As Boeing faces major financial and operational challenges, it has announced a key leadership change. Effective August 8, Robert “Kelly” Ortberg, the former CEO of Rockwell Collins, will succeed the retiring Dave Calhoun.
The transition follows a troubling financial report, with Boeing posting a $1.4 billion core operating loss in the second quarter—more than triple last year’s loss—due to increased scrutiny of aircraft safety and quality, which has hindered production and profitability.
“I’m extremely honored and humbled to join this iconic company,” said Ortberg in a statement from the company. “Boeing has a tremendous and rich history as a leader and pioneer in our industry, and I’m committed to working together with the more than 170,000 dedicated employees of the company to continue that tradition, with safety and quality at the forefront.”
Ortberg, with a background in mechanical engineering, is regarded as a potentially beneficial addition due to his experience and reputation in the aerospace sector. His selection is considered a pivotal step, particularly in light of the 737 Max incidents, which resulted in two fatal crashes attributed to a design flaw, a grounding for 20 months, and financial damages exceeding $20 billion.
Boeing’s ongoing issues encompass a recent occurrence involving a door plug detaching from a 737 Max, allegations of employing inferior components, and whistleblower claims of retaliatory actions taken against employees who raised safety issues.
“Kelly is an experienced leader who is deeply respected in the aerospace industry, with a well-earned reputation for building strong teams and running complex engineering and manufacturing companies,” said Boeing Chairman Steven Mollenkopf in a statement. “We look forward to working with him as he leads Boeing through this consequential period in its long history.”
The new CEO inherits a company with ongoing difficulties. Boeing’s commercial and defense sectors are underperforming, evidenced by nearly doubling losses in its defense, space, and security unit to $913 million. Complications with the Starliner spaceship and the costly Air Force One project further compound Boeing’s financial woes. The company’s recovery is constrained by a necessary production slowdown of the 737 Max, demanded by the FAA until safety and quality issues are resolved.
“The arrival of a new CEO at Boeing could not have happened at a more crucial and necessary time for the safety of the traveling public around the world,” said Robert Clifford, attorney for the families of 737 Max crash victims. He said that under Muilenberg, Calhoun, and Boeing’s “do nothing” board, the company has been in a “nosedive.”
“While this man is an industry insider, he comes from outside Boeing and, on the face of it, has a well-regarded reputation in the industry,” Clifford added. “Maybe he can bring the company back to the stature it once held before it criminally and preventively killed 346 people.”
Additionally, Boeing faces a potential strike by 36,000 hourly workers in Washington state, which could further disrupt its operations. The company’s leadership has undergone significant changes this year, with Calhoun indicating that further personnel shifts under Ortberg are unlikely.
“One person cannot turn around a company, but Kelly should be able to cast a wider net for talent than a Boeing insider could,” said Ron Epstein, aerospace analyst for Bank of America.
“Demand for commercial aircraft remains strong, and in a duopoly, Boing should be a beneficiary, in our view,” Epstein added. “We do note that Ortberg is walking into a Boeing with a potential production strike in September, a defense business that is limping along, and commercial business that has lost the trust of regulators and the public. Boeing overall has a long road ahead if the underperformance in this quarter is an indicator of what’s to come.”
Boeing’s stock initially dropped but then recovered slightly upon the news of Ortberg’s appointment, highlighting investor uncertainty.
“He knows full well that we’re in a recovery mode,” Calhoun told investors. “I don’t think this is intended to be a large personnel overhaul.”
Boeing’s journey back to stability will be arduous, with Ortberg tasked with restoring public and regulatory trust, enhancing safety standards, and navigating a challenging labor landscape. The new CEO’s reputation and outsider status may offer a fresh perspective and new strategies to address these deep-seated issues.
