The broad management shake up disclosed on 25 March by Boeing might hold a chance of finally setting the embattled company on a real recovery path.
But the challenge lies in the fact that many of Boeing’s troubles originate not in its corporate suites, but rather on the floors of its factories.
For those reasons, unions and aerospace analysts are optimistic but not convinced that a new management team will solve problems that have eluded so many others.
“This may be the first real chance, in a long time, Boeing has had to clean house and reset their own narrative,” BofA Global Research analyst Ron Epstein said in a 25 March report. “We see the changes as the first right steps of removing the old guard, and making way for a new team which can work from a less-sullied slate.”
“We need to see more than the name changes. We need to see corrective and positive action,” adds the Allied Pilots Association (APA), which represents pilots at 737 Max customer American Airlines.
Boeing disclosed the management overhaul on 25 March. CEO Calhoun – who took over in 2020 with a mandate to pull Boeing out of its first 737 Max crisis – will leave the company at end-2024, to be replaced by a yet-undetermined successor.
Additionally, Boeing chief operating officer (COO) Stephanie Pope is now leading Boeing Commercial Airplanes (BCA), taking over from Stan Deal, who has retired. Pope will retain the COO title “but will be 100% focused on BCA”, the company says.
Another major change is that Steve Mollenkopf is the company’s new board chair, replacing Larry Kellner. Mollenkopf, former CEO of Qualcomm, is an engineer by trade.
Who might replace Calhoun as Boeing CEO remains a mystery, though two names have been tossed around: Pope, and Patrick Shanahan, the former Boeing executive who last year became CEO of 737 fuselage maker Spirit AeroSystems – a company Boeing this month said it has interest in acquiring.
In a 25 March research notes, JPMorgan urged Boeing to consider CEO “candidates outside aerospace, as some of the industry’s most successful leaders in recent years… have come from other industrial verticals.”
Jon Holden, president of District 751 of the International Association of Machinists and Aerospace Workers, says Boeing needs “a leader who will prioritise the importance of the quality and safety of the production system, and a leader with a strong vision for the future”.
The union, which represents Boeing technicians in Washington state and this month started negotiating a new contract with the company, also aims to secure a seat on Boeing’s board of directors.
“We firmly believe our voice and the voice of the engineers must be heard at the highest level of the company’s decision-making process,” Holden says.
Calhoun has governed with mixed reviews. Some analysts credit him with being transparent and honest and for doing all he can to fix Boeing.
Others say his legacy made him ill-suited for implementing real change. Calhoun had been a Boeing board member since 2009, and had worked at General Electric – including GE Aerospace – and investment company Blackstone. For critics who fault Boeing for focusing too much on shareholder returns in recent decades, Calhoun was an imperfect solution.
“It makes sense to us that Boeing needs fresh leadership to move forward with customers, regulators, lawmakers and employees,” says JPMorgan. “Hopefully the changes announced this morning will be a step forward.”
“We greet news of the management shake up at Boeing with resigned exhaustion,” adds a report from financial information firm Morningstar. Calhoun’s and Deal’s departures were “ultimately necessary to clear a path forward for Boeing”.
Change will not come easy.
“These issues transcend Dave Calhoun or Stan Deal. They’ve been simmering beneath the surface in Seattle for well over four decades,” says Michel Merluzeau, aerospace analyst with consultancy AIR. “Without substantial operational improvements and personnel changes implemented at Boeing factories, particularly at the Renton factory leadership, tangible results will remain elusive.”
Fixing BCA now rests on the shoulders of Pope, the 30-year Boeing veteran who only in January became Boeing COO. Pope has been a well-respected, rising star at Boeing – hence rumours she is in line to become CEO.
But JPMorgan questions Pope’s suitability to head BCA, noting her financial-heavy background. She was previously chief financial officer of both Boeing Global Services and BCA, and vice-president of finance at Boeing Defense, Space & Security.
“From an outsider’s perspective, the challenge for her will be to prove she has the ability to improve manufacturing quality, since this is the primary task facing the company,” JPMorgan says.
Boeing has battled repeated quality and production problems in the four years since regulators in March 2019 grounded the 737 Max for 20 months. Pressure became particularly acute in recent months following the 5 January in-flight failure of an Alaska Airlines 737 Max 9 door plug, which spurred investigations from the Federal Aviation Administration and, reportedly, the Federal Bureau of Investigation.
Boeing workers apparently failed to secure the door plug prior to delivering the jet.
Even customers have lashed out. On 12 March, Southwest Airlines CEO Bob Jordan said “Boeing needs to become a better company”, and United Airlines CEO Scott Kirby said he was considering ordering more Airbus jets due to Boeing’s issues.
“Southwest is committed to working with Boeing’s new leadership team to ensure that each airplane meets the highest quality and safety standards,” that airline said on 25 March.
“United continues to root for Boeing’s success and we look forward to working with them during their leadership transition,” adds United.
APA, the American Airlines pilots’ union, remains concerned.
“Lately, the more Boeing changes, the more the output remains the same,” it says. “Boeing needs to leave behind their shareholder-economy philosophy and return to an engineering- and quality excellence philosophy”.
