NATIONAL NEWS

Boeing CEO to step down in management shake-up as manufacturing issues plague storied plane maker

Mar 25, 2024, 5:23 AM | Updated: 2:28 pm

A leadership shake-up at Boeing, including news Monday that its top executive plans to step down, highlights the difficult path facing the iconic aircraft manufacturer as it tries to navigate through yet another safety crisis.

CEO David Calhoun, who has been under unrelenting pressure since a panel blew off a Boeing 737 Max jetliner during a January flight, said he would retire at the end of the year. He said the decision to leave was his and the timing would allow for an orderly transition.

The head of the company’s commercial airplanes unit, Stan Deal, is already out. Boeing said he was replaced immediately by Stephanie Pope, a fast-rising insider who just became chief operating officer on Jan. 1.

In a third high-profile decision, board Chairman Lawrence Kellner, a former Continental Airlines chief, won’t stand for reelection in May, Boeing said. A former Qualcomm CEO who was appointed to succeed Kellner will lead the search for Calhoun’s replacement.

Calhoun was on the Boeing board during its worst time — the crashes of two 737 Max planes in 2018 and 2019 that killed 346 people. He leaves with the company under intense scrutiny from regulators and lawmakers since a door-plug panel blew off a brand-new Alaska Airlines Max jet in midflight on Jan. 5.

Investigators say bolts that help keep the panel in place were missing after repair work at the Boeing factory.

The Federal Aviation Administration reviewed Boeing’s 737 factory near Seattle and gave the company failing grades on nearly three dozen aspects of production. The company has until late May to give the FAA a plan for improvement. In the meantime, the federal agency is limiting production of 737s.

The FBI recently told passengers from the Alaska Airlines flight that they might be victims of a crime.

Airline executives have expressed their frustration with Boeing, and even minor incidents involving jets the company produced are attracting extra attention.

In a note to employees on Monday, Calhoun called the Alaska Airlines blowout a “watershed moment for Boeing” that requires a ”total commitment to safety and quality at every level of our company.”

“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,” he said.

Boeing’s most significant effort to improve quality has been opening discussions about bringing Spirit AeroSystems, which builds fuselages for the Max and many parts for that and other Boeing planes, back into the company.

Mistakes made at Spirit, which Boeing spun off nearly 20 years ago, have compounded the company’s problems. Bringing the work of the supplier back in-house would, in theory, give Boeing more control over the quality of manufacturing key airplane components.

Calhoun said the two companies were making progress in talks “and it’s very important.”

Calhoun had been a Boeing director since 2009 when he became CEO in January 2020, replacing Dennis Muilenburg, who was fired in the aftermath of the Max crashes. In 2021, Boeing’s board raised the mandatory retirement age for CEO to keep Calhoun in the job.

He oversaw the Max’s return to service after a worldwide grounding that lasted nearly two years, and orders for the plane quickly picked up. Since then, however, a series of manufacturing flaws have delayed deliveries of new 737s and larger 787 Dreamliners to airlines, forcing the carriers to reduce growth plans.

Boeing has not filed its proxy statement for 2023, but previous filings show that Calhoun received compensation valued at more than $64.6 million from 2020 through 2022. Almost all of it was in the form of stock awards, options and bonuses.

The company, based in Arlington, Virginia, has lost more than $23 billion since Calhoun took over, although most of that is residual damage from the two Max crashes in Indonesia and Ethiopia. Boeing shares have fallen more than 40% in that time – 24% since the Alaska incident, through trading on Friday.

Last week, Chief Financial Officer Brian West warned that Boeing burned between $4 billion and $4.5 billion more cash than it expected in the first quarter as it slowed down airplane production after the Alaska Airlines accident.

The company tapped former Qualcomm CEO Steven Mollenkopf to become the new board chairman and lead the search for Calhoun’s replacement.

Some Boeing critics in Congress said the shake-up in the top ranks is not enough and that Boeing needs to worry more about safety and less about producing more airplanes. That view is shared by a leading Boeing whistleblower.

“It is going to be hard to fix the culture, but the people at Boeing (who build planes) are capable of it,” said Ed Pierson, a former manager at Boeing’s 737 factory who is now director of a safety foundation. “Those employees need to feel valued and supported instead of (management) just directing them and pressuring them to produce planes.”

The focus on Boeing since early January took some of the surprise out of Monday’s news. Citi analyst Jason Gursky called the shake-up “both predictable and thoughtful.”

Some analysts had viewed the fast-rising Pope as a likely successor to Calhoun. Gursky said, however, that her move to lead commercial airplanes opens the way for an outsider to become CEO.

Before her promotion to chief operating officer at the beginning of the year, Pope, 51, was president and CEO of Boeing’s services business, where she dealt with both airline and military customers. She served as chief financial officer of the airplanes division before that.

Richard Aboulafia, a longtime aerospace analyst and now a consultant at AeroDynamic Advisory, said the management shake-up “is likely to be a pivotal moment in Boeing’s history, and probably a very positive one,” but the outcome depends on the next CEO.

Rebuilding Boeing will be “very hard, and a long road,” Aboulafia said. Putting people with technical skill in higher leadership positions would be a plus, he said.

He said Patrick Shanahan — a former Boeing executive and acting U.S. defense secretary during the Trump administration who has led Spirit AeroSystems since the fall — would be a “great choice.”

Cai von Rumohr, an aerospace analyst at financial services firm TD Cowen, said the management changes are “a partial step toward changing its culture to underscore safety and rebuild investor confidence in the company.” He said the fact that Calhoun gave more than eight months’ notice will help the Boeing board make “a considered decision” instead of “a knee-jerk reaction.”

The CEO of Irish airline Ryanair, a major Boeing customer, welcomed the management changes, including the replacement of Deal at the head of the commercial airplanes division. Michael O’Leary said in a video posted on X that Deal did a good job at Boeing sales, “but he’s not the person to turn around the operation in Seattle, and that’s where most of the problems have been in recent years.”

Shares of The Boeing Co. rose about 1% in trading Monday.

___

AP Business Writer Michelle Chapman contributed to this report from New York.

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