Boeing CEO Dave Calhoun to step down in leadership shake-up

Eleven weeks after a door-sized panel exploded off an Alaska Airlines 737 MAX in midair, the loss of public confidence and reputational damage to Boeing triggered a seismic shake-up in the company’s top leadership Monday.

Appointed in crisis four years ago and struggling to manage a series of deep shocks ever since, Boeing CEO Dave Calhoun will step down at the end of the year, the top line in the major leadership shift.

In addition, Stan Deal, CEO of Boeing Commercial Airplanes unit, is ousted. He’s retiring from the company and is replaced with immediate effect by Stephanie Pope who in January was promoted to be the company’s chief operating officer.

Also, Boeing Board Chair Larry Kellner, on the company board for 13 years and chair since 2019, announced he won’t stand for reelection at Boeing’s annual meeting later this Spring.

Qualcomm CEO Steve Mollenkopf, who served on the board of directors since 2020, will replace Kellner, and lead the search for a new CEO.

Deluge of bad news

Late last week, the writing seemed to be on the wall for Calhoun when major U.S. airline leaders — Boeing’s top customers — signaled a loss of confidence in his leadership by asking for a meeting this week with Boeing’s board without him present.

On Monday, the news was welcomed by industry observers as inevitable given the deluge of bad news from Boeing since the beginning of the year.

In a statement Monday, Rep. Rick Larsen (Everett — D), the lead Democrat on the House Transportation & Infrastructure Committee, said “Boeing’s new leadership team must work hard to earn back the trust of its customers and the flying public.”

“That starts with Boeing getting back to its roots as an engineering company and away from its multi-decades focus of being a financial services company,” Larsen said. “The women and men who work at Boeing need leaders who match their commitment to safety and quality.”

Veteran aviation analyst Adam Pilarski of consulting firm Avitas — who in late January predicted with “high probability Dave Calhoun will not survive long as CEO” — said in an interview that replacing Calhoun is critical for Boeing’s future.

“Getting rid of Stan [Deal] is I think secondary. He was not driving Boeing. He was a bureaucrat who had to run his division,” Pilarski said.

While it’s true, he said, that Calhoun had no control over the disastrous impact of the COVID pandemic on the industry, the CEO failed to act where he could have done more.

“I think the criticism that Boeing thought too much about financial metrics, not operational details and not the work culture, yeah, I think he deserves some of the blame,” Pilarski said. “He definitely wasn’t the hands-on leader that can motivate and inspire people.”

Pilarski also welcomed the departure of board chair Kellner, who was CFO of a bank before entering the aviation industry as CFO of Continental then ended his career as CEO of that airline.

“He is 100% a financial guy,” Pilarski said.

Another longtime aviation analyst, Richard Aboulafia of AeroDynamic Advisory, has called publicly for Calhoun’s ouster since last year.

“I’m deeply happy about the news,” Aboulafia said in an interview Monday. “It’s going to be a long road back, but at least they’re on the right path.”

Aboulafia added that Deal’s ouster was needed too because he didn’t show enough leadership.

“Whether it’s manufacturing culture, whether it’s product strategy, whether it’s company strategy, whether it’s labor relations, every aspect of [Deal]’s tenure was marked by complacency,” he said.

In a statement, Ray Goforth, executive director of Boeing’s white-collar union, the Society of Professional Engineering Employees in Aerospace, said “the problems in Boeing’s executive suite are systemic.”

“Nothing is going to change for the better without Company leadership acknowledging their failures and thoroughly committing to fixing them,” he said.

Jon Holden, president of the International Association of Machinists District 751, in an interview said Boeing workers “have been frustrated for quite some time. And we had hoped we were turning a corner.”

“It’s important to us that the next leaders, whoever they’re going to be, will prioritize quality and safety with the production system,” he said. “We have a lot at stake; the community has a lot at stake.”

Holden said the IAM will therefore seek a seat on Boeing’s board in its current contract negotiations.

“Whoever leads this company should have a broad clear understanding of the production system, the quality management system, so that we can focus on the foundation of building airplanes and ensure that we’re doing it safely, ensure that the quality of the products we deliver are top notch,” Holden said.

