We have previously reported on recent executive departures at both Boeing and Honeywell.  In those articles, we questioned the wisdom of letting seasoned veterans depart while the aerospace and defense industry was facing significant challenges.  Now comes word that, while some companies were reducing executive ranks of their defense subsidiaries, both EADS and Lockheed Martin were augmenting their executive leadership teams to prepare for the upcoming challenges.

In Boeing’s case, the company moved the head of its defense business (IDS) over to its commercial aircraft business (BCA) in order to cover the early departure of Scott Carson—leaving a vacancy that was filled by Jim Albaugh, who transferred over to BCA from his previous role leading Boeing’s IDS business.  Replacing Mr. Albaugh was Dennis Muilenberg (who was promoted after leading IDS’ global after-market services unit). In Honeywell’s case, it lost both the CEO and CFO of its aerospace business in the same week, as each left to pursue other (potentially more lucrative?) opportunities. The Honeywell Aerospace CEO was replaced by Mr. Tim Mahoney, the unit’s former Chief Technology Officer.

Now we are not saying that the executive replacements named above are any less competent than the men they replaced. What we are saying that the new leaders don’t have the deep experience and strong customer relationships that their predecessors had built up over time. Given the current economic pressures facing the industry, and likely near-term downturn, those relationships would seem to be more important than ever.  The executive departures would seem to impact the ability to win new work and to provide program execution assurance.

In contrast to those two entities, Lockheed Martin and EADS are adding to their executive leadership teams.  On October 15, 2009 Lockheed Martin announced the creation of a Chief Operating Officer (COO) position, to be filled by Chris Kubasik, who will also be given the title of President.  Effective January 1, 2010 Lockheed Martin will also reorganize its management structure.  Currently, the top six highest leadership positions all report to Bob Stevens (CEO).  After the reorganization, they will all report to Mr. Kubasik, enabling Mr. Stevens to “devote greater attention to high-level customers and partners and to shape domestic and international business strategies. I also intend to increase my efforts to strengthen the corporation strategically, operationally and financially." According to Lockheed Martin, the new COO position and management structure is being created to “strengthen oversight of program performance across the corporation and take operational excellence to an even higher level as we support our customers in their global security missions. … [C]onsidering the budget climate and priorities of the administration and the need to pay really close attention to what our customers are saying, that we need at this time in history to have a COO again.  … [The change] is going to enable Bob [Stevens] to focus at a higher level to the needs of the customers, and it would mean that Chris would then be able to oversee the business operations, day to day."

On October 20, 2009 the European Aeronautic Defence and Space Company (EADS) announced it was making former GE Aviation Vice President Sean O’Keefe the CEO of its North American subsidiary, replacing Ralph Crosby. Importantly, Mr. Crosby “will retain his position as Chairman of EADS North America” and will “devote the ‘lion's share’ of his time to winning the competition for the next U.S. Air Force refueling tanker.”  EADS Global CEO Louis Gallois stated “"It's not only continuity, because Ralph is staying with us. It's more than that. It's reinforcement of EADS North America, because we have big ambitions in the U.S."

What makes the hiring of Mr. O’Keefe interesting is his background, and what that background tells us about EADS’ intentions.  At GE Aviation, Mr. O’Keefe was head of the company’s Washington operations. As astute readers realize, such a position is generally a euphemism for lobbyist.  Indeed, one report calls him GE Aviation’s “top lobbyist.”  Mr. O’Keefe also served as NASA Administrator during President George W. Bush’s first term.  Before that, he “served as a top deputy at the White House Office of Management of Budget in 2001 and Secretary of the Navy from 1992-93.”  In other words, he is the epitome of a Washington insider.

EAD’s strategy is fairly clear:  adding O’Keefe to the executive leadership team positions the company to build on his deep Washington relationships as it attempts to win the next US Air Force tanker competition.  This was confirmed by Mr. Crosby, who commented—

The expansion of our senior team and the assumption of leadership of our activities in the United States by Sean does mark another key milestone in the development of the company. He obviously brings the kinds of experience, capability, strategic mindset and focus that will add materially to taking us forward. I have the leadership on the tanker campaign, and that's the leadership of the tanker activity. That's an expansion of the team.

According to an article on www.defensenews.com, Mr. O’Keefe commented: "Ralph's task is to win this. … My task is to make sure that we perform when that is accomplished."

To sum up, we have tried to present a contrast between several companies in transition.  All four companies are entering into rough waters containing potential storms and icebergs.  While entering these risky waters, two companies have thinned their executive ranks while two other companies have augmented theirs.  Time will tell who has made the correct strategic choice, but our money is on the companies focusing on deepening the experience of their executive leadership teams and enhancing their customer relationships.