Three days after setting the new schedule for the first flight of the trouble-plagued Boeing 787 program, Boeing execs announced the retirement of Boeing Commercial Airplanes (BCA) President and CEO Scott Carson effective immediately in favor of Jim Albaugh, who heads up the company’s military side.

Replacing Albaugh is Dennis Muilenburg who becomes CEO of Boeing Integrated Defense Systems (IDS). The changes are effective today although Carson will remain to help with the transition and for special projects until the end of the year.

Boeing Chair, President and CEO Jim McNerney, stressing Albaugh's strength in program execution and technical expertise, speaking during yesterday’s conference call for analysts and reporters, said the decision to retire was Carson’s. However, Carson had indicated at the Paris Air Show he was just awaiting the first flight of the 787, now more than two years behind schedule, to retire. The first flight is now scheduled for November 30, per the company’s announcement on Thursday. Related Story  But Carson accelerated his plans pegging retirement to the new schedule announced last week.

Carson, himself, discussed the timing in a letter to employees. "My decision is tied to many factors,” he wrote, “but perhaps the most important reason for me was resetting the schedule on the 787. With this baseline in place the new leader will have a clear path forward."

Boeing has long been criticized for its communications on the 787 and 747-8 program, which has also experienced technically glitches and delays. For instance, at Paris he promised the aircraft would fly by the end of June only to have to reveal shortly thereafter yet another glitch – having to do with the strength of the materials where the wing and fuselage join. With two years of such examples relating to the 787, Arbaugh’s main task will be to restore some semblance of credibility to BCA.

Albaugh, himself, seemed to acknowledge this. “In its soul, Boeing has always been and remains an engineering company,” he told employees in a letter. “Greatness, though, does not come easily. It is not an entitlement. It must be proven time and time again each and every day. We work on some of the most complex and challenging systems in the world. With challenges oftentimes are issues. And today we are facing significant issues on our two major development programs. It is imperative that we face into these challenges and deliver to our customers. Going forward I believe we have three imperatives: flawless execution, profitable growth and improved efficiency. It will take the personal commitment and leadership of all of us to achieve these goals.”

It came as no surprise that analysts wanted to know why the new schedule for the 787, that came only four days ago did not include Carson’s retirement. McNerney told analysts, the announcement of a new flight schedule was just that which all those who should have been on the call last week present. Reading between the lines, it seemed the company wanted to keep the distraction of a major management change for later.

"The decision to retire was Scott's," McNerney said during a conference call with reporters, praising his colleague. "The board of directors and I appreciate Scott's long record of accomplishment across many disciplines, functions and businesses, and the enduring contributions he has made to Boeing through 38 years of service. Thanks to his leadership and operational experience, Boeing Commercial Airplanes has performed extremely well in a tough business environment and remains positioned solidly for continued market success.

"Last week was about getting out a new schedule that we promised as well as discussing some of the financials around it,” he said. “I think Scott wanted to retire, and I totally get this, he wanted to retire after we had reset this thing and answer all the questions about it." He also indicated that there is no good time for a management change at this level and the company was guided by Carson.

It should be noted that Carson assumed the leadership of BCA in 2006 at a time when the company was undergoing two massive and risky changes – the development of the first all-composite aircraft as well as an entirely new manufacturing methodology, relying on outsourcing and supply chain management. One of those tasks would have been daunting to even the most effective leader, but pursuing both overwhelmed the company and also laid the groundwork for the labor troubles that caused further problems. The company faces billions in penalties and cost overruns as a result.

Still continuing rumors suggest BCA will conduct a major business case review beginning early next year. Even so, Boeing insists that despite cost overruns and penalties the 787 will be a money maker. The first aircraft is set to be delivered to launch customer late next year although some are questioning the newly rejiggered schedule. (See related story in Breaking News feed)

Carson, 63, is credited with reinvigorating sales of Boeing commercial airplanes and related services to airline customers and leasing companies around the world. Indeed, the 787 remains a record-breaking aircraft in terms of sales, despite its problems with over 850 on order. However, it has also broken company records for delays.

He previously served as BCA's executive vice president and chief financial officer, where he led the finance and business strategy organizations, as well as information systems and services. He also held leadership positions in the company's defense business and was the first president of Connexion by Boeing.

Albaugh, a 34-year company veteran with extensive experience in development programs and manufacturing, has led Boeing's defense, space and associated services businesses since 2002. Under his leadership IDS revenue has grown from $25 billion to an expected $34 billion in 2009, and now accounts for roughly half of Boeing's annual sales. Prior to his most recent assignment, he led Boeing's growth in space and communications, including network-centric operations, global missile defense, combat systems, and system-of-systems technologies. He began his career with Rockwell's aerospace and defense businesses, which Boeing acquired in 1996.

“Boeing is truly an iconic company and I believe we have the opportunity to change the 21st century just as we have changed the last one,” said Albaugh in his own letter to employees. “The 787 is the starting point.”

McNerney indicated Albaugh had a working knowledge of the 787. "Jim is a seasoned and effective aerospace executive with substantial experience leading and integrating technically complex businesses and programs from initial development through full production and delivery,” he said. “His program management and engineering focus will help ensure the success of BCA's key development and production programs. On top of that, as a Washington state native and the leader of more than 9,000 IDS employees working in the Puget Sound region, he is familiar with the people, issues and programs in the area. He is the ideal leader for BCA at this time.”

Muilenburg moves to his new position from Integrated Defense Systems' Global Services & Support unit, where he served as president of the $8 billion business that provides global after-delivery support for military platforms and systems, as well as a broad array of defense and government services. Prior assignments include leadership of the Combat Systems Division and Future Combat Systems, the company's development program for the U.S. Army. He also led the overall engineering development of Boeing's program to modernize global air traffic management systems.
"Dennis is ready to step up and lead the IDS team," said McNerney. "His experience in technology integration; track record delivering large-scale programs on time and budget; and work with customers in new, developing markets will help us generate new momentum and long-term growth," he added.

Albaugh holds bachelor's degrees in mathematics and physics from Willamette University, and a master's degree in civil engineering from Columbia University. He will relocate soon to the Seattle area.

Born in Iowa, Muilenburg earned a bachelor's degree in aerospace engineering from Iowa State University and a master's degree in aeronautics and astronautics from the University of Washington. He will continue to be based in St. Louis and spend substantial time in the Washington, D.C. area.

A replacement for Muilenburg will be named at a later date.