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2002 Speeches
Laurette Koellner

Laurette Koellner

Executive Vice President

Chief People and Administration Officer

Office of the Chairman

The Boeing Company

"Boeing: Yesterday, Today and Tomorrow"

Chicago Consular Corps

Chicago, IL

September 18, 2002

Thank you very much for having me here this evening. I am very happy to be here, and to have the opportunity to meet you. We are relatively new neighbors as Boeing just celebrated the one-year anniversary of our move to Chicago.

And hopefully, Boeing is a part of the neighborhood in the countries you represent, because Boeing is a global company. And, we are working very hard to have more presence around the world, to operate globally in the best sense of the word, and to be good citizens of the world and good neighbors wherever we are.

The topic of my address tonight is Boeing - Yesterday, Today and Tomorrow. I'd like to tell you a little bit about who we are and where we came from and what we see as the future of The Boeing Company - where we are going.

William Boeing, a Seattle lumberman, inspired by his visit to an international air meet in Los Angeles, founded the company back in 1916. So, in 2016 we look forward to our 100th anniversary.

Boeing has seen many firsts, and I'm delighted to tell Ambassador Lever that America's first international airmail, came from Canada in 1919, aboard a Boeing C-700.

That's Bill Boeing on the right, with the Canadian postal sack containing sixty letters written by people in Vancouver to people in Seattle. We like to think that this 1919 flight was a sign of things to come - bringing people in the world into the jet age, Boeing has also brought the world closer together.

The Boeing heritage also includes the distinguished history of other companies who have become part of Boeing over the years - Rockwell, McDonnell Douglas (itself the product of a merger) and Hughes Satellite Systems. These mergers, beginning in 1996 and 1997, resulted in more balance between military and commercial aerospace products. Today, we're the largest aerospace company in the world, the largest manufacturer of commercial airplanes, military aircraft and satellites. We have approximately 170,000 employees and major manufacturing operations in 26 American states, as well as in Canada and Australia. We have customers in 145 countries, employees in 61 countries, and over 15,000 suppliers in 81 countries.

If you took a look at our video, you may already have seen some of our products.

I have a few facts that will give you some idea of the scope and size of Boeing. We like to look at this as what will happen in the world in the next 24 hours:

One of the reasons I mention what will happen in the next 24 hours is because this list makes it clear that although most people associate the Boeing name with airplanes, we do a lot of other things as well. Our company is divided into seven business units, and Boeing Commercial Airplanes is the one most closely associated with our name and our brand.

Here's our current family of commercial airplanes.

And here's what we're working on for the future. The Sonic Cruiser is at the top of the commercial product agenda. It features canards, a unique "gloved" delta wing, rear-mounted engines and two horizontal fins at the back of the airplane instead of the standard horizontal and vertical tail section found on today's jetliners.

The Sonic Cruiser will use about the same amount of fuel, on a per passenger basis, as today's best-performing widebody airplanes, the 777 and 767. Many key emissions will be lower than current airplanes which is good for the environment - one of our key goals, and the Sonic Cruiser will be quieter than today's airplanes. The airplane is still in the very early stages of development, but our current baseline is that the initial version of the new airplane will accommodate 200 to 250 passengers, it will fly between 6,000 and 9,000 nautical miles, and travel at a speed between Mach 0.95 and Mach 0.98. The Sonic Cruiser will save about an hour for every 3,000 nautical miles flown - that's about a 15 to 20 percent faster than what currently is available.

We have already announced a number of technical development team members on the Sonic Cruiser including companies in Japan, Italy, the United States, the United Kingdom, Austria, Australia and The Netherlands. We expect additional announcements concerning international and U.S.-based suppliers in the months ahead, This international team is really fundamental to our ability to succeed.

Besides airplanes themselves, Boeing Commercial Airplanes also offers many aviation services such as training, spare parts, and maintenance and modification on the Boeing fleet already in the air.

