Historical Stock Chart
From Jun 2019 to Jun 2020
David Calhoun brings experience to manage company's response to 737 MAX turmoil
By Andrew Tangel, Alison Sider and Miriam Gottfried
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 15, 2019).
Boeing Co.'s boardroom shakeup puts David Calhoun, a powerful behind-the-scenes figure, in position to control the aerospace giant's response to the 737 MAX crisis, one of the most fraught episodes in the company's history.
Senior officials at some Boeing customers said they found the move to appoint Mr. Calhoun chairman, unveiled Friday, reassuring amid the MAX's prolonged grounding following two deadly crashes. They said his experience in the industry and handling other challenging situations should help the Chicago plane maker navigate the turmoil as it tries to restore public confidence.
It won't be easy. Boeing faces unrest from airlines losing money because of a flight ban that regulators won't lift until they approve fixes to a flight-control system implicated in the crashes that claimed 346 lives. The MAX's expected return to service has faced repeated delays, and its U.S. operators -- Southwest Airlines Co., American Airlines Group Inc., and United Airlines Holdings Inc. -- don't expect to fly passengers on the aircraft until January. Boeing is weighing whether to further cut or temporarily halt production at its Renton, Wash., factory as finished planes pile up.
Mr. Calhoun, 62 years old, has confronted other major corporate crises. Now an executive at the New York private-equity firm Blackstone Group Inc., Mr. Calhoun previously ran General Electric Co.'s airplane-engine business during the 9/11 terrorist attacks and ensuing downturn in the airline industry. He is credited with turning around the fortunes of Nielsen Holdings PLC when he was the market-research and measurement company's chief executive. He later became chairman of Caterpillar Inc.'s board weeks after federal agents raided the heavy machinery maker's Illinois headquarters.
Directors and executives who have worked with him say his experience and style will help Boeing overcome its problems. Inside boardrooms, Mr. Calhoun's personality looms large. People who have worked with him describe him as an intelligent, pragmatic and disciplined leader with little patience for managers who don't meet their goals. They also say he can be opinionated and at times brash, but skeptical when probing management.
"He's someone who is not going to get BSed," said Bill Daley, who served with Mr. Calhoun on Boeing's board until 2011 when he left to become White House chief of staff.
Boeing's directors had opposed splitting the chairmanship from the chief executive job, dually held by Dennis Muilenburg for about four years. But pressure has been building on the board ahead of Mr. Muilenburg's expected appearance at a congressional hearing in Washington, D.C., later this month and as reviews of the MAX have faulted Boeing.
Messrs. Muilenburg and Calhoun showed no signs of tension in September when they attended a private retreat for top aerospace executives in Wyoming called Conquistadores del Cielo, Spanish for conquerors of the sky, people familiar with the matter said. Friday's move followed internal discussions about whether to hold executives accountable, a person briefed on the matter said.
Mr. Calhoun, a board member since 2009, also had a role in the manufacturer's decision to launch the MAX's development in 2011, and its responses to both fatal accidents. After the first MAX crashed in Indonesia on Oct. 29, 2018, Boeing vouched for the safety of the plane's design, highlighted missteps by pilots and mechanics, and began working to fix the suspect flight-control system while the aircraft kept flying. The second MAX crashed in Ethiopia in March, and regulators soon grounded the aircraft.
A person close to Mr. Calhoun said: "He'll continue to push the company to own up totally to its problems."
Mr. Calhoun declined to comment for this article. On Friday, he said in a prepared statement that the board had full confidence in Mr. Muilenburg as CEO. The company said the split would allow Mr. Muilenburg to better focus on running the business and safely returning the MAX to passenger service -- a goal that has faced repeated delays.
Boeing also said Friday that it would review recommendations made in a report by a group of international aviation regulators and safety experts that faulted the design, testing and certification of the MAX. Mr. Muilenburg has previously defended the aircraft's development.
People familiar with Mr. Calhoun's work at Boeing describe him as generally more cautious than Mr. Muilenburg when it comes to production levels and plans to launch a new midsize aircraft. After the MAX's grounding, the company cut 737 production from 52 planes to 42 planes a month. Mr. Muilenburg signaled in July that Boeing planned to ramp up monthly production to 57 planes next year.
Boeing's board comprises a mix of various current and former chief executives and former government officials, but among them Mr. Calhoun is regarded as having the deepest aviation experience.
"He knows the industry cold. He knows the customers. He knows everyone," said Hamilton "Tony" James, who is executive vice chairman of Blackstone, where Mr. Calhoun heads a unit overseeing operations at the firm's portfolio companies and serves on its management committee.
James Albaugh, who retired as chief executive of Boeing's commercial airplane division in 2012, a year after it started developing the MAX, describes Mr. Calhoun as a straight shooter.
The MAX isn't the only source of Boeing's current troubles. Its commercial airplane division has suffered other recent setbacks, including engine issues with an update to its popular 777 long-haul plane. The commercial division is run by Kevin McAllister, a fellow GE alum of Mr. Calhoun's.
Some airline executives who worked with Mr. Calhoun in his GE days recall a creative deal maker with a customer focus. "He's good at solving problems and taking care of customers," said David Neeleman, who as JetBlue Airways Corp.'s chief executive worked with Mr. Calhoun to hammer out the airline's 2003 acquisition of some Embraer jets with GE engines.
In his dealings with Delta Air Lines Inc., Mr. Calhoun would regularly reach out to solicit opinions, said Ray Valeika, the carrier's former head of engineering and maintenance.
Mr. Calhoun rose through the ranks of GE in his two decades under Jack Welch, heading the company's powerful internal audit group and subsequently landing key roles in running the plastics division, transportation business and its insurance operations. In his memoir, Mr. Welch described Mr. Calhoun as a skilled golfer who sometimes would play an extended 54-hole rounds with the storied CEO.
"He is decisive, and he makes the tough calls. Yes or no, he is not a maybe guy," said Mr. Welch on Monday.
Mr. Calhoun took the reins of GE's aviation business in 2000 at just 43 years old. He was initially on the original list of 24 candidates that GE assembled in 1994 as possible successors to Mr. Welch but didn't make the cut.
On Sept. 11, 2001, Mr. Calhoun found himself stranded in Seattle with then-GE CEO Jeff Immelt, who was just days into the job. The executives were there for Boeing, speaking at its aerospace conference and meeting with customers. The pair watched the terrorist attacks unfold on television.
A global response grounded hundreds of planes that GE leased to airlines. It would take years for air traffic to return to pre-9/11 levels. Under Mr. Calhoun, GE helped carriers adjust to the downturn, providing financial support by deferring customer payments and advancing $5 billion in direct financing to the airlines.
Mr. Calhoun had long been viewed as a contender for top corporate jobs. In 2005, The Wall Street Journal reported that industry officials cited him as a potential candidate to lead Boeing as CEO. The next year he left GE as vice chairman, essentially the highest role in the company under the CEO.
As Caterpillar chairman, Mr. Calhoun pushed the company to boost profit margins by focusing on selling parts and services, people familiar with the matter said. He eventually ceded the Caterpillar chairmanship back to the company's CEO, and remains Caterpillar's presiding director.
--Thomas Gryta, Andy Pasztor and Daniel Michaels contributed to this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com, Alison Sider at email@example.com and Miriam Gottfried at Miriam.Gottfried@wsj.com
(END) Dow Jones Newswires
October 15, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.