Boeing belatedly fires Dennis Muilenburg as company’s disastrous year comes to a close

He’s gone:

Boe­ing said on Mon­day that it had fired its chief exec­u­tive, Den­nis A. Muilen­burg, who was unable to sta­bi­lize the com­pa­ny after two crash­es involv­ing its best-sell­ing 737 Max plane killed 346 peo­ple and set off the worst cri­sis in the man­u­fac­tur­ing giant’s 103-year history.

The plane has been ground­ed by reg­u­la­tors since March, and the com­pa­ny and its air­line cus­tomers have lost bil­lions of dol­lars. Boe­ing has faced a series of delays as it tries to fix the Max, and the jetliner’s return to the air remains months away at best.

Muilen­burg’s ouster (which is effec­tive imme­di­ate­ly) was announced in a com­pa­ny press release that out­lined the com­pa­ny’s suc­ces­sion plans.

Boe­ing [NYSE: BA] announced today that its Board of Direc­tors has named cur­rent Chair­man, David L. Cal­houn, as Chief Exec­u­tive Offi­cer and Pres­i­dent, effec­tive Jan­u­ary 13, 2020.

Mr. Cal­houn will remain a mem­ber of the Board.

In addi­tion, Board mem­ber Lawrence W. Kell­ner will become non-exec­u­tive Chair­man of the Board effec­tive immediately.

Since Cal­houn will not become the new chief exec­u­tive offi­cer right away, one of Muilen­burg’s deputies will be in charge for the next few weeks.

Boe­ing Chief Finan­cial Offi­cer Greg Smith will serve as inter­im CEO dur­ing the brief tran­si­tion peri­od, while Mr. Cal­houn exits his non-Boe­ing com­mit­ments. The Board of Direc­tors decid­ed that a change in lead­er­ship was nec­es­sary to restore con­fi­dence in the Com­pa­ny mov­ing for­ward as it works to repair rela­tion­ships with reg­u­la­tors, cus­tomers, and all oth­er stakeholders.

Like sev­er­al of his pre­de­ces­sors, Cal­houn is a Gen­er­al Elec­tric import. Bloomberg:

Boe­ing is turn­ing to a GE vet­er­an to run the com­pa­ny for the third time in less than two decades, as the U.S. plane­mak­er faces scruti­ny for its unre­lent­ing focus on share­hold­er val­ue. The two CEOs who pre­ced­ed Muilen­burg — Jim McN­er­ney and Har­ry Stoneci­pher — also rose through the ranks at GE while Jack Welch was chief executive.

Cal­houn had been in the run­ning to head Boe­ing almost 15 years ago, when direc­tors instead select­ed McN­er­ney. Cal­houn ran GE’s air­craft engines divi­sion from 2000 through 2004 and ascend­ed to the vice chair­man role before leav­ing the com­pa­ny in 2006.

Affa­ble and diplo­mat­ic, he’s also very connected.

Cal­houn serves on the Cater­pil­lar Inc. board with Muilen­burg and over­sees Blackstone’s pri­vate equi­ty portfolio.

Muilen­burg’s tenure as CEO at Boe­ing last­ed a lit­tle over four years. At the time he was installed, the com­pa­ny seemed to be on a sol­id footing.

But then, about a year ago, tragedy and cri­sis struck with the crash of Lion Air Flight 610, which was fol­lowed by the crash of Ethiopi­an Air­lines Flight 302 ear­ly this year. That even­tu­al­ly prompt­ed the world­wide ground­ing of the 737 MAX, the “next gen­er­a­tion” incar­na­tion of Boe­ing’s best­selling nar­row­body pas­sen­ger jet.

The MAX remains ground­ed and its return to ser­vice is unknown. The ground­ing has already cost Boe­ing bil­lions of dol­lars and is like­ly to cost bil­lions more.

Many Boe­ing crit­ics have argued that top brass the aero­space giant inher­it­ed from its all ‑stock 1996 merg­er with McDon­nell Dou­glas (includ­ing Har­ry Stoneci­pher) are to blame for the com­pa­ny’s present predicament.

The McDon­nell Dou­glas con­tin­gent have often been deri­sive­ly referred to as bean coun­ters by vet­er­an Boe­ing work­ers and retirees, many of whom still jus­ti­fi­ably resent the relo­ca­tion of Boe­ing’s head­quar­ters from Seat­tle to Chica­go in 2001.

