Why Boeing Is Suddenly Making So Much Noise

To the casual reader, the ads were jarring. On June 9, Boeing Co. placed a full-page letter in The New York Times and four other newspapers, a broadside that stoutly defended the aerospace giant's honor against charges that it used unfair tactics to win military contracts. Against a backdrop of corporate scandals, the ads -- part of an aggressive Boeing effort to head off criticism of its business ethics -- immediately raised questions from Wall Street to Main Street. Was something amiss at Boeing's Chicago headquarters? Was another shoe about to drop?

The answers -- some apparent, some not -- began to come on June 10, when archrival Lockheed Martin Corp. sued, accusing Boeing of pilfering proprietary Lockheed documents to land a 1999 U.S. Air Force rocket deal. Boeing blames the dispute on a handful of its engineers and says its dealings are aboveboard. Boeing Chief Executive Philip M. Condit's assertive stance also goes to a deeper issue: The airplane-frame maker is embroiled in a dispute over a lucrative jetliner-leasing deal. Critics are only too happy to use any Boeing transgressions against it in a bid to upend the arrangement.

At issue is a megabuck Pentagon jet deal that could go a long way toward shoring up Boeing's bottom line. The company is angling for a $16 billion deal to supply airliners to the Air Force for use as aerial refueling planes. The unusual pact would see Boeing's 767 jetliners converted to tankers and leased to the military. A group of defense reformers are attacking the plan as pork, and insisting the government could save some $4 billion by buying planes outright.

The deal would be a huge plus for Boeing. It would yield a 15% percent profit margin, compared with the 3% the company gets for commercial jets, and help keep 767 production humming. Still, because Congress must O.K. the leases, Boeing clearly is rattled by the dispute and worried about image damage from federal probes into the alleged theft of trade secrets. That's one reason Condit insisted in his open letter that "Boeing has always stood for integrity" -- a retort to public interest groups such as the Project on Government Oversight, which accuses the company of a history of misdeeds on defense contracts.

While the preemptive approach to crisis management poses risks in calling attention to Boeing's troubles, some public relations professionals think going on the offensive is smart. "Boeing wants to convince investors that it's doing everything to be up-front on this issue," says David D. Snepp, managing partner of C4CS LLC, a crisis-management firm in Charlotte, N.C. The letter "puts Boeing in the role of victim instead of villain."

Boeing officials portray the defense of company honor and ethics as appropriate. "Condit felt it was important to put that message out," says spokesman Dan Beck. The target audience, he adds, was Boeing employees and government clients, but "certainly we hope Capitol Hill took notice."

If that was Boeing's goal, mission accomplished. The company's still must wade through a swamp of critics and commercial rivals to nail down the lease deal -- insisting all the while it represents the good guys in the dispute.

By Lorraine Woellert in Washington, with Louis Lavelle and Stan Crock in New York, and Stanley Holmes in Seattle

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