Philip M. Condit
Chairman and CEO
The Boeing Company
"Address to Shareholders"
St. Louis, MO
April 27, 1998
This is the first annual meeting of The Boeing Company to be held outside the state of Washington. I think it is fitting that the first meeting of what we are calling the "new" Boeing Company is being held in St. Louis.
St. Louis stands at the confluence of three mighty rivers -- the Missouri, the Illinois and the Mississippi. In bringing together three of the biggest names in aerospace, the new Boeing Company represents the greatest confluence of capabilities and talents ever witnessed in the history of our industry.
This morning I would like to spend a few minutes discussing the challenges we face in harnessing the power and potential of the new Boeing.
Clearly, our first challenge is to improve financial performance and increase shareholder value. Our financial results in 1997 were extremely disappointing. And they were not much better in the first quarter of this year. As we announced last Wednesday, we earned just $50 million on first quarter revenues of $12.9 billion. Those results include a $219 million after-tax forward loss due to production problems in the Next-Generation 737 program. This is something we can and will fix.
As you will hear in greater detail later on, we have made progress in getting commercial aircraft production back on track. Now we are turning our attention to reducing costs. This sets the stage for sharply improved performance later this year and a significant improvements next year.
Looking further ahead -- over the coming decade and beyond -- we face a larger challenge and opportunity. We must change dramatically. All of our major customers . . . and we . . . are in the midst of major, fundamental transition. In the past, we have measured success in terms of technological prowess . . . and product performance. Cost was never the primary concern. Our customers on both sides of the business -- military and commercial -- were prepared to pay a high price for superior performance. Cost-based pricing was the norm.
That was true in defense and space -- throughout the Cold War. Price was not the issue when protecting national security. And, when the airlines were regulated, they, too, could treat our costs as a pass through to their customers. Under regulation, if our costs went up, we passed them along to the airlines, and they passed them along to the traveling public in higher fares.
All that has changed forever.
With the decline in defense procurement budgets, our military customers expect and demand greater value. They continue to want improved performance, but at a sharply reduced cost. And that mirrors the situation in the commercial aircraft business as airline deregulation continues to spread around the world. Like the military customers, the world's airlines are shopping for value as never before. Thus, we have left the cost-based world behind; and we are now in value-based business, where the customer dictates and defines value.
We have a simple vision statement that defines where we want to be in this new world. It is "People Working Together As One Global Company for Aerospace Leadership." Every one of those words is loaded with particular meaning. It begins with People, the key to our success. . . and ends with Leadership. Leadership is not about being second best . . . or following others. It is about being the best.
We must be the best in every important respect -- the leader in value, the leader in customer satisfaction, and the leader in financial and stock market performance.
We are focused on three core competencies: Detailed Customer Knowledge and Focus: Large-Scale System Integration; and Lean, Efficient Design and Production Systems.
We are implementing principles and practices of lean design and production across our entire enterprise. That is coupled with a new emphasis on teamwork -- encouraging and enabling people to organize their operations to achieve major reductions in cost and flow times.
In 97 days, we will celebrate the first anniversary of the creation of the new Boeing Company. We have brought together three of the biggest names in aerospace; The Boeing Company does represent the greatest confluence of capabilities and talents ever witnessed in the history of our industry. I am excited about he future.
Over the past year, I have had the opportunity to work closely with a truly great business leader. Now I would like to call upon Harry Stonecipher to give you his view of the company.