Boeing Chief Resigns

Boeing Co. chairman and chief executive Phil Condit has resigned, the aerospace manufacturer said Monday in a surprise announcement days after two other Boeing officials were fired for an alleged ethics breach.

The company's board accepted Condit's resignation after deciding "a new structure for the leadership of the company is needed," according to a Boeing statement.

Condit said he resigned to "put the distractions and controversies of the past year behind us."

The move comes a week after Boeing unexpectedly fired its chief financial officer, Mike Sears, for unethical conduct, saying he negotiated the hiring of an Air Force missile defense expert while she was still working for the Pentagon and was in a position to influence Boeing contracts.

Sears was dismissed along with the former Air Force official, Darleen Druyun. She was hired earlier this year as vice president and deputy general manager of Boeing's Missile Defense Systems unit.

Condit's resignation is effective immediately, the company said.

It named Lewis Platt, a Boeing board member and retired chairman of Hewlett-Packard, as non-executive chairman and Harry Stonecipher, who retired from Boeing last year, as president and chief executive officer. Stonecipher had worked in a number of capacities, including vice chairman, president and chief operating officer.

The Pentagon's Office of the Inspector General is investigating the circumstances surrounding Druyun's departure from government service.

The deal under scrutiny is a $21 billion to $25 billion agreement by the Pentagon to lease 100 Boeing tankers for refueling aircraft while aloft.

The Air Force said it wanted to lease — rather than buy — the planes because that requires less money up front. But the Congressional Budget Office estimates the deal will end up costing taxpayers $5.7 billion more than if the Pentagon bought the planes outright.

Budget watchdogs say the deal breaks federal purchasing rules and is unnecessary. When Boeing made an unsolicited bid in February 2001 to sell the Air Force some tankers, an Air Force study suggested the existing fleet of tankers might last until 2040, since they had been operated an average of 12.5 days a year, according to The Washington Post. Air Force officials dismissed that study.

The Post has reported that Boeing enlisted the assistance of members of Congress, Defense Department officials and Bush administration aides to push the deal.

White House chief of staff Andrew Card told the Air Force and the White House Office of Management and Budget to end their disagreement over the deal. After his intervention, The Post reports, OMB quieted its objections. Quoting officials, the newspaper said Card acted at the president's direction.

Documents released in September reveal an April 2002 exchange between two Boeing officials about the deal. The exchange said Druyun, then the principal deputy assistant Air Force secretary for acquisition and management, had told Boeing that rival Airbus had submitted a bid $5 million to $17 million less per plane than Boeing's offer.

Nine months later, Druyun joined Boeing.

Boeing was to make 15 percent profit — twice what it gets on private-sector deals — on the tanker deal, The Post reported, and get $5 billion to maintain the planes it leases to the Air Force.

Last week, Congress approved a slimmed-down deal for 80 rather than 100 planes, which is expected to cut as much as $5 billion of the $21 billion cost.

Defense Secretary Donald Rumsfeld said Tuesday that the deal might be worth looking into in light of the recent firings. But the Defense Department has not yet received the senators' letter and could not comment, said spokesman Lt. Col. Barry Venable.

In a letter Friday to Rumsfeld, Republican Sens. John McCain of Arizona and Peter Fitzgerald of Illinois said it would be "irresponsible" for the department to go ahead without a full review into whether the Boeing executives, who were fired for alleged unethical behavior, improperly affected negotiations in the multibillion-dollar deal.

Boeing made no connection between Condit's departure and the firings in its Monday announcement.

Platt praised Condit's "characteristic dignity and selflessness in recognizing that his resignation was for the good of the company" and said the board "is in unanimous agreement that the company has been pursuing the right transformation strategy and that Boeing is in excellent financial condition."

For decades, Boeing was primarily an aircraft maker, earning most of its money from its jetliners. But in the aftermath of the Sept. 11, 2001, terror attacks, Boeing's defense division now brings in more revenue than commercial airplanes. Boeing has expanded its space, communications and other businesses as well.

Rival Airbus expects to eclipse Boeing this year as the world's largest commercial jet manufacturer.

The tanker investigation is not the first time Boeing's extensive dealings with the Defense Department have come under scrutiny. The Justice Department has charged former Boeing managers with conspiring to steal trade secrets, and has sued Boeing for providing defective parts for Army helicopters and concealing fraud by a subcontractor on NASA work. Boeing paid settlements in both those lawsuits.

Boeing was the No. 2 defense contractor in fiscal 2002, with $16.6 billion in deals, just behind Lockheed Martin's $17 billion.