Coverage: Boeing replaces CEO
Boeing has fired its chief executive Dennis Muilenburg, replacing him with chairman David Calhoun to take over in two weeks.
Cathy Bussewitz and David Koenig reported the news for the AP:
Boeing ousted CEO Dennis Muilenburg on Monday with no end in sight to the crisis that has engulfed the vaunted American aircraft manufacturer since the crash of two of its 737 Max airliners.
The Boeing board had supported 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.
Board members decided to remove him on a conference call Sunday, according to a person familiar with the events who discussed the private deliberations on condition of anonymity.
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 to the International Space Station.
The company said Muilenburg departed immediately and its current chairman, David Calhoun, will take over as CEO on Jan. 13.
Boeing said it decided it needed new leadership to regain the confidence of regulators. The company — which has been criticized over the design of the Max, Boeing’s failure to tell pilots about a new flight-control system on the plane, and its handling of the crisis after the first crash — promised a “renewed commitment to full transparency.”
Dan Catchpole and Erik Sherman noted for Fortune more trouble was ahead:
“I am pleased that Dave has agreed to lead Boeing at this critical juncture,” Larry Kellner, who replaces Calhoun as Boeing’s chair said in a statement. “Dave has deep industry experience and a proven track record of strong leadership, and he recognizes the challenges we must confront.”
But while firing Muilenburg is a step in the right direction, analysts and investors tell Fortune that Calhoun may not be the right person to replace him.
“I think this is good news for Boeing,” says Ivan Feinseth, chief investor officer and director of research at Tigress Financial Partners, which advises large investors and also holds some Boeing stock for clients. “Muilenburg has dragged this on for over a year and has been ineffective. Hopefully this is more of an indication that they’re taking the situation seriously.”
Boeing stock closed at $337.55 on Monday, up 2.9%, or $9.50, from Friday’s close. But that is still more than 23% off the March 1 record close of $440.62.
Market reactions are only an initial response and not something Boeing can take for granted. “Investors lost faith with him and his senior executive team long ago, given their handling of the 737 MAX incidents and aftermath,” says Jeff Yastine, senior equities analyst at Banyan Hill Publishing. He added that the botched orbital test of Boeing’s Starliner—a manned space capsule for reaching the International Space Station—only underscored the company’s reputation under Muilenburg as an aerospace organization that struggles to get across the finish line.
Having Boeing’s chairman Calhoun step in may not placate markets on more than a “placeholder basis,” Yastine says, noting that as chairman, Calhoun defended Muilenburg’s handling of the 737 MAX crisis and in November told CNBC that the now-former CEO “had done everything right.”
Leslie Josephs reported for CNBC:
Calhoun, 62, is no stranger to crises nor to aviation. His more than two-decade career at General Electric included a stint at the company’s important aviation unit, a job he took months before the Sept. 11, 2001, attacks roiled the airline business.
He has sat on Boeing’s board for a decade, including as the 737 Max was under development, so he is familiar with the mistakes related to the troubled plane.
“He’s not new blood,” said Bank of America Merrill Lynch senior aerospace and defense analyst Ron Epstein. “He seems like a capable manager, but he was on the board when all the decisions were made.”
Taking the reins of a sprawling company whose businesses span commercial airplanes, defense, services and space as it grapples with the biggest crisis in its more than 100-year history will be an immense challenge for Calhoun.
Wall Street applauded the move, sending shares up 3% as of Monday afternoon, a sign investors expect Calhoun to help the company though these challenges. One top airline executive told CNBC he welcomed the news as a positive step forward.
Calhoun has most recently been an executive at Blackstone Group, overseeing portfolio operations at the private equity giant. Prior to joining Blackstone, he was CEO of Nielsen Holdings, the data analytics and measurement firm, from 2010 to 2014, after leading its marketing research firm, The Nielsen Company. Calhoun is also on the board of Caterpillar and serves as chairman of Gates Industrial.