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2 Months : From Sep 2019 to Nov 2019
By Andrew Tangel
Boeing Co.'s board stripped Chief Executive Dennis Muilenburg of his dual role as chairman on Friday in an unexpected shake-up at the highest ranks of the company amid the prolonged crisis of its 737 MAX plane.
Boeing said it took the action to allow Mr. Muilenburg to focus on running the company as it returns the MAX fleet to service after it was grounded world-wide in March following two fatal crashes in less than five months.
The leadership change came hours after a panel or air-safety experts sharply criticized Boeing and the U.S. Federal Aviation Administration for missteps that led to the crashes, which killed all 346 people on flights in Indonesia and Ethiopia. The report has added to criticism in Washington, D.C., where lawmakers are considering potential changes to aviation oversight.
David Calhoun, a senior Blackstone Group Inc. executive who has been the board's lead director, will become its chairman. The board has "full confidence in Dennis as CEO and believes this division of labor will enable maximum focus on running the business with the board playing an active oversight role," Mr. Calhoun said in a statement.
Getting control of the crisis proved challenging for Mr. Muilenburg, who is slated to testify before a House committee at the end of the month.
Mr. Calhoun, who previously served as chairman of Caterpillar Inc.'s board, has become increasingly assertive in recent months, according to people familiar with the matter. Mr. Calhoun joined Boeing's board in 2009 with prior aerospace experience, having at one point run General Electric Co.'s aircraft engine business.
The prolonged grounding of the MAX, the Chicago-based aerospace giant's best-selling jet, has disrupted the plans of airlines and passengers around the world. Boeing is considering additional cuts to production or temporarily shutting down MAX assembly at the Renton, Wash., plant where the airplane is built.
The manufacturer has faced repeated setbacks in getting the MAX flying again. An update to the MAX flight-control software to fix problems with the jet had previously been expected to gain FAA approval as early as April. The discovery of another potential safety risk has added to delays.
Boeing hasn't yet submitted the revised software for FAA approval amid scrutiny by aviation regulators, further pushing back the aircraft's return to passenger service.
Three U.S. operators of the MAX -- United Airlines Holdings Inc., American Airlines Group Inc. and Southwest Airlines Co. -- don't expect to resume flying passengers on the aircraft until early next year.
Mr. Muilenburg said he fully supported the board's move and that the team was focused on returning the 737 MAX safely to service.
Boeing's shares were little changed in aftermarket trading, but the biggest U.S. exporter has lost around $30 billion in market value since the Ethiopian Airlines crash in March.
Mr. Muilenburg will remain a director on the board. Boeing has been scrambling to adjust how it manages its projects in the wake of the crashes and said Friday it would add a new director to the board with "deep safety experience."
Last month, the plane maker said it would centralize control of engineering and safety practices, giving more control ultimately to Mr. Muilenburg. Top engineers throughout Boeing's sprawling commercial and defense units will report directly to the company's chief engineer rather than division chiefs.
The decision to split the chairman and CEO roles marks the biggest setback for Mr. Muilenburg, 55 years old, since he was named chief executive in 2015. He also became chairman the following March.
Mr. Muilenburg joined Boeing as an engineering intern in 1985 before graduating as an aerospace engineer from Iowa State University a year later.
He rose through the ranks to take charge of Boeing's defense business in 2009. The unit faced challenges, including an Army contract that was eventually canceled after running up more than $20 billion in costs. Most of the blame for those delays fell on the Pentagon.
After taking over from Jim McNerney as CEO in July 2015, Mr. Muilenburg focused on some weak spots in Boeing's sprawling operations. He secured long-term labor deals, addressed a pension deficit and reversed slowing sales at the defense unit. He also oversaw missteps including cost overruns in the military tanker program.
Mr. Muilenburg also faced a challenge when President Trump criticized Boeing for the cost of building the next Air Force One. He personally took on the effort to appease the president and turned him into an ally, hosting Mr. Trump for the first flight of its newest Dreamliner.
Boeing's military business also has battled persistent problems under Mr. Muilenburg. The U.S. Air Force has been unhappy with Boeing's performance on the multibillion-dollar KC-46A Pegasus refueling plane contract, complaining of quality problems. Boeing already has suffered more than $3 billion in losses on the project.
Boeing this year also encountered setbacks on its newest commercial airliner development program, an update to its popular 777 long-haul plane. Flight trials of the so-called 777X have been delayed for months because of engine issues, risking Boeing's plans to get the plane into customers' hands next year.
Earlier this year, Boeing shareholders rejected a proposal for an independent chairman following criticism of the company's response to the two 737 MAX crashes. The push for an independent chairman was rejected by 66% of shares. The 34% vote in support of the proposal compared with a 25% favorable vote for a similar measure last year.
After an April shareholder meeting, Mr. Muilenburg didn't respond directly to questions about whether he had considered resigning. "I am very focused on safety," he said.
The aviation regulators' report on Friday prompted calls by lawmakers for more answers about how Boeing designed the 737 MAX.
Sen. Richard Blumenthal (D., Conn.) said Congress should call Boeing directors to explain how they have overseen Boeing's top executives.
"Members of the board should be among the witnesses and they should be asked, 'What have you done to attribute responsibility and hold management accountable?'" Mr. Blumenthal said in an interview.
--Robert Wall contributed to this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
October 11, 2019 20:37 ET (00:37 GMT)
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