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Boeing facing tough choice

Firm to decide whether to hire from outside

SEATTLE -- With its chief executive's office vacant for the second time in less than two years, Boeing Co. faces a tough choice: whether to promote an executive familiar with the company's complex inner workings, or turn to an outsider who is perceived as completely clear of its ethics scandals.

It's a difficult decision that analysts say could end up pitting experience against image.

''When you have a situation that's just one scandal after another, after another, after another, [then] sometimes you have to go outside to bring in someone who is recognized to be a squeaky Mr. Clean, to have a complete break with the corporate culture," aerospace analyst Scott Hamilton said.

But analyst Paul Nisbet with JSA Research said a push to find someone who cannot possibly be tied to Boeing's ethical lapses could also force the company to pass over internal candidates who are ultimately better for the job.

''The one possible impact is that in their quest to find a squeaky-clean guy, they may have to take someone who's not as well-qualified," Nisbet said.

Yesterday, Boeing said Harry Stonecipher -- brought back from retirement to help clear Boeing's tainted name -- was forced out after revelations that the married executive violated the company's code of conduct and had an affair with an unnamed female Boeing executive.

Stonecipher had replaced Phil Condit, who resigned in December 2003 amid defense contracting scandals that ultimately sent two executives to jail.

The difficulties in finding a new leader are compounded because Chicago-based Boeing faces several big business hurdles in the coming months.

Boeing has said it will decide by midyear whether to halt production of its 767 airplane. The fate of the production line is in limbo while the Pentagon reconsiders an air refueling tanker contract marred by the scandal that forced Condit out.

The company also may decide soon whether to sell a new version of its jumbo 747, and is also working feverishly to win orders for its new 787, due to enter service in 2008.

''The timing of this couldn't have been worse," said J.B. Groh, an analyst with D.A. Davidson in Portland, Ore.

Boeing has said it will consider candidates both inside and outside the company, and the company reassured investors that it intends to move quickly.

Many analysts believe the top inside candidates include Alan Mulally, who runs Boeing's Seattle-based commercial airplane division, and Jim Albaugh, who heads the company's defense operation.

Groh said Mulally may have an edge over Albaugh because he has managed to make the commercial airplanes operation much more efficient, while also dealing with a long and fierce downturn in the airplane market. The international airplane market is beginning to improve, but Mulally -- and Boeing -- face tough competition from rival Airbus SAS.

Boeing declined to comment on whether Albaugh or Mulally were in the running.

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