Boeing has named Robert “Kelly” Ortberg as its new CEO, effective August 8. Ortberg, who previously led Rockwell Collins, takes over from Dave Calhoun, who is stepping down amid a series of legal, regulatory, and production issues that have plagued the company. Boeing’s recent financial report reveals a staggering $1.4 billion core operating loss for the second quarter, more than triple last year’s loss. This financial strain highlights the company’s ongoing struggles with safety and quality concerns, which have hampered its ability to produce enough aircraft and return to profitability.
Ortberg’s Commitment and Background
Ortberg expressed his deep respect for Boeing’s legacy and his commitment to addressing the company’s current issues. “Boeing has a tremendous and rich history as a leader and pioneer in our industry. I’m honored to join and work with the 170,000 dedicated employees to uphold this tradition, with safety and quality as our top priorities,” Ortberg said. His engineering background may be seen as a positive shift, as he holds a degree in mechanical engineering and began his career at Texas Instruments before moving to Rockwell Collins. His experience is expected to bring a renewed focus on engineering excellence at Boeing.
Facing Persistent Issues
Despite Ortberg’s impressive credentials, his appointment does not automatically resolve Boeing’s ongoing problems. Calhoun’s term saw a focus on financial issues rather than engineering challenges. His predecessor, Dennis Muilenburg, faced criticism for his role in the 737 Max crisis, which involved two fatal crashes and a prolonged grounding of the aircraft. Ortberg’s experience at Rockwell Collins, especially during its integration into United Technologies, could be beneficial, but Boeing’s troubles are deeply rooted and complex.
Financial Woes and Ongoing Investigations
Boeing’s recent financial results reflect broader difficulties, with both its commercial and defense sectors reporting losses. Revenue fell short of Wall Street expectations, adding to the company’s financial woes. Investigations into Boeing’s safety practices and manufacturing quality are ongoing, intensifying the scrutiny on the company. Ortberg’s arrival comes at a crucial juncture, with hopes that his leadership will help navigate these turbulent times. Robert Clifford, an attorney for families affected by the 737 Max crashes, noted that Ortberg’s appointment might be key to restoring Boeing’s reputation and ensuring aviation safety.
Challenges Ahead
Ortberg faces the formidable task of turning around a company that has not posted a profitable year since 2019. Boeing’s total core operating losses now exceed $33 billion, with the latest quarterly loss surpassing analysts’ expectations. Restoring profitability will depend on convincing regulators that Boeing has addressed its safety and quality issues. The company has acknowledged design flaws in the 737 Max, which led to two fatal crashes and over $20 billion in related costs. Boeing has also agreed to plead guilty to defrauding the FAA during the 737 Max certification process and will be monitored by a court-appointed overseer.
Broader Issues and Setbacks
Beyond the 737 Max, Boeing is dealing with other setbacks. In January, a 737 Max experienced a critical failure shortly after takeoff, prompting renewed scrutiny. Whistleblowers have reported problematic practices at Boeing, including the use of non-compliant parts and retaliation against safety whistleblowers. The FAA has ordered Boeing to reduce 737 Max production until safety concerns are fully addressed, further impacting the company’s financial performance.
Defense Sector Struggles and Space Setbacks
Boeing’s defense sector also faces significant challenges, reporting a $913 million loss for the quarter, nearly double the previous year’s figures. The company’s Starliner spacecraft, which recently conducted its first crewed flight, encountered issues after docking at the International Space Station, leaving astronauts stranded. Additionally, Boeing is facing escalating costs related to its Air Force One contract, which has already exceeded $2 billion.
Market Reaction and Outlook
Following the announcement of Ortberg’s appointment, Boeing’s shares saw a slight increase, rising over 1% at the U.S. market open. However, the stock remains down 28% year-to-date. Ortberg’s leadership will be pivotal in addressing both immediate and long-term challenges, with the goal of restoring Boeing’s financial health and industry standing.