Now, as I'm sure you know, this is an especially challenging time for our airline customers, and hence for the commercial airplane side of our business. And since we're talking about the history of Boeing, I'm reminded of what Bill Boeing did when he faced a temporary business downturn.

In Bill Boeing's day, right after World War One, the airplane business was in a downturn. Surplus wartime aircraft flooded the market. So in 1919 Bill Boeing put his employees to work making furniture. They were used to working with wood and they had the tools and the space and the skills to do this.

We've come a long way and we won't be building furniture, but the idea behind Bill Boeing's short-lived furniture venture never went away. Today's Boeing is working to ensure growth and prosperity for our shareholders, our employees and the communities where we do business around the country and around the world.

Our strategy is straightforward. We run healthy core businesses, then leverage our strengths into new products and services, then ultimately open new frontiers in terms of products, customers, and opportunities. That means we are involved in areas beyond the manufacture of commercial and military airplanes and spacecraft.

We know what we do well, and we've identified three "core competencies."

The first of these core competencies is "Customer Knowledge and Focus." In the airplane business, we work closely with our customers, from before we begin designing a airplane, making sure it is configured for that customer airline's or military customer's specific needs. We continue working with that customer on airplane maintenance and modification - everything from installing a new carpet and remodeling the interior to maintaining the airplane and providing spare parts - until that plane completes its service. That relationship could well be more than thirty years.

The second is "Large-Scale Systems Integration". We make very complex products. All the parts and systems - such as, in an airplane, the fuel system or the avionics system - must work together smoothly. The airplane itself must be integrated with systems outside the airplane, such as the Air Traffic Control system. We have provided military and space applications that require the most challenging large-scale systems integration mankind has ever known.

Now our third core competency is "lean and efficient design and production systems". Our products have to be affordable, and we are always working to produce them more efficiently. This means shortening cycle times, smooth product flow, and maintaining very high quality.

We look for opportunities where we can leverage these core competencies. To that end, we have made acquisitions, alliances and partnerships over the years and around the world.

Let me tell you about some of the other business units besides commercial airlines, where we are calling on those core competencies or otherwise leveraging our knowledge and experience.

Boeing Air Traffic Management - ATM - is a unit working with stakeholders all over the world to develop tomorrow's air traffic management system. We want an affordable system that will improve the capacity and efficiency of worldwide transportation, while enhancing safety and security. The present system is becoming overburdened, and it was designed for technology that is becoming obsolete. Our ATM unit has offices in Brussels and Hong Kong to improve our ability to work with stakeholders in Europe and Asia. A Boeing subsidiary, The Preston Group, headquartered in Melbourne, Australia, which provides leading simulation, decision support and scheduling systems for the global aviation industry is part of this business unit.

Boeing Capital Corporation is another business unit that provides financing primarily for commercial aircraft, business aircraft, commercial equipment and space and defense products. Its predecessor was begun as part of McDonnell Douglas in 1968 to help customers finance new and used aircraft. Boeing Capital has offices around the US and in Brussels, Dublin, Hong Kong and Stockholm. It has a portfolio of more than 11 billion U.S. dollars.

Connexion by Boeing, based in Irvine, California, is a business unit working with industry leaders around the globe, including Mitsubishi Electric of Japan and Alenia Aerospazio from Italy. Connexion works to provide mobile information services that will give commercial airline passengers access to the Internet, two way e-mail, and streaming television and audio right from their seats while the plane is in flight. We have completely revolutionized the way people spend their time when they travel.

Boeing Integrated Defense Systems, based in St. Louis, Missouri is a $25 billion U.S. business with capabilities in defense, intelligence, communications and space. It includes Boeing Satellite Systems, the world's largest manufacturer of commercial satellites, and a leader in military communications.

Boeing is the prime contractor for NASA on the International Space Station, and builds and modifies the Space Shuttle. The International Space Station is the largest and most complex space venture ever undertaken. It involves 16 countries, each with its own tools and parts, assembling a structure as large as a 777 airplane while it's flying almost 200 miles above the Earth at 26,000 miles an hour -- that's where final assembly takes place.

