By Andrew Tangel
Boeing Co.'s board stripped Chief Executive Dennis Muilenburg of
his dual role as chairman on Friday in an unexpected shake-up at
the highest ranks of the company amid the prolonged crisis of its
737 MAX plane.
Boeing said it took the action to allow Mr. Muilenburg to focus
on running the company as it returns the MAX fleet to service after
it was grounded world-wide in March following two fatal crashes in
less than five months.
The leadership change came hours after a panel or air-safety
experts sharply criticized Boeing and the U.S. Federal Aviation
Administration for missteps that led to the crashes, which killed
all 346 people on flights in Indonesia and Ethiopia. The report has
added to criticism in Washington, D.C., where lawmakers are
considering potential changes to aviation oversight.
David Calhoun, a senior Blackstone Group Inc. executive who has
been the board's lead director, will become its chairman. The board
has "full confidence in Dennis as CEO and believes this division of
labor will enable maximum focus on running the business with the
board playing an active oversight role," Mr. Calhoun said in a
statement.
Getting control of the crisis proved challenging for Mr.
Muilenburg, who is slated to testify before a House committee at
the end of the month.
Mr. Calhoun, who previously served as chairman of Caterpillar
Inc.'s board, has become increasingly assertive in recent months,
according to people familiar with the matter. Mr. Calhoun joined
Boeing's board in 2009 with prior aerospace experience, having at
one point run General Electric Co.'s aircraft engine business.
The prolonged grounding of the MAX, the Chicago-based aerospace
giant's best-selling jet, has disrupted the plans of airlines and
passengers around the world. Boeing is considering additional cuts
to production or temporarily shutting down MAX assembly at the
Renton, Wash., plant where the airplane is built.
The manufacturer has faced repeated setbacks in getting the MAX
flying again. An update to the MAX flight-control software to fix
problems with the jet had previously been expected to gain FAA
approval as early as April. The discovery of another potential
safety risk has added to delays.
Boeing hasn't yet submitted the revised software for FAA
approval amid scrutiny by aviation regulators, further pushing back
the aircraft's return to passenger service.
Three U.S. operators of the MAX -- United Airlines Holdings
Inc., American Airlines Group Inc. and Southwest Airlines Co. --
don't expect to resume flying passengers on the aircraft until
early next year.
Mr. Muilenburg said he fully supported the board's move and that
the team was focused on returning the 737 MAX safely to
service.
Boeing's shares were little changed in aftermarket trading, but
the biggest U.S. exporter has lost around $30 billion in market
value since the Ethiopian Airlines crash in March.
Mr. Muilenburg will remain a director on the board. Boeing has
been scrambling to adjust how it manages its projects in the wake
of the crashes and said Friday it would add a new director to the
board with "deep safety experience."
Last month, the plane maker said it would centralize control of
engineering and safety practices, giving more control ultimately to
Mr. Muilenburg. Top engineers throughout Boeing's sprawling
commercial and defense units will report directly to the company's
chief engineer rather than division chiefs.
The decision to split the chairman and CEO roles marks the
biggest setback for Mr. Muilenburg, 55 years old, since he was
named chief executive in 2015. He also became chairman the
following March.
Mr. Muilenburg joined Boeing as an engineering intern in 1985
before graduating as an aerospace engineer from Iowa State
University a year later.
He rose through the ranks to take charge of Boeing's defense
business in 2009. The unit faced challenges, including an Army
contract that was eventually canceled after running up more than
$20 billion in costs. Most of the blame for those delays fell on
the Pentagon.
After taking over from Jim McNerney as CEO in July 2015, Mr.
Muilenburg focused on some weak spots in Boeing's sprawling
operations. He secured long-term labor deals, addressed a pension
deficit and reversed slowing sales at the defense unit. He also
oversaw missteps including cost overruns in the military tanker
program.
Mr. Muilenburg also faced a challenge when President Trump
criticized Boeing for the cost of building the next Air Force One.
He personally took on the effort to appease the president and
turned him into an ally, hosting Mr. Trump for the first flight of
its newest Dreamliner.
Boeing's military business also has battled persistent problems
under Mr. Muilenburg. The U.S. Air Force has been unhappy with
Boeing's performance on the multibillion-dollar KC-46A Pegasus
refueling plane contract, complaining of quality problems. Boeing
already has suffered more than $3 billion in losses on the
project.
Boeing this year also encountered setbacks on its newest
commercial airliner development program, an update to its popular
777 long-haul plane. Flight trials of the so-called 777X have been
delayed for months because of engine issues, risking Boeing's plans
to get the plane into customers' hands next year.
Earlier this year, Boeing shareholders rejected a proposal for
an independent chairman following criticism of the company's
response to the two 737 MAX crashes. The push for an independent
chairman was rejected by 66% of shares. The 34% vote in support of
the proposal compared with a 25% favorable vote for a similar
measure last year.
After an April shareholder meeting, Mr. Muilenburg didn't
respond directly to questions about whether he had considered
resigning. "I am very focused on safety," he said.
The aviation regulators' report on Friday prompted calls by
lawmakers for more answers about how Boeing designed the 737
MAX.
Sen. Richard Blumenthal (D., Conn.) said Congress should call
Boeing directors to explain how they have overseen Boeing's top
executives.
"Members of the board should be among the witnesses and they
should be asked, 'What have you done to attribute responsibility
and hold management accountable?'" Mr. Blumenthal said in an
interview.
--Robert Wall contributed to this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
October 11, 2019 20:37 ET (00:37 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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