Business / Corporate

Boeing ousts Dennis Muilenburg and names David Calhoun as CEO amid Max crisis

AFP-JIJI

Boeing on Monday replaced its embattled chief executive, Dennis Muilenburg, as it attempts to pivot from a protracted crisis surrounding the grounding of its top-selling 737 Max after two deadly crashes.

More than nine months after the Max was grounded and a week after halting production of the aircraft, Boeing named board Chairman David Calhoun as chief executive and president, saying the company needed to “restore confidence” and “repair relationships with regulators, customers and all other stakeholders.”

The company pledged to “operate with a renewed commitment to full transparency, including effective and proactive communication with the FAA, other global regulators and its customers.”

The aerospace giant’s financial picture remains clouded following the global grounding of the Max in March after two deadly crashes.

The move comes a week after Boeing took the monumental step of temporarily shutting down Max production because of the crisis, which has pushed the aircraft’s return to the skies into 2020.

Though coming during the sleepy days ahead of the Christmas holiday, the move was not entirely unexpected after Boeing stripped Muilenburg of his chairman title in October, installing board member Calhoun in that post.

Shares rallied on the announcement, which came after a series of rare public rebukes by the top U.S. air safety regulator and calls in Congress for Muilenburg to go. The stock price jumped 2.1 percent to $334.80 in midmorning trading.

But Scott Hamilton of Leeham News, an aviation website, noted that Calhoun, a veteran of the Boeing board, had roundly praised Muilenburg’s performance as CEO in a November television interview.

Calhoun has been “part of the Board policy-making that led to the cost-cutting some say had deleterious impact on the development of the MAX,” Hamilton wrote.

“Calhoun has been on the board 10 years,” he said. “Is Calhoun, an insider, the right person to pull Boeing out of its dive?”

Calhoun previously served as vice chairman of General Electric, where he had a long career after starting with the company soon after graduating from Virginia Tech. He also currently serves as senior managing director of investment banking firm Blackstone Group.

Richard Aboulafia of the Teal Group, a research consultancy focused on aviation and defense, noted that Calhoun’s background is in private equity so “in long-term direction, I’m not sure this is the right move.”

Muilenburg will exit the company immediately but Calhoun will not take the CEO post until Jan. 13, while he exits existing commitments, Boeing said in a news release.

During that period, Chief Financial Officer Greg Smith will serve as interim CEO. Meanwhile, board member Lawrence W. Kellner will become nonexecutive chairman of the board effective immediately.

Muilenburg’s response to the crisis was increasingly criticized as the Max grounding has dragged on far longer than initially expected as more disturbing details have dribbled out about the certification of the aircraft.

He has also been seen as tone deaf and awkward toward families of the 346 people killed in the crashes.

Michael Stumo, whose daughter, Samya, was killed in the Ethiopian Airlines crash, called Muilenburg’s departure “a good first step toward restoring Boeing to a company that focuses on safety and innovation.”

“The next step is for several board members who are underperforming or underqualified to resign in favor of a newly-configured excellence at the top level of the company and on the Board,” Stumo said.

The company resisted grounding the planes even after the second crash when Muilenburg pressed his case in phone calls with President Donald Trump.

Probes of the two crashes have focused in particular on the Maneuvering Characteristics Augmentation System, an automated system that Lion Air and Ethiopian Airlines pilots were unable to control, resulting in crashes.

The Federal Aviation Administration called out the company for overly optimistic time-frame for restoring the Max that the agency said created the perception that Boeing was trying “to force FAA into taking quicker action.”

FAA chief Steve Dickson also ripped Muilenburg in October for not disclosing communications from a Boeing pilot that raised questions about the MCAS system.

The company took another hit to its reputation on Sunday when its Starliner spacecraft landed six days early after a failed mission to rendezvous with the International Space Station.