Boeing faces questions on firing CEO

2019-12-25 08:35:52China Daily Editor : Li Yan ECNS App Download

Plane-maker still must strive to restore its credibility, despite boost to stock

Boeing's firing of Chief Executive Officer Dennis Muilenburg is a needed first step in restoring the company's credibility, as reflected by the market's favorable reaction on Monday, yet it raises questions about top management's long-term strength in a competitive field, analysts said.

Muilenburg's tenure was a public relations disaster for Boeing after two crashes of the 737 Max killed a total of 346 passengers and crew. He was overly optimistic about the recertification schedule, leading airlines to believe the jet would return to service this year. He also initially mishandled hostility directed at him by family members who lost loved ones in the crashes, critics charged.

Boeing Chairman David Calhoun will become Boeing's new CEO on Jan 13. He is a former senior managing director and head of private equity at the Blackstone Group and former chairman of Nielsen Holdings, a marketing and media information company. Muilenburg is an aerospace engineer.

Investors cheered Muilenburg's departure. Boeing's stock rose as high as $340.58 a share in intraday trading and closed on Monday at $337.55, up 2.91 percent.

"If the market, Congress and the Federal Aviation Administration view Muilenburg as the face of the problem, then today's action at least changes the face," Robert Mann, president of R.W. Mann& Co, an aviation consulting firm in Port Washington, New York, told China Daily.

"Short term, this is an olive branch. But it appears to be the end of engineers on the Boeing board of directors for now. Given the nature of the company in its commercial aviation, defense and space roles, I don't know that a well-intentioned board made up of accountants and lawyers has the skills to be informed decision-makers."

James Hall, managing partner of Hall& Associates in Washington and former chairman of the National Transportation Safety Board, said Monday's action was long overdue.

"Boeing needs to reset the table and put safety first," he told China Daily. "The whole thing was blown when Boeing lobbied Congress to self-certify the Max. There were a lot of missteps before Monday's announcement."

Development of the Max was announced in 2011. The first test flight was completed in January 2016 and the plane entered commercial service in March 2017. Muilenburg joined Boeing in 1985 as an intern before graduating as an aerospace engineer from Iowa State University a year later. He became CEO in 2015. He quickly signed long-term labor deals, worked on a pension deficit and boosted slowing sales in the company's defense division.

"I don't think Muilenburg has done a bad job," John Cochran, president and CEO of Eaglemark, an aviation consulting firm and former professor of aerospace engineering at Auburn University, told China Daily.

Strategic plans

"The immediate fix is a software update for MCAS, but based on what I know now, the problem began when Boeing decided to use different engines on the Max. Boeing has strong strategic plans and lessons learned here will be put to use in the future. Boeing will go through a difficult phase-perhaps for years-but the company will definitely survive." MCAS refers to the Max's software system designed to detect and reverse incorrect upward pitch; its malfunctioning is believed to have caused the two crashes.

Competitive factors may have played into the crashes. Before Boeing introduced the Max, American Airlines, for more than 10 years one of the manufacturer's best customers, had said it was close to buying several hundred planes from European rival Airbus.

Boeing knew it had to act aggressively and quickly to preserve market share, so it abandoned plans for an entirely new plane because design, testing and certification by the Federal Aviation Administration, or FAA, and other national regulators could take as long as 10 years. To remain competitive, Boeing updated an existing plane, the NG.

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