David Calhoun brings experience to manage company's response to
737 MAX turmoil
By Andrew Tangel, Alison Sider and Miriam Gottfried
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 15, 2019).
Boeing Co.'s boardroom shakeup puts David Calhoun, a powerful
behind-the-scenes figure, in position to control the aerospace
giant's response to the 737 MAX crisis, one of the most fraught
episodes in the company's history.
Senior officials at some Boeing customers said they found the
move to appoint Mr. Calhoun chairman, unveiled Friday, reassuring
amid the MAX's prolonged grounding following two deadly crashes.
They said his experience in the industry and handling other
challenging situations should help the Chicago plane maker navigate
the turmoil as it tries to restore public confidence.
It won't be easy. Boeing faces unrest from airlines losing money
because of a flight ban that regulators won't lift until they
approve fixes to a flight-control system implicated in the crashes
that claimed 346 lives. The MAX's expected return to service has
faced repeated delays, and its U.S. operators -- Southwest Airlines
Co., American Airlines Group Inc., and United Airlines Holdings
Inc. -- don't expect to fly passengers on the aircraft until
January. Boeing is weighing whether to further cut or temporarily
halt production at its Renton, Wash., factory as finished planes
pile up.
Mr. Calhoun, 62 years old, has confronted other major corporate
crises. Now an executive at the New York private-equity firm
Blackstone Group Inc., Mr. Calhoun previously ran General Electric
Co.'s airplane-engine business during the 9/11 terrorist attacks
and ensuing downturn in the airline industry. He is credited with
turning around the fortunes of Nielsen Holdings PLC when he was the
market-research and measurement company's chief executive. He later
became chairman of Caterpillar Inc.'s board weeks after federal
agents raided the heavy machinery maker's Illinois
headquarters.
Directors and executives who have worked with him say his
experience and style will help Boeing overcome its problems. Inside
boardrooms, Mr. Calhoun's personality looms large. People who have
worked with him describe him as an intelligent, pragmatic and
disciplined leader with little patience for managers who don't meet
their goals. They also say he can be opinionated and at times
brash, but skeptical when probing management.
"He's someone who is not going to get BSed," said Bill Daley,
who served with Mr. Calhoun on Boeing's board until 2011 when he
left to become White House chief of staff.
Boeing's directors had opposed splitting the chairmanship from
the chief executive job, dually held by Dennis Muilenburg for about
four years. But pressure has been building on the board ahead of
Mr. Muilenburg's expected appearance at a congressional hearing in
Washington, D.C., later this month and as reviews of the MAX have
faulted Boeing.
Messrs. Muilenburg and Calhoun showed no signs of tension in
September when they attended a private retreat for top aerospace
executives in Wyoming called Conquistadores del Cielo, Spanish for
conquerors of the sky, people familiar with the matter said.
Friday's move followed internal discussions about whether to hold
executives accountable, a person briefed on the matter said.
Mr. Calhoun, a board member since 2009, also had a role in the
manufacturer's decision to launch the MAX's development in 2011,
and its responses to both fatal accidents. After the first MAX
crashed in Indonesia on Oct. 29, 2018, Boeing vouched for the
safety of the plane's design, highlighted missteps by pilots and
mechanics, and began working to fix the suspect flight-control
system while the aircraft kept flying. The second MAX crashed in
Ethiopia in March, and regulators soon grounded the aircraft.
A person close to Mr. Calhoun said: "He'll continue to push the
company to own up totally to its problems."
Mr. Calhoun declined to comment for this article. On Friday, he
said in a prepared statement that the board had full confidence in
Mr. Muilenburg as CEO. The company said the split would allow Mr.
Muilenburg to better focus on running the business and safely
returning the MAX to passenger service -- a goal that has faced
repeated delays.
Boeing also said Friday that it would review recommendations
made in a report by a group of international aviation regulators
and safety experts that faulted the design, testing and
certification of the MAX. Mr. Muilenburg has previously defended
the aircraft's development.
People familiar with Mr. Calhoun's work at Boeing describe him
as generally more cautious than Mr. Muilenburg when it comes to
production levels and plans to launch a new midsize aircraft. After
the MAX's grounding, the company cut 737 production from 52 planes
to 42 planes a month. Mr. Muilenburg signaled in July that Boeing
planned to ramp up monthly production to 57 planes next year.
Boeing's board comprises a mix of various current and former
chief executives and former government officials, but among them
Mr. Calhoun is regarded as having the deepest aviation
experience.
"He knows the industry cold. He knows the customers. He knows
everyone," said Hamilton "Tony" James, who is executive vice
chairman of Blackstone, where Mr. Calhoun heads a unit overseeing
operations at the firm's portfolio companies and serves on its
management committee.
James Albaugh, who retired as chief executive of Boeing's
commercial airplane division in 2012, a year after it started
developing the MAX, describes Mr. Calhoun as a straight
shooter.
The MAX isn't the only source of Boeing's current troubles. Its
commercial airplane division has suffered other recent setbacks,
including engine issues with an update to its popular 777 long-haul
plane. The commercial division is run by Kevin McAllister, a fellow
GE alum of Mr. Calhoun's.
Some airline executives who worked with Mr. Calhoun in his GE
days recall a creative deal maker with a customer focus. "He's good
at solving problems and taking care of customers," said David
Neeleman, who as JetBlue Airways Corp.'s chief executive worked
with Mr. Calhoun to hammer out the airline's 2003 acquisition of
some Embraer jets with GE engines.
In his dealings with Delta Air Lines Inc., Mr. Calhoun would
regularly reach out to solicit opinions, said Ray Valeika, the
carrier's former head of engineering and maintenance.
Mr. Calhoun rose through the ranks of GE in his two decades
under Jack Welch, heading the company's powerful internal audit
group and subsequently landing key roles in running the plastics
division, transportation business and its insurance operations. In
his memoir, Mr. Welch described Mr. Calhoun as a skilled golfer who
sometimes would play an extended 54-hole rounds with the storied
CEO.
"He is decisive, and he makes the tough calls. Yes or no, he is
not a maybe guy," said Mr. Welch on Monday.
Mr. Calhoun took the reins of GE's aviation business in 2000 at
just 43 years old. He was initially on the original list of 24
candidates that GE assembled in 1994 as possible successors to Mr.
Welch but didn't make the cut.
On Sept. 11, 2001, Mr. Calhoun found himself stranded in Seattle
with then-GE CEO Jeff Immelt, who was just days into the job. The
executives were there for Boeing, speaking at its aerospace
conference and meeting with customers. The pair watched the
terrorist attacks unfold on television.
A global response grounded hundreds of planes that GE leased to
airlines. It would take years for air traffic to return to pre-9/11
levels. Under Mr. Calhoun, GE helped carriers adjust to the
downturn, providing financial support by deferring customer
payments and advancing $5 billion in direct financing to the
airlines.
Mr. Calhoun had long been viewed as a contender for top
corporate jobs. In 2005, The Wall Street Journal reported that
industry officials cited him as a potential candidate to lead
Boeing as CEO. The next year he left GE as vice chairman,
essentially the highest role in the company under the CEO.
As Caterpillar chairman, Mr. Calhoun pushed the company to boost
profit margins by focusing on selling parts and services, people
familiar with the matter said. He eventually ceded the Caterpillar
chairmanship back to the company's CEO, and remains Caterpillar's
presiding director.
--Thomas Gryta, Andy Pasztor and Daniel Michaels contributed to
this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com, Alison Sider at
alison.sider@wsj.com and Miriam Gottfried at
Miriam.Gottfried@wsj.com
(END) Dow Jones Newswires
October 15, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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