Boeing’s chief executive officer has been forced out by the board of directors amid ongoing problems with the company’s troubled 737 Max aircraft, including two crashes.
The Boeing board had supported Dennis Muilenburg for months despite calls for his resignation from lawmakers and relatives of the passengers killed. When it became clear in recent days that federal regulators would not certify the grounded Max to fly again by year’s end as Muilenburg had hoped, the board finally abandoned him.
The Chicago-based manufacturer said Monday that Muilenburg is stepping down immediately. Board chair David Calhoun will take over as CEO on Jan. 13.
Board member Lawrence Kellner will become non-executive chairman of the board.
“On behalf of the entire board of directors, I am pleased that Dave has agreed to lead Boeing at this critical juncture,” Mr. Kellner said in a prepared statement.
“Dave has deep industry experience and a proven track record of strong leadership, and he recognizes the challenges we must confront. The board and I look forward to working with him and the rest of the Boeing team to ensure that today marks a new way forward for our company.”
Board members decided to remove Muilenburg on a conference call Sunday, according to a person familiar with the events who discussed the private deliberations on condition of anonymity.
Muilenburg was eligible for $39 million US in cash severance, stock and bonuses based on Boeing’s stock price of $322.50 at the end of last year, according to a Boeing securities filing. The stock closed Monday at $337.55.
Bad week for Boeing
The move came after another bad week for Boeing.
The aerospace giant had announced it would temporarily halt production of the Max because it wasn’t clear when it could deliver the planes. And Boeing’s new Starliner space capsule went off course during a bungled, unmanned test flight Friday to the International Space Station, a blow to the company’s effort to launch astronauts for NASA next year.
The Max was grounded worldwide after two crashes — in October 2018 off the coast of Indonesia, and in March 2019 in Ethiopia — that left a total of 346 people dead. The company’s board said a change in leadership is needed to restore confidence in the company as it works to repair relationships with regulators and stakeholders.
The crashes and the decisions that were made leading up to those tragedies have shaken Boeing.
“The company appears to have known about safety issues for quite some time. This indicates that there might be more fundamental cultural issues at the company,” said Tim Hubbard, assistant professor of management at the University of Notre Dame’s Mendoza College of Business.
“Furthermore, the recent failure of a rocket test launch indicates that the company might not be as innovative as they once were. Increasing innovativeness and changing the culture of a company the size of Boeing is challenging. One way to jump start changes at Boeing could be new leadership.”
Muilenburg criticized for crash response
The Max is crucial to Boeing and has been unable to get approval from regulators to put the plane back in the air. Sales at Airbus, Boeing’s top rival, surged 28 per cent during the first half of the year.
Boeing began designing the Max in 2011 to compete with a new plane from Airbus that was cutting into sales of Boeing’s venerable 737. Critics, including members of Congress, say Boeing, with the Federal Aviation Administration’s help, rushed the plane into production and minimized safety risks.
Investigators say that in both crashes, a faulty sensor caused the plane’s MCAS flight-control system to push the nose of the plane down and pilots were unable to regain control.
Muilenburg was faulted for Boeing’s initial response to the accidents, when he and the company seemed to blame the foreign pilots. Criticism grew in recent months as news reports and U.S. congressional investigations disclosed internal Boeing documents that revealed concern within the company about key design features on the Max.
Earlier this month, the FAA’s head expressed concern that Boeing was pushing for an unrealistically quick return of the grounded 737 Max.
But Boeing said last week that production of the Max would be wound down in January. The shutdown will likely ripple through its vast network of 900 companies that make engines, bodies and other parts for the 737.
United Airlines said it would pull the Boeing 737 Max from its flight schedule until June. The same day, Spirit AeroSystems, which makes fuselages, said it would end deliveries intended for the Max in January.
‘Emphasis on engineering’
Speculation that Muilenburg would be fired had been circulating in the industry for months, intensifying in October when the board stripped him of his chairman title.
Aerospace analyst Richard Aboulafia said the appointment of Calhoun, who previously served as head of Blackstone Group’s private equity portfolio operation, will provide needed short-term stability but not the long-term “emphasis on engineering” the company needs.
“Calhoun is respected in the industry,” Aboulafia said on Monday. “But long-term, does he bring the right tool kit? Private equity leans companies out. That’s not Boeing’s problem right now.”