonnell Douglas, with which it merged in 1997, developed the aft propulsion pods and structural parts of the boosters used to get the shuttles into orbit.

But probably the most exciting and interesting project that Boeing was involved in in the late 1990s was the International Space Station, the largest peacetime international scientific venture ever undertaken. Sixteen countries were participating. Boeing was the main contractor of the station that, when completed, will have a total area covering two football fields. It is scheduled to be completed in 2003 and will take more than 40 launches to complete. This massive undertaking is truly a venture that requires international cooperation. Says Doug Stone, Boeing Space Station program manager, "Space Station is about people of all walks, all races, many political systems all coming together to reach outside ourselves and accomplish something far greater than any of us could accomplish alone. To attempt what seems impossible, to reach beyond your grasp, to dare great deeds—this is an important part of being human." James T. Kirk couldn't have said it better himself.

The cyclical nature of aircraft manufacturing is notoriously hard on workers, as evidenced by a suit brought against the company in 1995 by 18 former Boeing employees accusing the company of employment fraud. These people, hired in 1988 and 1989 at the end of the Boeing boom, contended Boeing misled job applicants the promised of secure new careers in the Puget Sound area as pre-flight mechanics and electricians in the Everett division. These people had, according to newspaper accounts, left homes in locations as distant as Georgia, Texas, and New York to work for the aircraft manufacturer. They contend they were promised at least five years of work; none worked for more than three years. Boeing contended none of these employees were provided with a contract or written statement promising them long-term employment, nor did they ask for a written guarantee.

Changes in technology have also resulted in worker woes. When Boeing shifted to using advanced design software, for example, that translated into the need for thousands fewer machinists to build each plane.

Once again on an upswing, at the end of 1996 Boeing was hiring at such a rapid pace that its suppliers' employees were being drained. According to the Puget Sound Business Journal, "One wag said the company will hire anyone who can pronounce 'machinist'." Worldwide employment was up to 238,000 at the end of 1997, compared to 211,000 in 1996 and 169,000 in 1995.

SOURCES OF INFORMATION

Bibliography

1997 current market outlook. seattle, wa: the boeing company: 1997.

banks, howard. "slow learner." forbes, 4 may 1998.

the boeing company 1997 annual report. seattle, wa: the boeing company, 1998.

"boeing corp. moving ahead and flying high." the online investor, 4 august 1997. available at: http://www.investhelp.com/ba_spotlight.shtml.

brown, leslie. "former boeing workers accuse washington jet-maker of employment fraud." knight-ridder/tribune business news, 16 may 1995.

company profile. seattle, wa: the boeing company, 1995.

dove, laurie. "boeing turns dilemma into success story." wichita business journal, 16 march 1998.

hackney, holt. "boeing: back on course." financial world, 18 january 1994.

homes, stanley. "boeing's dangerous liaison." seattle times, 22 march 1998.

ropelewski, robert. "boeing keeps sharp focus on china." interavia business & technology, november 1996.

wald, matthew l. "checks of 737's show more damaged wiring." the new york times, 12 may 1998.

wilhelm, steve. "boeing: commercial side still the growth engine." puget sound business journal, 3 january 1997.

For an annual report:

on the internet at: http://www.reportgallery.com/boeing97or telephone: (800)457-7723 or write: the boeing company, mail code 3t-33, po box 3707, seattle, wa 98124-2207