Boeing’s Next CEO Will Have ‘Massive Job’ at Company in Crisis

 

• Federal probes
• snarls
• shake-up
• ample time
• instill confidence
• front-page scandals
• Outgoing CEO, outgoing president
• ripple through
• weighing on employees
• lieutenant
• heir apparent
• as the problems mounted
• countered by
• repel
• avert
• fuselage
• that are needed to keep it in place
• The tension came to a head earlier this month.
• seat mishap
• plunge
• thwarted growth
• his role will likely morph into that of a caretaker

Boeing’s Next CEO Will Have ‘Massive Job’ at Company in Crisis

David Calhoun was brought in to fix Boeing’s issues, but he will leave a big repair job for the next leader

By Sharon Terlep, Chip Cutter and Andrew Tangel

Updated March 26, 2024 12:12 am ET

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Airline executives and government officials said they welcomed the shake-up at Boeing. PHOTO: SCOTT BRAUER/ZUMA PRESS

 

Federal probes, sloppy factories, angry airlines, tense union negotiations and supply-chain snarls. 

Boeing’s crisis won’t end when David Calhoun exits as chief executive. 

The next leader of the American manufacturing icon will have to address some of the same issues that Calhoun, a longtime Boeing director, was brought on to clean up four years ago when the board he led ousted his predecessor. 

Boeing said Monday that Calhoun will step aside by the end of the year, though he is expected to leave as soon as his replacement is found. Calhoun’s biggest ally on the board, Chairman Larry Kellner, is also stepping down, and the top executive for the commercial aircraft unit was replaced on Monday.

Airline executives and government officials said they welcomed the shake-up. The board has started searching for a new leader. While it will look at internal executives, it faces added pressure to bring on an outsider who can clean up quality issues that have slowed production of 737 MAX jets that airlines need.

 

“They understand what they need to do,” 

General Electric CEO Larry Culp said in an interview in mid-March, when asked about Boeing. “As it was for us, a lot of work ahead.” 

Culp would know. He has just spent five years restructuring GE by splitting off business units, paying down debts and streamlining its factories. Soon he will oversee a slimmed-down GE Aerospace, which makes jet engines that go into the 737 MAX.

By setting Calhoun’s exit date at the end of the year, Boeing gave itself ample time to find a successor who the board hopes could instill confidence in the company internally and externally. And if other controversies surface at Boeing in the coming months, Calhoun can take the blame for them instead of the new CEO, executive advisers said. 

“Let’s hope there aren’t any front-page scandals” to come, said Peter Crist, chairman of the executive search firm Crist Kolder Associates. “But boards do think about that stuff.”

A long transition could slow turnaround efforts: Outgoing CEOs rarely make bold strategy moves, and uncertainty at the top can ripple through a company, paralyzing decision-making and weighing on employees and other executives. 

“The faster they get someone in, the better,” said Bill George, former chairman and CEO of 

Medtronic

, who has co-written case studies on Boeing’s challenges. “The new CEO is going to have a massive job.”

Succession scramble

The shake-up announced Monday—after a near-tragedy Jan. 5 on a 737 MAX flown by Alaska Airlines—highlighted shortcomings in the company’s current succession plans. Boeing’s board had previously doubled down on Calhoun, extending his stay past the traditional retirement age of 65. 

Calhoun, who turns 67 next month, had been preparing for his succession and, before the Alaska Airlines accident, had elevated one of his lieutenants, Stephanie Pope, to a No. 2 role, making her the heir apparent. But as the problems mounted, people familiar with them said that Calhoun, Kellner and other directors discussed the need to accelerate leadership changes.

Calhoun had told directors after the Alaska accident that the company had no immediate successor to commercial unit chief Stan Deal, keeping him in place for the time being, according to people familiar with the matter. Pope’s appointment to replace Deal in that role on Monday showed the board couldn’t wait.

At the same time, several airline CEOs requested to take their concerns directly to Boeing’s board, asking the directors to spell out plans for fixing the manufacturer’s quality problems, The Wall Street Journal reported last week. Boeing countered by offering to send Kellner, former CEO of Continental Airlines, and other board members for meetings with individual airline bosses as soon as this week. 

