Boeing CEO to step down in overhaul sparked by safety crisis

27 Mar, 2024 - 00:03 0 Views
Boeing CEO to step down in overhaul sparked by safety crisis Dave Calhoun

eBusiness Weekly


Boeing Co Chief Executive Officer Dave Calhoun is stepping down at the end of the year, part of a sweeping leadership overhaul as the planemaker struggles to get a handle on a spiraling safety crisis.

Chairman Larry Kellner will not stand for re-election, Boeing said in a statement Monday. Stan Deal, the embattled chief of Boeing’s commercial airplane division, is also departing immediately and will be replaced by Chief Operating Officer Stephanie Pope.

The shakeup reflects growing customer frustration as the crisis centering on the planemaker’s manufacturing quality and safety shows no signs of receding. Kellner, Calhoun and Deal mark the highest-profile departures since a near-catastrophic incident in January involving its 737 Max jetliner plunged Boeing into ever-deepening turmoil.

Calhoun and Deal faced growing criticism from unhappy customers after the Alaska Airlines incident exposed lapses in Boeing’s manufacturing controls, and pressure had been growing on directors to revamp Boeing’s senior management. Questions over their leadership reached a crescendo last week when the heads of major airlines asked the board to meet directly, without Calhoun present.

The move to bypass the CEO offered a signal to investors and company officials alike: The airlines were losing patience with the top brass.

The leadership shuffle was finalized during a board session over the weekend, according to people familiar with the matter who asked not to be identified. The changes had been discussed for months amid the burgeoning crisis, the people said, but the matter was brought to a head by the need to issue the annual proxy statement, which already is weeks later than is typical for Boeing.

Kellner in particular wanted to make sure the handoff for the chair and CEO roles were mapped out ahead of the company’s annual meeting, one of the people said.

“While someone losing their job is rarely something to celebrate, we think that this is probably a wise move by the Boeing board of directors,” Robert Stallard, an analyst with Vertical Research Partners, told clients Monday. “Many of Boeing’s customers, suppliers and other stakeholders have arguably lost faith in the company, while its relations with the FAA and NTSB are clearly strained.”

A detailed audit of Boeing and its suppliers by the US Federal Aviation Administration raised concerns about the company’s safety culture, the agency’s top official said last week.

Former Qualcomm chief Steve Mollenkopf, who has been on Boeing’s board since 2020, will head the search for a new CEO as lead independent director, the company said.

Potential candidates for the top job include Pope, who remains in the running despite changing roles in Monday’s reshuffling, according to a person familiar with the matter. Others potentially under consideration could include General Electric Co.

CEO Larry Culp; David Gitlin, a Boeing director and CEO of Carrier Global Corp.; Patrick Shanahan, CEO of Boeing supplier Spirit AeroSystems Holdings Inc.; and Greg Smith, chairman of American Airlines Group Inc. and Boeing’s former finance chief.

Representatives for Gitlin, Shanahan and Smith didn’t immediately respond to requests for comment. In a February interview, when asked if he would be interested in becoming Boeing’s CEO, Culp said he was “looking forward to serving Boeing as their most important partner and supplier.” GE had no additional comment.

Whoever is chosen will take over a company that “has been playing a reactionary defense for quite some time,” Ron Epstein, an analyst with Bank of America, said in a note. “This may be the first real chance, in a long time, Boeing has had to clean house and reset their own narrative.”

Boeing’s shares rose 1.6% at 12:59 p.m. Monday in New York, paring earlier gains. The stock had tumbled 28% this year through March 22, the worst performer in the Dow Jones Industrial Average.

Multiple crises

Calhoun, a long-time Boeing director and veteran of General Electric Co. and Blackstone Group LP, stepped into the top role in early 2020 as the planemaker was reeling from a global grounding of the 737 Max following two crashes. He is ending a four-year stint as CEO dealing with the fallout from another near-catastrophe with the same model.

“I have been considering for some time, in discussion with our board of directors, the right time for a CEO transition at Boeing,” Calhoun said in a message to employees.

“The eyes of the world are on us, and I know we will come through this moment a better company, building on all the learnings we accumulated as we worked together to rebuild Boeing over the last number of years.”

The latest 737 Max debacle has further strained Boeing’s finances, limiting its ability to boost production it had been counting on to achieve its pre-crisis target of generating $10 billion in cash by 2025 or 2026.

Boeing Chief Financial Officer Brian West last week cautioned that the company expects a massive cash drain this quarter, an outflow of at least $4 billion.

On Calhoun’s watch, Boeing returned the 737 Max to commercial service in 2020 following a lengthy global grounding in the wake of two fatal accidents in 2018 and 2019. But the planemaker has struggled to raise production levels in the wake of the Covid pandemic as it grappled with worker turnover and with a series of quality lapses within its factories and those of suppliers.

Now Boeing faces a makeover of its senior leadership team and board as it works to re-establish quality controls and win back trust from customers, employees, regulators and the flying public. Calhoun, 66, had laid out his succession plan late last year by elevating Pope to the role of chief operating officer — signaling an eventual end to his run as CEO.

Kellner, a former CEO of Continental Airlines, was contemplating stepping down after 13 years as a Boeing director and four years as chairman. He decided the CEO selection process should be led by his replacement, Mollenkopf. Calhoun told CNBC that he’d also be involved.

‘Much needed’

The outspoken leader of Ryanair Holdings Plc welcomed Monday’s moves in a statement calling them “much needed.” Other major airline customers were more guarded in their reactions, with Delta Air Lines Inc., United Airlines Holdings Inc. and Southwest Airlines Co. each committed to working with the new team.

SPEEA, the union representing more than 19,000 Boeing and Spirit workers, issued a scathing statement calling Boeing’s problems in the executive ranks systemic. Executive director Ray Goforth said “nothing is going to change for the better without company leadership acknowledging their failures and thoroughly committing to fixing them.”

The moves provide “leadership continuity, which a knee-jerk change would not,” analyst Cai von Rumohr of TD Cowen said Monday. He described the overhaul as a “partial step” toward changing the company’s culture and rebuilding investor confidence.

He suggested directors also review whether Boeing should move its headquarters back to Seattle and give its largest union a seat on the board.

The latest changes are “a good first step in addressing the company’s myriad of problems,” said Stallard, of Vertical Research Partners.

“The major piece that is missing from the puzzle is who will be the next CEO?” he said. “It will require someone with pedigree and patience, as fixing Boeing is probably a multiyear non-linear journey.”

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