Chairman, President and Chief Executive Officer
The Boeing Company
"Address to Shareholders"
May 01, 2006
This is the first time that I have had the honor of addressing a Boeing shareholder meeting on the state of the company. Though I am one of the newer employees-- having joined the company as its chairman, president and chief executive only ten months ago-- I have known and admired Boeing for a much longer time... as a member of the board, a supplier partner and a long-time participant in the aerospace industry. On that basis, I'd like to begin with a personal observation.
This company was founded just 12-and-a-half years after the first powered flight of the Wright brothers. As we get ready to celebrate Boeing's 90th birthday-- on July 15-- what seems truly remarkable to me is the enterprising spirit, the enthusiasm, and the raw capability of the people of Boeing. This is a company that is constantly renewing itself and reinvigorating its approach.
One of the most important parts of the state of this company-- or any company, for that matter--is the state of mind of its people... how they feel about their jobs and themselves. Are they really excited about what they are doing? The state of mind here at Boeing is excellent. Let me show you an example in video form.
Of course, one of the things that motivates people and makes them excited in thinking about the future is strong operational and financial performance, combined with the strong prospect of future growth. And we have all of those things-- in spades.
In 2005 --
- Our earnings per share rose 42 percent, our revenues rose 5 percent, and our operating cash flow doubled-- to $7 billion.
- Our Commercial Airplanes business set a Boeing record with 1,002 net orders for new airplanes, growing its backlog 89 percent in one year.
- Our Integrated Defense Systems business had record revenues, earnings and margins, along with continued success in building the largest backlog of any defense contractor.
In fact, our backlog as a company is the highest it has ever been. Our programs are performing very well. And we are meeting our commitments to our customers.
For this outstanding performance, I give full credit and thanks where it is due-- to the Boeing employees who maintained their discipline and focus throughout a year of challenges and distractions... and especially to James Bell, who led the company as interim CEO for several months.
Compared with the first quarter of 2005, earnings in the first quarter of 2006 were up 29 percent, and revenues were up 12 percent. So that's a powerful indicator-- along with the continuing rise in the price of Boeing shares (which have tripled in value since April 2003)--that Boeing's performance is only getting stronger. We expect to achieve continued growth and excellent performance throughout the rest of this year and into next year.
Looking out over the next five to ten years, we will strive for nothing less than world-class performance. Over the next decade-- leading to 2016, when Boeing will join Procter and Gamble, GE and other great companies that have reached the age of 100 years-- I expect this company to achieve both accelerated top-line growth and bottom-line productivity... that promise to produce improved margins and strong cash generation.
Our growth will be customer-inspired and customer-driven. In one of our principal businesses, our customers include the world's airlines and the traveling public; in the other, they include the armed services of the United States and allied governments. These are terrific customers to have. Without a doubt, if we do a great job of listening to them and finding the best way to satisfy their needs, Boeing will continue to grow... year after year.
One of our best examples of customer-inspired innovation and customer-driven growth is the Boeing 787 Dreamliner-- which is now regarded as the most exciting new product in commercial aviation in many a year. Rather than tell you about this myself, I've asked Mike Bair, vice president and general manager of the 787 program, to show you, through this next video, about the customer focus in our commercial airplanes business.
If growth is primarily about customer satisfaction, productivity-- the other key element-- is about retaining competitiveness. While some think of growth and productivity as incompatible, no substantial business I know has been able to achieve long-term growth without impressive continuing gains in productivity.
At Boeing, we are focused on four initiatives to help us accelerate improvements in productivity... and thereby to enable growth. The initiatives are:
- Internal Services Productivity
- Global Sourcing
- Development Process Excellence
By using these initiatives as tools to replicate and leverage our successes... and by tapping into the creativity of both our own people and those of our partners and suppliers... there is no end of opportunity for adding value and taking out cost in the wonderful products we build and the valuable services we provide.
In the next video, Chris Chadwick, vice president and general manager for Global Strike Systems in our defense business, tells us about some of the Lean techniques that are driving productivity gains in some of our key programs. These techniques are the basis for our Lean+ initiative, which we are now taking to the next level in our production areas and moving into our back offices throughout the company.
In the videos we're showing today, you're hearing from some of this company's leaders. Leadership development is the key to driving sustainable growth and productivity, and I consider it one of my top priorities. Through a collaborative effort involving the entire Executive Council, we have devised our own leadership model. In it, we not only define leadership; we also lay out the roadmap by which we model it, teach it, expect it, measure it, and reward it.
We expect Boeing leaders to embody certain leadership attributes. They should:
- Chart the course
- Set high expectations
- Inspire others
- Find a way
- Live the Boeing values (the most important of which is unswerving integrity)
- And, finally, deliver results.
Since the beginning of this year, we have begun to embed these simple but powerful expectations into the whole pay and promotion process at Boeing. If, for example, a leader "delivers results" but does not live the Boeing values, that person will not remain a member of our management team.
Therefore, in going forward, there will be no tradeoff between performance and values at Boeing; we expect our people to demonstrate both. I have called upon all of the leaders of this company to make ethics and compliance a regular topic of discussion with all of their people. We don't want anyone hiding in the bureaucracy or winking at questionable behavior, ever.
In this regard, it is my belief that the best companies will go from defense to offense... and turn ethics and compliance into a competitive advantage. In other words, they will move from "This will keep us out of trouble" to "Hey, this will make us different-- and better... and it will give us a competitive edge."
So... I have just one more video to show you. It's from an "Ethics Recommitment" event, which is just one of the ways that we are working to make integrity a competitive advantage in this company. I want you to see the pervasive... and proactive... commitment that exists around ethics and compliance in today's Boeing-- from people at all levels.
As you can see, our people really are our strength.
No account of the last year at Boeing would be complete without acknowledging our gratitude to one very special person-- Lew Platt. Lew rendered immense service to Boeing as the company's non-executive chairman from December 2003 through July 2005. I can think of no business leader who better exemplified the linkage between values and valor. Both come from the same root-- the Latin word for strength. As much as we mourn his passing, we take inspiration from his life and example. We have the privilege of carrying forward the rich legacy that he and others have left to us.
We --the Boeing leadership team-- aspire to deliver financial results that match the quality of our people and our technology, which is a meaningful step forward from where we are today. There is no shortage of opportunity in front of us, and therefore no end to this flight-- not this year, next year or when Boeing turns 100 in 2016. We are as committed as ever to the goal of leadership. To repeat the words of our 2016 vision statement, when you think of Boeing, you should think of "People... working together... as a global enterprise... for aerospace leadership."
That concludes the Chairman's Report.