Boeing shares rose Monday on news of the leadership changes, closing up $2.53 or 1.3% at $191.38

Intense pressure

Calhoun in a letter to employees Monday called the Alaska Airlines Flight 1282 accident “a watershed moment for Boeing.” Yet even as he announced the looming end of his tenure, he struck an optimistic tone for the future of the company.

“The eyes of the world are on us, and I know that we will come through this moment a better company,” Calhoun wrote. “We are going to fix what isn’t working, and we are going to get our company back on the track towards recovery and stability.”

Calhoun became Boeing CEO in January 2020, replacing Dennis Muilenburg, who was fired in the aftermath of the MAX crashes.

“It has been the greatest privilege of my life to serve Boeing,” Calhoun told employees.

Boeing has been under intense regulatory scrutiny and legal pressure after a series of high-profile technical issues that brought the quality of its manufacturing into question.

The Alaska Airlines accident on January 5 renewed concern that the quality lapses had become a threat to the safety of the flying public.

A federal investigation by the National Transportation Safety Board and a grand jury investigation by the Department of Justice are looking at the cause and assessing what the consequences should be.

In the meantime, the Federal Aviation Administration, which after the fatal 737 MAX crashes was already tracking Boeing’s performance, cracked down with an order that Boeing postpone its planned production ramp-up while its manufacturing and quality systems undergo a strict audit.

Interviewed on CNBC Monday morning, Calhoun said the FAA will be at Boeing throughout this week, going through a a 30-day plan to get control of the quality management system, with the auditors returning each month for another assessment.

“We’re going to have to demonstrate progress in each one of those moments,” Calhoun said.

A possible successor

The delay in Calhoun’s departure seems to leave a pathway for one potential candidate to succeed him: Pat Shanahan a former top operational executive at Boeing who was appointed in the fall to take over the company’s troubled major supplier Spirit AeroSystems of Wichita, Kan.

On CNBC, Calhoun said the negotiations under way for Boeing to acquire Spirit — bringing that operation back in-house, two decades after it was sold off to a private equity firm — are “making progress” and that a deal could come “soon.”

Spirit makes the entire fuselage of the MAX and the forward fuselage and cockpit of every Boeing commercial airliner.

Calhoun said undoing that outsourcing move is the only way to get control of productionand stem the flow of unfinished fuselages coming from Wichita that have caused out-of-sequence work and quality lapses in the Puget Sound area factories.

Already, “some pretty dramatic actions have been taken,” Calhoun said. “I think Pat [Shanahan] is doing a fantastic job down there in responding to the aftermath of Alaska Air.”

Pilarski of Avitas said Shanahan would be “an inspired choice.”

Shanahan, who left Boeing to serve as Deputy Secretary of Defense under President Donald Trump, was known as a very hands-on operational leader.

Along with Carolyn Corvi, he successfully led the transformation of 737 production in Renton into a moving line in the 1990s and then finally fixed the serious production issues that delayed introduction of the 787 Dreamliner in the Everett widebody jet plant.

Pilarski has a model airplane given to him by Shanahan, signed, “to Adam, from the guy who put Humpty Dumpty together again,” meaning the 787.

Shanahan was known at Boeing as a taskmaster, demanding results.

“He is not an easy person to work for. But he obviously he knows his stuff. He knows Boeing. And he knows operations,” said Pilarski. “I would not want to work for him, but keep him in very high regard.”

The next CEO, whoever it may be, must decide on the launch of a new airplane, a decision critical to Boeing’s future and, depending on where it will be built, to the future of aerospace manufacturing in this region.

Pilarski particularly criticized Calhoun’s public declarations that Boeing won’t be launching an all-new jet for years.

The analyst said while he understands that was a message to comfort shareholders — who would worry about the financial impact of Boeing embarking on a giant investment project — he considers it tantamount to telling the industry and Boeing’s own employees that they don’t have a future.

On CNBC Monday, Calhoun said his successor needs to be someone “who knows how to handle a big, long cycle business like ours.”

“It’s not just the production of the airplane. It’s the development of the next airplane,” Calhoun said. “That will all happen on that next watch. So I would like somebody who clearly has the experience inside our industry.”