Those meetings will now feature Steve Mollenkopf, who is taking over as Boeing’s chairman and will lead the CEO search. The former Qualcomm CEO is a relative newcomer to Boeing, though he is well known in Silicon Valley circles and on Wall Street. He joined the aircraft maker’s board in 2020 and serves as a director at Dell Technologies.

The electrical engineer led Qualcomm through several high-profile challenges, repelling an activist investor, averting a hostile takeover and waging a legal battle with Apple, one of its biggest customers.  

Struggles with Spirit

Calhoun had been trying to address Boeing’s supply-chain issues by cracking down on quality problems with fuselage maker Spirit AeroSystems. Boeing said this month it would stop accepting parts from Spirit that had flaws or problems.  

The Alaska Airlines door plug had to be opened when it arrived at Boeing’s factory in Renton, Wash. Boeing workers then reinstalled it without bolts that are needed to keep it in place, investigators have said. A few months later, it blew off a plane full of passengers at 16,000 feet. There were no fatalities.

Calhoun is also in the midst of negotiations with Spirit about acquiring the company. A deal would mark a reversal of Boeing’s manufacturing strategy of outsourcing many components to focus on final assembly. Boeing had sold the Spirit factories in 2005.

Boeing and Spirit had hoped to announce a deal as soon as this week but haven’t yet been able to come to an agreement, a process complicated by the fact that Spirit also supplies parts to Boeing’s chief rival Airbus, said people familiar with the matter.  

 

Fixing Boeing’s problems will be a big undertaking, Scott Kirby, United’s chief executive, said earlier this month. 

“This is not a 12-month issue. This is a two-decade issue,” he said during an investor conference. The airline said in a statement Monday that it continues to root for Boeing and looks forward to working with the company during its leadership transition. 

The Federal Aviation Administration, Boeing’s most important regulator, has been unsettled by what officials have seen at Boeing since the Alaska accident, current and former government officials said. Calhoun has been agreeable to the FAA’s requested changes, one former FAA official said, but the agency hasn’t seen enough results so far. 

Calhoun has apologized for Boeing’s mistakes, slowed production and said the company is working with regulators and customers to address their concerns.

Growing tensions

The tension came to a head earlier this month. The FAA found “multiple instances” of Boeing quality-control issues after conducting an audit of Boeing’s 737 production. Soon after, the company advised airlines to check cockpit seats on 787 Dreamliner jets after a seat mishap caused a terrifying plunge on a flight to New Zealand.

The Justice Department has been reviewing a 2021 settlement it reached with Boeing after two deadly MAX crashes and has opened a criminal investigation of the Alaska Airlines accident. The Federal Bureau of Investigation in recent days has reached out to passengers on the Jan. 5 flight identifying them as possible crime victims, generating news headlines that also got the board’s attention, according to one person briefed on the matter.

 

Union leaders representing Boeing workers said in recent days that they were demanding a seat on the board for the first time in the company’s nearly 108-year history, along with commitments that the next plane model be built at facilities with union members, not factories Boeing opened in other states.

“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,” said Jon Holden, one of the International Association of Machinists and Aerospace Workers leaders. “The safety of aircraft manufacturing isn’t negotiable and must be safeguarded above all else.”

Airline executives had expressed frustration for years—even before the Jan. 5 blowout—at delivery delays that complicated planning and in some cases thwarted growth. The smallest and largest types of MAX jets haven’t been certified, and it is unclear when the FAA will sign off. Southwest Airlines, which relies entirely on Boeing jets, said earlier this month that it would have to cut its schedule in the second half of the year. United, which had been waiting on the largest MAX variant, has said it can no longer rely on receiving those planes and is shopping for Airbus jets to replace them. 

In his final months on the job, Calhoun’s role will likely morph into that of a caretaker, helping to prepare for a new CEO to take on the job, executive advisers said. His lame-duck status remains.

“Is he going to be in a position to deal with some of the strategic challenges that need to be made?” said Harry Kraemer, a former chief executive of healthcare company Baxter International. “God knows they’ve got a lot of them.”

 

Alison Sider and Emily Glazer contributed to this article.

Write to Sharon Terlep at sharon.terlep@wsj.com, Chip Cutter at chip.cutter@wsj.com and Andrew Tangel at andrew.tangel@wsj.com