Where Will Boeing Land?

Dec. 21, 2004
Pending headquarters move generates some turbulence.

Which will it be? Chicago? Dallas/Fort Worth? Or Denver? By the end of this month, Seattle-based Boeing Co. expects to designate one of these three cities as its new corporate-headquarters location. Then, moving at near supersonic speed, the aerospace firm anticipates having senior staff relocated by Labor Day. Boeing is not hinting at its destination. However, among economic-development and public-policy experts, the betting is on Dallas/Fort Worth. "As we've grown, we have determined that our headquarters needs to be in a location central to all of our operating units, customers, and the financial community -- but separate from our existing operations," says Philip M. Condit, Boeing's chairman and CEO. "The role of the new, leaner corporate center will be to seek new growth opportunities around the globe." Dennis J. Donovan, a principal in the Wadley-Donovan Group, a Morristown, N.J.-based corporate relocation firm, believes establishing a new image as a marketing-oriented, more-diverse firm while lessening the impression that it is only an engineering-driven aerospace company is Boeing's biggest potential gain from the move. Donovan contends that it is difficult for a company to change its market image and internal mind-set when the headquarters is "co-located with thousands of manufacturing people," as is Boeing's situation in Seattle. Boeing says it has not calculated the cost savings from a leaner headquarters operation, expected to number fewer than 500 people. Its current headquarters in Seattle, across from Boeing Field, has 1,000 employees. Depending upon which city is chosen and whether new construction is involved, the move might cost Boeing $50 million to $100 million, a spokesman estimates. However, there could be other kinds of costs. "You can reinvent yourself by relocating, but you have to be careful that you don't blow up in the process," cautions one veteran corporate siting consultant who is critical of Boeing's approach. "They claim they have given this extreme due diligence, but we haven't had any indication of that," he asserts. Companies such as $51.3 billion Boeing that begin aggressively moving away from their core businesses "should also be careful that they don't prematurely abandon the crown jewels," cautions Chris Zook, the Boston-based director of Bain & Co.'s worldwide strategy practice. What's more, Boeing "really angered some of their most important allies," from the mayor of Seattle to members of the U.S. Congress, by both the substance and timing of its Mar. 21 surprise announcement of the move, states Robert Sommer, executive vice president of the MWW Group, an East Rutherford, N.J.-based public-affairs and public-relations firm. For a company whose fortunes are "very dependent" on government actions, "they made a terrible decision," Sommer says. Boeing sees the situation differently. The company has made a long-term and strategic decision "about how the company should be organized and deployed to grow -- growth that will benefit all of our stakeholders," stresses John Dern, a Boeing spokesperson. And the "few" senior executives who knew about the move "very much" wanted to keep the decision quiet until the day of the announcement because, says Dern, of the premium that Boeing puts on telling employees first. Nevertheless, he says, in the hours prior to Boeing's announcement press conference, company executives, also as planned, picked up phones to reach as many officials as they could. Although not as concentrated recently as was the rush of corporate bailouts from Manhattan in the 1970s, large-company headquarters relocations such as Boeing's aren't all that unusual. For example, in 1998 Pharmacia & Upjohn Inc., now Pharmacia Corp., relocated its global headquarters from the UK to New Jersey. And when Germany's Hoechst AG and France's Rhne-Poulenc merged in 1999 to create Aventis, the new headquarters was neither Frankfurt nor Paris, the previous corporate centers, but Strasbourg, France, where the law-writing European Parliament is located.

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