IDS military products for the armies, air forces, and navies of the United States and her allies include the AWACS - the airborne warning and control systems aircraft, the C-17, the Super Hornet, the Delta family of rockets, Chinook helicopters and the F-15 Eagle.

IDS is also the prime contractor on the Future Combat Systems program -- a networked program of improved communications between land, air and sea, and lighter, more mobile armored vehicles. Another innovative military product is the Unmanned Combat Air Vehicle.

But IDS does a lot of other things as well. For example, they have a contract with the United States Department of Transportation to install and maintain equipment to detect explosives at all 438 US commercial airports, and to train approximately 30,000 baggage screening employees.

With Norwegian and Ukrainian partners, IDS also operates Sea Launch, an ocean-based commercial satellite launching service.

IDS recently announced the successful completion of more than two weeks of demonstrations of the Autonomous Underwater Vehicle (AUV) system, setting the stage for performing commercial surveys for the world's oil and gas industry with a vehicle that doesn't need to stay tethered to a mother ship. Its partners in this venture were companies based in Texas and the Netherlands.

The unusually-named Phantom Works Business Unit is an internal research and development organization and was formerly focused on cold war technologies. It is designed to keep Boeing products on the forefront of technology. Phantom Works explores new, innovative and affordable solutions and technologies for possible use in Boeing products.

At Phantom Works, engineers are defining the future of aerospace, with aircraft and spacecraft that are safer, more capable and more reliable than today's - and that can be designed, produced and maintained in much less time and for much less money.

Phantom Works has about 4,000 employees working across the United States on almost 500 advanced technology projects. These projects focus on providing breakthroughs in performance, quality and cost that will provide greater value to Boeing commercial airplane, space, communications and defense customers around the world.

A Phantom Works team developing 3-D modeling, simulation and virtual reality tools, for instance, has found ways to cut design cycle times and cost in half, by eliminating the need to build costly prototype hardware, and produce more efficient, supportable, higher performance systems with first-time quality.

Phantom Works has pioneered new manufacturing techniques such as high speed machining, and new techniques for producing large, monolithic metallic and non-metallic composite structures that are stronger and lighter than multi-piece structures, and much faster and much less costly to produce.

Phantom Works is also tasked with combining the best of all the different products, technologies, processes and intellectual talent that Boeing has into a single, integrated, low-cost approach to meeting customers' needs.

Phantom Works is developing an array of futuristic products like the Blended Body Wing, the canard rotorwing, and the X-37 reusable spaceplane.

It is now developing relationships and collaborative projects with researchers around the world. It has established multi-year collaborative research and development relationships with Cambridge, Cranfield and Sheffield Universities in the United Kingdom to work on a variety of advanced information, aeronautics and manufacturing technologies.

And we are very excited about the Boeing Research and Technology Center which opened in Madrid this summer. The Madrid Research and Technology Center is directed and operated by Spanish nationals, and will serve as a center of excellence in environmental, safety and reliability, and air traffic control technologies. It plans to work closely with industries, academia and other research centers in Spain and the rest of Europe in these areas. At the same time the Madrid Research and Technology Center opened, Boeing announced new collaborative projects with Sener engineering firm and the Polytechnic Universities of Madrid and Barcelona.

The final business unit on the list is the Shared Services Group, or SSG. This organization is responsible for supporting the other business units and World Headquarters by developing and delivering all the internal products and services they need to grow and prosper. Shared Services Group is quite a large organization; in fact, if Shared Services Group were a stand-alone company it would rank approximately 300 in the Fortune top 500 companies.

SSG manages the company's computing and information services, which includes 175 thousand desktop and laptop computers. Our computing help desk fields a million calls a year. On an average day, Boeing employees exchange 3.5 million e-mail messages, and an additional 620,000 messages linking Boeing with customers, suppliers, stakeholders and the public.

