NPI's Cascadia Advocate

Offering commentary and analysis from Washington, Oregon, and Idaho, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Monday, December 23rd, 2019

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.

Boeing's 737 Max

A depic­tion of the new Boe­ing 737 Max, which includes a new fam­i­ly of engines. (Image cour­tesy of The Boe­ing Com­pa­ny).

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.

Safe­ty laps­es at the North Charleston plant have drawn the scruti­ny of air­lines and reg­u­la­tors.

Qatar Air­ways stopped accept­ing planes from the fac­to­ry after man­u­fac­tur­ing mishaps dam­aged jets and delayed deliv­er­ies.

Work­ers have filed near­ly a dozen whis­tle-blow­er claims and safe­ty com­plaints with fed­er­al reg­u­la­tors, describ­ing issues like defec­tive man­u­fac­tur­ing, debris left on planes and pres­sure to not report vio­la­tions. Oth­ers have sued Boe­ing, say­ing they were retal­i­at­ed against for flag­ging man­u­fac­tur­ing mis­takes.

Joseph Clay­ton, a tech­ni­cian at the North Charleston plant, one of two facil­i­ties where the Dream­lin­er is built, said he rou­tine­ly found debris dan­ger­ous­ly close to wiring beneath cock­pits.

“I’ve told my wife that I nev­er plan to fly on it,” he said.

“It’s just a safe­ty issue.”

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.

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