Last week, days before his ouster at Boeing CEO, Dennis Muilenburg sat for an interview with the Wall Street Journal, which quoted him as follows: “We’ve been humbled by these two accidents. We’re making changes to our company, and I’m changing as a leader as well.”
Too late, his board decided over the weekend. Monday, it announced what it called Muilenburg’s resignation, but in the next breath made it clear his departure wasn’t voluntary. He had to go, the board said, so Boeing can repair its relationships with regulators, customers and suppliers.
It’s the main job for the Chicago-based company, reeling from two crashes of its 737 Max jet that killed 346 people. Investigators blame the crashes on faulty sensors that caused the flight control system to push the plane’s nose down. The pilots were unable to regain control.
The damage to Boeing’s reputation was severe. But many say Muilenburg made it worse with a pattern of denying or shifting blame, at one point suggesting the pilots were at fault. That could point to broader problems with Boeing culture.
Internal company documents surfaced showing its top ranks had concerns about the flight control systems. Then, as he worked for regulatory approval to get the planes flying again, Muilenburg overpromised on the timing, causing chaos for the Max’s 900 suppliers. His bravado angered the Federal Aviation Administration and the airlines, which Boeing now is compensating over-delayed flights. There may be years of litigation with victims’ families.
Muilenburg is out immediately and will be replaced Jan. 13 by David Calhoun, the company’s current chairman, who will depart outside company boards in the meantime. Boeing said Chief Financial Officer Greg Smith will be interim CEO. Board member Lawrence Kellner, a former Continental Airlines CEO, will become non-executive chairman. The company declined to make executives available for interviews.
“The handling of the crisis was viewed as getting a bit out of control, so the firing wasn’t a major shock,” said Richard Aboulafia, vice president of analysis at the aviation and defense consultancy Teal Group. “David Calhoun will be a better communicator, and should present a better outside image for Boeing, with Congress and with regulators, suppliers, and customers, which will help stabilize the company’s situation.”
But Aboulafia said Boeing ultimately may need another CEO. Calhoun’s background “is private equity and Jack Welch-era GE. For years, top Boeing executives have come from that background, and it might be the wrong approach for an engineering company seeking to restore its program management and new product development capabilities.”
Joseph Schwieterman, professor at DePaul University and a transportation expert, said he thought Boeing might stick with Muilenburg at least until the 737 Max got back aloft. He said Boeing must set a realistic timetable for the plane’s return and make sure it can do so for the peak summer travel season.
“The Max has been a protracted soap opera and Boeing can’t afford for that to continue,” Schwieterman said. He said it also must quickly compensate its stakeholders.
“Customers feel they have been misled. The final straw has been the loss of orders by key airlines,” he said. Competitor Airbus has gained business in the meantime.
The Max was grounded worldwide after the two disasters — one in October 2018 off the coast of Indonesia, the other in 2019 in Ethiopia. Boeing has come under fierce criticism on Capitol Hill and elsewhere over the design and rollout of the jetliner.
Last week, the crisis inside the company deepened when Boeing announced it will suspend Max production in January. And in another stinging setback for the aerospace giant, Boeing’s new Starliner space capsule went off course Friday during a bungled unmanned test flight to the International Space Station.
One thing that might have kept Muilenburg in good stead with his board, despite the crisis, was the company stock price. He took over the mid-2015 and it had nearly tripled by spring 2019, as Boeing squeezed much higher profits from sales that rose only modestly. Shares have fallen this year on fears about Max orders, but rose almost 3% Monday on the Muilenburg news.
Critics said Boeing’s focus on profits and speedy production timetables compromised safety.
U.S. Rep. Jesus Garcia (D-Ill.), a member of the Transportation committee, emphasized that point, saying Muilenburg’s “relentless focus on stock price and the company’s bottom line negatively affected employee performance. He did everything to drive profits over safety. He eluded regulations at every corner and even his employees admitted to lying to the Federal Aviation Administration.
“Either Mr. Muilenburg didn’t realize Boeing had a defective plane — which demonstrated gross incompetence and negligence — or he knew he had a defective plane but still tried to push it to market, in which case it is just clear corruption.”
U.S. Rep. Dan Lipinski (D-Ill.), another Transportation committee member, said: “Dennis Muilenburg was not solely responsible for what happened at Boeing, but I am hopeful that this move reflects an understanding at the company that things must change. Safety must always be the top priority for Boeing.”
Ababu Amha, who lost his wife, an Ethiopian Airlines flight attendant, in the 2019 crash, welcomed Muilenburg’s departure but said it wasn’t enough. “They should further be held accountable for their actions because what they did was a crime,” he said.
“The company appears to have known about safety issues for quite some time,” said Tim Hubbard, a professor of management at the University of Notre Dame’s Mendoza College of Business.
“This indicates that there might be more fundamental cultural issues at the company.”
Contributing: AP, Lynn Sweet