New CEO’s labor views at Boeing key for S.C.

Dennis Muilenburg will become new CEO of Boeing Co. on July 1. He succeeds Jim McNerney, who is stepping away from the controls after 10 years.

Dennis Muilenburg, who takes over as Boeing Co.’s new CEO on July 1, is promising little change from the path predecessor Jim McNerney set. But analysts say his stance toward labor relations will play a key role in whether, and how fast, North Charleston’s Dreamliner production facility expands in coming years.

McNerney has long had a reputation for confronting organized labor, and many viewed the company’s decision to open the North Charleston campus in 2009 as a way to avoid another union shop while giving the company negotiating leverage with its Washington state unions.

Muilenburg, on the other hand, has been silent on his stance regarding organized labor.

If Muilenburg, an aeronautical engineer who previously ran Boeing’s military division, doesn’t take the same hard-line stance as McNerney, one analyst said, it could hurt North Charleston in the long run.

“McNerney was eager to establish a second final-assembly site as a way of weakening labor, a motivation Muilenburg may or may not share,” Richard Aboulafia, an aviation analyst with the Teal Group in Fairfax, Va., told The Post and Courier on Thursday. “In other words, the growth of Boeing’s North Charleston site might not be quite as robust, nor as guaranteed, as under McNerney.”

McNerney has said the North Charleston decision wasn’t anti-labor, but a move to geographically diversify Boeing’s operations.

Muilenburg, who was named Boeing’s new CEO on Tuesday, could get his first test this year if the International Association of Machinists union refiles its petition for a vote by about 3,000 North Charleston production and maintenance workers.

The IAM pulled its last petition in April, just days before a scheduled vote, in the face of what it called an insurmountable misinformation campaign by Boeing.

The IAM has said it may file for another election as early as this fall.

IAM spokesman Frank Larkin said he doesn’t expect a kinder, gentler attitude toward labor unions under Muilenburg.

“All indications point to a continuation rather than a departure from Boeing’s current policies regarding workers’ organizing rights,” Larkin said. “But the campaign will continue and the IAM will continue to defend those rights.”

Most say it’s too early to tell how Muilenburg will react to an organizing attempt in North Charleston or approach negotiations with Boeing’s more than 35,000 union members in Washington state, including the company’s second Dreamliner plant in Everett.

The engineers’ union contract in Washington state comes up for amendment next year.

“A Wall Street aerospace analyst who knows Muilenburg says he hasn’t expressed his personal views about unions beyond the corporate lines,” Scott Hamilton, editor of the aerospace industry newsletter Leeham News & Comment, wrote earlier this year. Hamilton calls Muilenburg “an enigma” to organized labor.

John Dern, a spokesman at Boeing’s headquarters in Chicago, said Muilenburg’s appointment “doesn’t change the fundamental structure of the corporation,” including the North Charleston campus.

“The capabilities and workforce at North Charleston are a fundamental part of the corporation, nothing changes that,” Dern said.

Saj Ahmad, chief analyst for StrategicAero Research, said he doesn’t expect any near-term changes from Muilenburg.

“Whatever views Muilenburg has that differ from McNerney’s, he won’t be reversing those decisions any time soon,” Ahmad said. “He’ll be too busy fine-tuning both commercial and defense arms so then he can pave the way for his own legacy-leaving moves. It’s too premature to suggest any rollback on McNerney’s initiatives — however controversial they are.”

Analysts say it’s unlikely Boeing would promote someone whose labor views differ from the board of directors’ anti-union stance. Ultimately, however, Muilenburg’s attitude toward labor might be driven by his reputation as a tight fiscal manager.

“He is known as a cost-cutter, so it follows that there will be a natural tension at (labor union) contract time,” Hamilton told The Post and Courier.

Ahmad agrees, saying Muilenburg “will be wary of undoing changes made by McNerney that would have a negative financial impact.”

That includes tinkering with the Dreamliner program, Ahmad said.

“With the 787 on track to break even on a unit-cost basis, don’t expect to see any 787-specific changes yet,” he said. “The program has just about gotten stability and it now needs that to monetize the backlog to be profitable and bring down deferred production costs.”

Boeing’s deferred production costs for the Dreamliner program are likely to hit $30 billion. Deferred production cost accounts for the gap between what it costs the company to build each plane and the average cost it has projected for the first 1,300 aircraft. Boeing has said it expects the Dreamliner program to be cash-positive by the end of this year.

McNerney, 65, has been Boeing’s chairman and chief executive since 2005 and will remain chairman until next February. Muilenburg, 51, also will join Boeing’s board.

Muilenburg “is an industry veteran and a respected engineer,” Aboulafia wrote in an article for Forbes magazine. “He needs to learn the unique dynamics of the commercial side of the business, but given his very strong industry background he should be able to make Boeing a better company. But he will also need to cope with that $30 billion 787 deferred-costs overhang and a Boeing jetliner labor-management relationship that’s worse than anywhere else in the aerospace industry.”

Reach David Wren at 937-5550 or on Twitter at @David_Wren_