A new CEO took over the reins of Boeing on Thursday. He began by touring the factory near Seattle that has become the center of the aviation giant’s problems.
Robert “Kelly” Ortberg takes the helm of a loss-making company that has pleaded guilty to conspiracy to defraud, is struggling to get its aircraft manufacturing process in order, and is unable to bring two astronauts home from the International Space Station due to defects in a spacecraft built for NASA.
“I’m excited to get started!” Ortberg told employees on his first day of work.
Boeing announced Ortberg’s selection just over a week ago, the same day the company reported another huge loss: more than $1.4 billion in the second quarter, which was marked by a sharp decline in deliveries of new aircraft, including the 737 Max.
The National Transportation Safety Board just concluded a two-day hearing on the 737 Max, which was the result of a side panel on the plane bursting during an Alaska Airlines flight in January. The panel’s investigators interviewed workers at the 737 factory in Renton, Washington, who say they are under too much pressure to produce planes quickly, leading to defects.
During the hearing, a Federal Aviation Administration (FAA) executive said the regulator had 16 open enforcement actions against Boeing – three to four times the usual number – and half of them had been initiated since the doorstop burst.
Ortberg, an outsider, will try to turn Boeing around after the last two CEOs failed.
Dennis Muilenburg, a Boeing lifer, was fired in 2020 while the company tried to persuade regulators to let the Max planes fly again after crashes in 2018 and 2019 that killed 346 people. David Calhoun, a longtime Boeing board member and General Electric executive, got the revamped Max back in the air but failed to stem losses that have now exceeded $25 billion since early 2019. Calhoun announced his resignation in March.
In a memo to employees on Thursday, Ortberg said: “While we clearly have a lot of work ahead of us to restore trust, I am confident that together we can return the company to being the industry leader we all expect it to be.”
Boeing is a century-old aviation innovator with roots in Seattle, although its headquarters moved first to Chicago and then to the Washington, D.C., area. The new CEO plants a symbolic flag in the ground in the Pacific Northwest.
“Because our work is very complex, I strongly believe we need to get closer to the production lines and development programs across the company,” Ortberg told employees. “I will be based in Seattle so I can be close to the commercial aircraft programs. In fact, I will be at the Renton factory today, talking to employees and learning more about the challenges we must overcome while also reviewing our safety and quality plans.”
The company declined to make Ortberg available for interviews.
Ortberg’s name came up relatively late in the search for a new CEO. Boeing Chairman Steven Mollenkopf, who led the search, said Ortberg was known for leading complex engineering and manufacturing businesses.
Analysts were also generally positive. Richard Aboulafia, a longtime industry analyst and consultant, said Ortberg is highly regarded “and brings more hope for a better future than the company has enjoyed for decades.”
Louie DiPalma, an analyst at William Blair & Co., said Ortberg will benefit from low expectations due to Boeing’s low share price — at the start of trading Thursday, the stock was down 37 percent this year, reflecting the turmoil at Boeing since its bankruptcy.
“Boeing’s safety problems and corporate culture have come under such scrutiny that Ortberg is seen as the savior of any progress he may have made,” DiPalma wrote in a note to clients. He said Ortberg may lower some of Boeing’s financial targets to emphasize quality and believes investors would understand.
One of Ortberg’s key tasks will be to improve the manufacturing process and increase production of Boeing’s best-selling Max plane. The FAA has limited Boeing to 38 per month since the Alaska Airlines bankruptcy, but Boeing’s top safety official said this week that production isn’t even that high — it’s in the 20s per month.
Calhoun got one job done before Ortberg took the helm: The company agreed with the Justice Department last month to plead guilty to conspiracy to commit fraud in connection with the development of the Max. A federal judge in Texas will decide whether to approve the deal, which carries a fine of at least $244 million because Boeing must invest at least $455 million in quality and safety programs. The deal would spare Boeing the ordeal of a public trial.
Boeing’s defense and aerospace division is also in trouble, losing $913 million in the second quarter due to setbacks in fixed-price government contracts, including a contract to build two new Air Force One presidential jets.