Back in the sum­mer, one com­men­ta­tor took the oppor­tu­ni­ty to imag­ine what might have hap­pened if Boe­ing had nev­er merged with McDon­nell Douglas.

This isn’t the first time in Boe­ing’s post-merg­er era that it has got­ten into trou­ble as a result of board and C‑Suite man­dat­ed cor­ner-cut­ting by the MD contingent.

When the 787 Dream­lin­er was on the draw­ing board, the com­pa­ny’s man­age­ment fig­ured that the plane could be built much more cheap­ly by out­sourc­ing a lot of the work that had tra­di­tion­al­ly been done in-house. Their grand plan back­fired spec­tac­u­lar­ly, caus­ing a series of delays and pro­duc­tion prob­lems that cost an enor­mous amount of mon­ey to inves­ti­gate, diag­nose, and rectify.

The 787’s trou­bles con­tin­ued even after it entered rev­enue ser­vice.

In 2013, at least four of the first 787s were plagued by elec­tri­cal sys­tem mal­func­tions stem­ming from the mod­el’s onboard lithi­um ion batteries.

The entire 787 fleet was sub­se­quent­ly ground­ed while the Fed­er­al Avi­a­tion Admin­is­tra­tion inves­ti­gat­ed. The Nation­al Trans­porta­tion Safe­ty Board also launched a probe that result­ed in the release of a report in Decem­ber of 2014.

As bumpy as the 787’s devel­op­ment and ear­ly years were, the 737 MAX cri­sis is worse. The 737 series is Boe­ing’s crown jew­el and its best­seller; unlike the 787 series, it car­ries a sig­nif­i­cant per­cent­age of the Unit­ed States’ domes­tic air traffic.

Where­as the 787s were allowed to return to the air just a few months after being ground­ed, the 737 MAX fleet will have been ground­ed for more than a year by the time it returns to ser­vice. Muilen­burg had report­ed­ly been lean­ing on the Fed­er­al Avi­a­tion Admin­is­tra­tion to give his opti­mistic pro­jec­tions about the 737 MAX’s return to ser­vice cre­dence, but had been rebuffed by the agency.

And as for the 787 series, well, it’s still suf­fer­ing from qual­i­ty assur­ance prob­lems, as The New York Times report­ed in April of this year.

Muilen­burg’s ouster may have giv­en Boe­ing’s stock a tem­po­rary shot in the arm, but what Boe­ing real­ly needs is a new board of direc­tors and top exec­u­tives who are com­mit­ted to the val­ues of safe­ty, integri­ty, qual­i­ty, and trans­paren­cy. The com­pa­ny can­not be suc­cess­ful over the long term if it does not secure lead­er­ship com­mit­ted to trans­for­ma­tive change that cre­ates a cul­ture of excellence.

This is a mes­sage that many peo­ple are offer­ing in response to Muilen­burg’s exit.

If Boe­ing wants to remain a going con­cern, it must stop antag­o­niz­ing and under­min­ing its union work­force and pres­sur­ing the FAA to let it reg­u­late itself. Obses­sive­ly focus­ing on short term prof­its is unhealthy and dangerous.

The com­pa­ny could gen­er­ate a lot of good­will around these parts if it moved its head­quar­ters from Chica­go back to Seat­tle, where most of its com­mer­cial air­planes are still built. Boe­ing’s exec­u­tives would undoubt­ed­ly ben­e­fit from greater geo­graph­i­cal prox­im­i­ty to their own key plants and personnel.

Boe­ing’s board would be wise to begin look­ing out­side of the com­pa­ny for a new leader who can take over from Cal­houn and lead the firm into the future. Some­one who won’t be afraid to cham­pi­on wis­er gov­er­nance and man­age­ment prac­tices. Some­one who lis­tens well, thinks crit­i­cal­ly, and long term. Some­one who is a tact­ful nego­tia­tor, calm com­mu­ni­ca­tor, and savvy recruiter.

Good lead­ers can be hard to find, but it’s imper­a­tive that Boe­ing find them if it wants to avoid lurch­ing from the cri­sis it’s in now to a new one beyond the horizon.