Boeing Inc is finally on the right track, but it needs a lot more urgency to restore the faith of customers and investors.
The beleaguered planemaker said on Monday that it was cleaning house, an announcement that came after its airline customers met with the board of directors last week. Airline leaders obviously conveyed that they no longer had confidence that Chief Executive Officer Dave Calhoun and Stan Deal, the chief of commercial airplanes, could mount a turnaround at the 108-year-old company.
While Deal is retiring immediately and Chairman Larry Kellner will not stand for reelection, Boeing said it would keep Calhoun on until the end of the year while it searches for a successor. This is way too much time to leave an already reeling company in limbo.
Boeing had been struggling with serious quality issues dating back to the two tragic crashes of the 737 Max, but the final straw came when workers failed to put the bolts on the fuselage panel of an Alaska Airlines Inc aircraft. That panel, the size of an aircraft door, blew off midair during a flight on Jan. 5, stunning the aerospace industry after so many pledges by Calhoun and Deal that their focus was on reviving high-quality production. Then a scathing audit of Boeing and its suppliers by the Federal Aviation Administration spurred Airline CEOs to take action.
Calhoun said the right thing in a memo to the company’s staff: “We also must inculcate a total commitment to safety and quality at every level of our company.” What was missing was any acknowledgment that he might have been part of the problem. What is certain is that Boeing cannot afford to drag out the succession until the end of the year. The incoming chairman, Steve Mollenkopf, and the rest of the board need to move more quickly and find an experienced turnaround artist well before the end of December.
The timing for Boeing’s start of its CEO search may be impeccable. Larry Culp, who deserves to be heralded for rescuing General Electric Co, will have completed the heavy lifting of his work next week with the spinoff of GE Vernova, the energy unit of the iconic industrial company that Culp broke into three parts. When Culp took over as CEO of GE in 2019, it seemed as if the industrial giant was sinking under huge debt with little hope of rescue. After paying down more than $100 billion of debt and applying Culp’s continuous improvement philosophy to drastically improve factory operations, the GE companies are now on firm footing.
Culp spun out GE’s health-care business at the beginning of last year, and the stock has climbed more than 50 percent. That will leave this prominent turnaround artist to run GE Aerospace, which is arguably the healthiest part of the legacy GE empire.
Culp, 61, would be uniquely qualified to take control of Boeing and to return the planemaker to its position as the world’s top aircraft company. He successfully built a little know Danaher Corp. into a huge life sciences company with a current market value of $183 billion while spawning industrial spinoffs such as Fortive Corp. While resurrecting GE, he gained valuable aerospace industry experience.
Boeing would have to pay up for Culp to leave GE Aerospace. He could be enticed by the challenge. Certainly, if Culp could fix Boeing after the magic he worked at GE, he would be on the short list of the greatest American business leaders.
While Culp is the most obvious candidate, a dark horse is Dave Cote, who turned around a floundering Honeywell International Inc at the turn of the century. After retiring from Honeywell, Cote then founded Vertiv, a hot stock right now because it makes supplies for data centers.
Cote knows the aerospace industry from his days at Honeywell, which supplies myriad aircraft components including jet engines and cockpit controls. The only drawback is that Cote is 71 and in semi-retirement as chairman of Vertiv. He could be a tough sell. When asked if he would be willing to step in and run Boeing, he replied succinctly in an email: “Nope!”
The bottom line is that Boeing needs to move fast to bring in a strong candidate to right the ship. It can’t afford a drawn-out transition, certainly not until December. The company would benefit from a new CEO with experience turning around a troubled company — someone like Culp or Cote.
Thomas Black is a Bloomberg Opinion columnist. Views do not represent the stand of this publication.
Credit: Bloomberg
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