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April 17, 2024
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Editorial: Boeing – It is Time for a Leadership Change

I’ve hammered Boeing pretty hard editorially over the last few years, and this editorial will be no exception.

There have been too many events at Boeing that should never happen that continue to happen concerning quality and safety. That is unacceptable. The current CEO, David Calhoun, has been a part of the Boeing culture for over a decade, first as a Board Member and later directing that culture as CEO. It is time for new leadership and a new culture at Boeing.

The leadership and board focus on the wrong audience – investors don’t buy airplanes. A single head won’t send the message to the disillusioned shop floor. It’s time for a clean slate.

Let’s look at the most recent incident with the Alaska Airlines AS1282 Boeing MAX 9 flight, focusing on Boeing’s reaction to the findings. The company held an all-hands meeting with a teary CEO imploring employees to do better.

That doesn’t work and doesn’t change the culture at Boeing. That culture, introduced after the McDonnell-Douglas merger, brought the same culture that forced McDonnell-Douglas to exit the commercial aircraft business and merge with Boeing. With a larger installed base and aftermarket revenues, Boeing is taking longer to fail than McDonnell Douglas but is on the same trajectory. Richard Aboulafia asked this question back early in 2021.

What should the reaction to Alaska 1282 have been? Since aircraft OEMs keep records of employees who complete tasks and those who inspect tasks for each aircraft built, it should not be hard to isolate which employees are responsible for tightening and inspecting those loose bolts found on the aircraft. These employees should be immediately fired for cause, indicating the seriousness with which the company needs to enforce safety. Actions speak louder than tears, and Boeing needs to fire those employees and their supervisors and managers publicly.

Boeing has three major product families: the 737 MAX, the 787, and the 777X. Each has been troubled since its inception, and Boeing is not out of the woods, with continuing quality issues and development delays. A fourth program, the MoM, was needed to remain competitive. Boeing management vacillated on launching the program, enabling Airbus to capture virtually all of that market with new A321 variants. We estimate this MoM vacillation cost Boeing nearly $30Bn. Boeing is failing across the board, including its military tanker based on the 767 built by the commercial division.

Grounding an aircraft for safety issues is rare. I’ve seen the DeHavilland Comet, Lockheed Electra, Douglas DC-10, and Concorde grounded for major safety issues. We’ve recently added the Boeing 737 MAX (twice) and the 787 to that process, with additional production stoppages to fix quality issues on already-built airplanes for both types. Typically, these issues occur about once every 20 years. But with Boeing, we’ve had three in the last dozen years. That is unacceptable quality and an unenviable track record that includes 346 fatalities.

We and others have written extensively on Boeing’s cultural issues. But the bottom line is that David Calhoun hasn’t been able to change the culture and that failure will lead to continuing safety issues at Boeing. There needs to be active leadership on safety and finding the root causes of the problem. One of those problems has been management failing to understand the true safety costs, cutting corners that result in ten to a hundred times more expensive failures.

Managing the share price has been one of the cornerstones of the Jack Welch School of Management, from which many Douglas and Boeing executives graduated. Unfortunately, it has been proven not to work, and Boeing is a prime example of how cultural change took a once successful company down the road toward failure. David Calhoun is a product of the GE and Boeing cultures that are a part of the problem rather than a part of the solution.

Tears and promises that it won’t happen again, without direct action to find and expose problems with full transparency, can no longer be tolerated. There are only so many times that being told this will never happen again can be said without losing credibility. Boeing is now well beyond that point.

The competitiveness of the US aerospace industry and supply chain is on the line, as each new Boeing problem reflects poorly on the FAA and threatens the international reciprocity system. International sales will break down when international regulators no longer trust the FAA to supervise Boeing appropriately, as in China.

The FAA will hammer Boeing by requiring a third party to fix and manage its quality system. That’s likely to impact Boeing’s margins and stock price significantly. As AerCap CEO Aengus Kelly said this week, this should be the second priority. Quality must come first. Boeing appointed retired Admiral Kirkland H. Donald will lead an independent review of the quality management system, on which it has taken steps since 2020. But that’s not enough.

It is time for David Calhoun and the board to step down from their leadership role. Mr. Calhoun is the wrong person for this job at the wrong time.