"People Services," part of SSG, manages health and welfare plans, pension programs, savings plans and more for more than a million employees, retirees, and their dependents.

SSG also provides training. Every day Boeing instructors will teach from more than 1,600 on- and off-hours training courses in the areas of Industrial Skills, Certification, Engineering, Computing, Leadership and Business Awareness. And, every day 336 employees will take one of the 3,000 self-paced courses offered by Boeing Learning Centers.

SSG is responsible for procurement of more than 4 billion dollars in non-production goods, for security and fire protection, and the management of safety, health and environmental affairs for the Boeing Company.

Here in Chicago is Boeing World Headquarters.

The functions performed here include the Office of the Chairman, responsible for the total operations of the Company and for carrying out decisions of the Board of Directors. The Executive Council consists of the Chairman and key leaders of the Company. This Council meets regularly to review strategy, progress on operating plans, to agree on new initiatives, and to support the Office of the Chairman in reviewing activities that significantly impact the Company.

Here at World Headquarters we also have the office of ethics and business conduct, the law department, communications, finance, international relations, and the office of technology. And, we have the organization that I lead - People and Administration.

These responsiblities include human resources and labor policy, diversity, corporate administration, and community & education relations. I'm also very pleased to have oversight of the Boeing Leadership Center in Saint Louis, which is where we offer our own management training. The Leadership Center offers an integrated business and leadership curriculum at a state-of-the-art campus. In 2002, we expect about 4,000 employees to graduate from various programs at the Leadership Center, including 700 executives.

As the Chief People & Administration Officer, I am very proud of the emphasis that Boeing places on lifelong learning. In addition to the Leadership Center, Boeing offers employees 100% tuition reimbursement for continuing education. Its called our "Learning Together" program. In 2001, nearly 30,000 employees participated, earning nearly 1,500 degrees, 671 of which were masters degrees. In fact, in the next 24 hours, 12,000 Boeing employees will attend training and higher education courses.

Boeing makes a serious investment in lifelong learning - paying approximately $87.5 U.S. million in education expenses under the Learning Together Program last year and operating with an annual budget of approximately $30 million for Boeing Leadership Center.

Boeing had been in Seattle since 1916, so the move to Chicago was not taken lightly. In May of 2001, when we announced the selection of Chicago as the site of our new Boeing World Headquarters we marked an important milestone in the transformation of the company. Boeing is working toward long-term growth and value creation. We are proud of our history, but we believe we must continue to identify and pursue new business opportunities that fit in well with our core competencies. We chose Chicago in part because after the mergers of 1996 and 1997, Chicago became a location central to Boeing operating units as well as close to the financial community. It provided easier access to our customers all over the world, and it provided a diverse professional talent base in a business friendly environment.

And, it was separate from existing operations, so that leadership would not be identified with any one business unit. This was part of a strategy in which the business unit CEOs - based in St. Louis and Washington State -- are responsible in an autonomous way to manage their business, while allowing Boeing World Headquarters to concentrate on strategy and the development of people.

Developing a stand-alone headquarters was also a part of our globalization strategy.

I think it is safe to say that we do business in many of the countries represented here today - Brazil, Canada, Australia, Turkey, India, Belgium, Israel, Japan, and of course the United States, to name a few.

In yesterday's world, Boeing had seen itself as a US company that went overseas to sell and support its products. Boeing had also developed long-term relationships with international suppliers. We have 15,000 of them in 81 countries. When you travel in a Boeing jetliner, you are surrounded by the products of many fine companies around the world.

But we believe we must go farther. We must tap into the tremendous capabilities that exist everywhere around the globe, and seek opportunities everywhere. Boeing will do this through strategic investments in other companies, acquisitions, partnerships, traditional supplier relationships and industrial participation.

Boeing also wants to build stronger relationships with leaders and key constituencies in other parts of the world. To this end, we have called on a member of your own profession, and hired a diplomat to lead this effort, Ambassador Tom Pickering.

