Dave Calhoun, the corporate CEO, will be stepping down at the end of 2024. The CEO of the commercial airline division, Stan Deal, has already been replaced by Boeing Company’s COO, Stephanie Pope, who has a strong finance background. And the board of directors Chairman Larry Kellner has informed the board that he does not intend to stand for reelection at the upcoming annual shareholder meeting. Moving quickly, the board has already elected Steve Mollenkopf to succeed Mr. Kellner as the independent board chair.
This shakeup follows, in what many have described as suspicious circumstances, the death of Boeing whistleblower John Barnett, who was found dead in his car with a gunshot wound to his head before he could deliver part two of his testimony against Boeing.
Was it suicide? We don’t know.
Was it foul play? We don’t know.
But we do know is that one of America’s most iconic and important, and some would say irreplaceable companies, is in big trouble.
And airliner passengers are paying attention, with many of them purposely avoiding flights and airlines that feature Boeing aircraft. Further, every little incident involving a Boeing aircraft is now being talked about excitedly on the news, talk radio, and social media, even if the incident is not Boeing’s fault. One might even call it a feeding frenzy, and it’s hard to remember another company that has gone through such a long stretch of bad publicity. Turns out that companies that make planes that you get into and fly tens of thousands of feet above the ground in are held to a really high standard by the public.
So, Boeing is in trouble. Still, one might think that being one of only two major companies that make jet passenger airliners, Boeing will be able to weather the storm. But with China chomping at the bit to position its C919 as a competitor to Boeing, assuming that Boeing can weather any storm is not a good idea, as losing the passenger airliner market to foreign competition would be a major blow to the United States. Especially if that foreign competition is China.
You see, Boeing is not just any other big company. During World War II, 28 percent of the allied aircraft, 98,955, were produced by Boeing, including the legendary B-17 Flying Fortress that dropped 640,036 tons of bombs in Europe, more than any other American aircraft. Boeing also built the B-52 Stratofortress, some of which will end up flying for 100 years before they are retired.
Other prominent military aircraft still in use today include the F/A-18 Hornet/Super Hornet and the CH-47 Chinook heavy lift helicopter.
On the civilian side, some of the more impactful planes built by Boeing include the legendary 707 and the iconic 747, and, with more than 16,000 having been ordered to date, the 737 was the record holder for most passenger jet sales in history until its recent issues allowed the Airbus A320 to sneak past it.
Today, along with being one of the two largest producers of commercial airliner jets in the world, in any given year Boeing is the United States’ third or fourth largest defense contractor. But, unlike the other major defense contractors such as Lockheed Martin and Raytheon, Boeing derives 48 percent of its revenues by selling into the commercial/civil market. This means that, unlike many defense contractors, it won’t have to shut its doors should it fail to get a key defense contract.
Further, by revenue, the Boeing Company is the United States’s largest exporter.
So, we have a company currently doing a poor job in serving its customers and shareholders that is also very important to the United States from an economic and national security perspective. Further, even after taking the massive hit from the grounding of its cash cow, the 737, Boeing has seemingly failed to correct major quality control issues that if not resolved could result in deaths, and maybe even Boeing’s demise.
What to do?
Before answering that question, let’s look at what Boeing did to fix its quality control issues during the 737 Max grounding period of 2019–2020. First, they fired the CEO who oversaw a culture in which getting aircraft built and delivered seemed to be more important than the quality and safety of the planes being delivered. Then, from the board of directors, they hired a new CEO, David Calhoun, who was a finance and accounting guy. More specifically, he did not have a background in quality control. And lo and behold four years later, Boeing still has major quality control issues.
No doubt Mr. Calhoun is a very sharp guy, and he did promise to fix the quality issues, but he is not a quality control guy. Hence, given Boeing’s huge quality control issues, would it not make sense to bring in a real quality control guru to head up the company? When I say guru, I mean the kind of person who eats and breathes quality control and has a framed picture of W. Edwards Deming in his or her office. The kind of person who can get his or her colleagues and employees really excited about the safety and financial benefits of having a manufacturing process under stable statistical quality control. And a person who as the new CEO would have the authority to get things done.
By putting someone like that at the very top ASAP, and giving him or her free rein to bring back a culture of quality to Boeing built around stable measurable quality processes and procedures, not only would Boeing be giving itself the best chance to get its house in order, but it would send a very strong message to the public that Boeing is serious about quality and the safety of the people who trust their lives to its planes.
In the meantime, replacing the Boeing commercial airplane division CEO with a Boeing insider and finance person sends the wrong message to Boeing customers and partners.