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President AirInsight Group LLC

3 thoughts on “Editorial: Boeing needs a leadership change

  1. I couldn’t agree more with this article. I was a Boeing employee for 38 1/2 years and I retired late 2010. It is sad to see what is happening to Boeing over the past 10 years. I have been writing to my friends over the past couple of weeks that Boeing needs to terminate some employees to send all the employees a message that doing the job right the first time is why they are being paid and in the airplane industry, safety has to be a very high priority. I have also told my friends that Boeing needs to remove the CEO and CFO who were both former GE employees where profit and share hold value were king. That doesn’t work well in a company like Boeing where they have long term products that will provide profits over a long period of time. I have also told my friends that there are too many former McDonnell Douglas employees in high level positions who are short term profit managers. They also need to be removed. Boeing needs to hire back Pat Shanahan, who is an engineer and put an engineer back in the CEO seat.

  2. As a former engineer and manager in both defense and commercial I completely agree with some of your comments but not fully your solution. I couldn’t take it anymore, same issues no leadership so I left. My opinions of issues that plague Boeing.

    1) former GE execs and managers have infected the Boeing culture with the Jack Welsh BS. They were never truly bought into Boeing and building high quality airplanes.

    2) the fox guards the hen house. Production leadership runs the program. Quality division is pressured immensely and isn’t independent enough or have enough teeth to make change.

    3) Quality is more a talking point than action. The old timers would say how QA could shut down the line if a major escape happened, I never saw that kind of power. The focus was solely on schedule. Quality division should be completely independent of both military and commercial divisions answering to the CEO not program VPs or division CEOs.

    Engineering did its own QA, I think they need oversight, may have prevented tearing apart a bunch of 787s. It’s embarrassing!

    4) Middle management is the problem not senior leadership, even though I’m not a fan of Calhoun, removing just him won’t make the culture change needed. I’ll say Mullenberg was an excellent leader and a much better CEO than the previous CEO occupant who did nothing. Dennis got canned but it didn’t change culture as you point out. They also need to stop putting a major focus on hiring middle managers from the Tauber program, most have a great education but not the experience needed to lead at a high level. They also need to scrap hiring practices that put inexperienced people in significant leadership positions. There was an appearance that some were put in their role because of political reasons rather than merit. For example an employee goes from college grad engineer to VP in 10ish years doesn’t seem right nor was it right. How many middle managers were fired for any of these program issues? None that I know of.

    5) selling off capability eg. Boeing production sites, most notably Wichita and the worst business deal in Boeings history that created a single source supplier Spirit, is a major and probably a bigger problem than culture within Boeing. The many years I was there and dealt with Spirit, nothing changed because they knew Boeing couldn’t go to anyone else. They’d fix an issue for awhile but they were always a quality problem. Maybe with Shanahan at the helm things will get better but I doubt it.

    I believe this plug is installed by Spirir not Boeing.

    6) the defense side was always run much better with high quality probably because they had more scrutiny from DCMA.

    7) there was an unhealthy focus on eliminating inspections.

    8) COVID took a toll on employment. A tremendous amount of knowledge was lost with mass employee and management turnover. Elimination of the pension (even though I think they are a major burden) contributed to this loss too.

    9) moving the corporate HQ to Chicago was a major mistake, they (senior leadership) were disconnected from the action.

    I loved being a part of Boeing overall a great American company and want pride to be restored but it will take a major shakeup to make that happen.

    My 2 cents from nearly 20 years in the grind.

  3. All valid points in the article and the comments above. I will add an additional chapter that has yet to be mentioned however. In late 2020, due to their cash-poor position and the dramatic revenue loss impacts of the pandemic, Boeing pushed a Voluntary Layoff (VLO) opportunity out to the masses. The actuarial justification was to significantly reduce payroll and improve cash flow. Since an earlier VLO issued in April 2020 didn’t bring home enough financial benefit to the bottom line, the later VLO was aimed at executives as well. No less than 75 Directors, Sr. Directors, and Vice Presidents took them up on their offer and separated from the troubled company. At the time, the FAA Directorate was very concerned regarding the cumulative amount of aircraft leadership walked out the door on that first weekend in December. Could it be that, in addition to saving a ton of payroll, Boeing also suffered greatly from the overnight removal of so much cultural experience?

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