In a diplomatic career spanning five decades, Tom has served as U.S. ambassador to the Russian Federation, India, Israel, El Salvador, Nigeria, and the Hashemite Kingdom of Jordan. He also served on assignments in Zanzibar and Dar es Salaam, Tanzania. From 1989 to 1993, Tom served as Ambassador and Permanent Representative to the United Nations in New York, and he has served as Under Secretary of State for Political Affairs. Tom holds the personal rank of Career Ambassador, the highest in the U.S. Foreign Service, and we are very pleased to have him on board and he's making a real difference in our globalization initiatives.

Under his leadership, we are now building teams led by strong executives in up to twenty carefully selected countries and regions. Just a few weeks ago, Boeing named Greg Pepin, a retired US Army officer who has lived in Turkey for ten years, as President of Boeing Turkey. Boeing has a long relationship with Turkey, where we have valued military and commercial customers. Turkey also contributes to Boeing products as suppliers. Turkish Aerospace Industries is producing flight deck panels for the 737 next-generation family of aircraft. This appointment marks the ninth new country or regional executive chosen by Boeing over the last fourteen months. Again, Tom has been a great asset.

We have some wonderful executives performing these roles. The chief executive at Boeing Italy, for example, is another member of your profession, Rinaldo Petrignani who served as Italy's ambassador to Washington.

We also recently announced that Dr. Sergey Kravchenko will serve as president of Boeing - Russia/Commonwealth of Independent States. Sergey will be responsible for all company business activities in Russia, Ukraine, Uzbekistan and other countries within the Commonwealth of Independent States. He will be based at the Boeing - Russia/CIS headquarters in Moscow.

Boeing has had a long-standing partnership with Russian aerospace companies for more than 10 years. We've invested more than 1.3 billion dollars in cooperative programs within the Russian aerospace industry, including the International Space Station, Sea Launch and the opening of new airplane routes over Russia. In addition, Boeing operates design and technology centers in Russia. I was able to see some of these centers first-hand, on a recent trip to Moscow. We have 350 engineers in Moscow who are part of a design team with engineers in Seattle. They are working together using common tools and technology to design parts for our commercial airplanes. It's a great example of how technology and teamwork helps drive globalization.

Another diplomat, Paul Walters, was named to the new position of regional vice president, Southeast Asia, The Boeing Company. He'll be responsible for coordinating all company business activities in a number of countries in the region. Walters' international experience began with his entry into the Peace Corps in Malaysia, then to the U.S. Agency for International Development in Vietnam. His career in the U.S. Foreign Service spanned a range of senior commercial and economic assignments in U.S. embassies in Kenya, Malaysia, the Philippines, Hong Kong and Indonesia. He also served as an international economist in the U.S. State Department.

I hope you get the idea that we want our country executives to be people who are part of the countries and cultures and the languages where they serve. They will support sales of Boeing products and help develop supplier relationships in those countries and then look for partnership opportunities for Boeing.

We want to maintain a stable, informed presence in the countries and regions where we do business. We want to work within those countries, and contribute to their prosperity and growth. We want to exchange ideas and technology with others around the world for the benefit of all the world. We believe if we do this, we will also grow and prosper.

Boeing Chairman and CEO Phil Condit said, "A global market is inevitable. So is global competition - It is no longer enough to arrive with a great product or service and expect to make a sale. Boeing must become part of the fabric of the communities in which we do business." He has also said that Boeing will have significant operations overseas in the next five years. We are committed to doing that, and we're also committed to being a gracious guest and a good corporate citizen wherever in the world we do business.

My own perspective on Boeing globalization is that it's fundamentally all about people. Our official company vision is simple: "People working together as a global enterprise for aerospace leadership." Now it's no coincidence that this vision of what we are and what we are to become begins with the word "people." We try very hard never to lose sight of the fact that our strength and competitive advantage is - and always will be - our people. And, in reaching out to people all over the world, we believe we can all benefit.

Thank you so much for having me this evening. I'd be delighted to answer any questions you might have about The Boeing Company.