Boeing announced a major management overhaul on the 23rd after a series of adverse events such as the suspension of production of Boeing’s 737 Max aircraft, public rebukes from the Federal Aviation Administration, a downgrade of the company’s rating and the failure of the Starliner ship’s test flight. On December 23rd Boeing issued a statement saying that Dennis Milenberg had resigned as CEO of the company. The Company appointed David Calhoun, the current Chairman of the Board of Directors, to the post.
Notably, Boeing’s decision to change the board was welcomed by the market, with Boeing’s shares jumping 2.91 percent on the day.
Two air crashes in six months, questioned by all sides.
Every Sunday evening, Boeing executives have a brief phone call. Last weekend, however, executives preparing for the festival were unexpectedly informed that the company had decided to ask CEO Mienberg to resign amid the 737 Max crisis. Mr. Millenberg quickly accepted the decision, according to people familiar with the matter.
Millenberg was born on a farm in Iowa, according to CCTV. In his junior year, Millenberg received a summer internship at Boeing, where he graduated in 1985 and has been working ever since. From engineers to managers, Milenberg has moved on to several departments. It can be said that The growth of Millenberg was given by Boeing.
In 2015, the former CEO of Boeing stepped down after a decade in office, and Milenberg took over as CEO of the entire Boeing Group.
Boeing’s share price has more than tripled since Mr. Millenberg became ceo of Boeing to the global suspension of 737 Max, and the immediate reason behind this is that it has increased jet production and returned a larger percentage of its profits to shareholders through share buybacks and higher dividends.
But two air crashes in six months, with 346 deaths, have raised questions from the public, the media and the judiciary.
On October 29, 2018, a Boeing 737 Max8 aircraft of Indonesia’s Lion Air crashed into the sea shortly after take-off, killing all 189 people on board.
On March 10, 2019, an Ethiopian Airlines Boeing 737 Max8 crashed six minutes after takeoff, killing all 157 people on board.
On April 4, 2019, Boeing acknowledged for the first time that there was a problem with the aircraft system, and then-CEO Michael Millenberg apologized to the families of the victims of the two air crashes, El Sei and Lion.
Millenberg: Boeing is sorry for the 737 Max victims.
On October 29, Mr. Millenberg attended a hearing in Washington, D.C. At the hearing, Mr. Millenberg was grilled harshly.
MILLENBERG: Before today’s hearing, I would like to say to the families of the victims and to the victims present, on behalf of me and Boeing, we are sorry and deeply sorry.
However, Mr. Millenberg’s frequent apologies did not save Boeing, which was in deep whirlpool.
Boeing’s 737 Max series has crashed in two months, causing the aircraft to be grounded or banned from flying in many countries and regions around the world. Boeing has decided to suspend production of the 737 Max series aircraft from January because the Federal Aviation Administration could not complete its re-flight certification for the 737 Max series this year.
On October 23rd Boeing released its third quarter 2019 report. Boeing’s net profit for the first three quarters of 2019 was $374 million, down 95 percent from a year earlier, according to the results.
According to CCTV, during the Boeing 737 Max was banned, Milenberg repeatedly released too positive news, making it difficult for Boeing’s big customers to make timely decisions, including Southwest Airlines has lost hundreds of millions of dollars because of the Boeing storm, and because the 737 Max was discontinued. The number of flights has to be slashed by 2020.
The FAA also took a dim vein from Mr. Millenberg. On the one hand, since the 737Max ban, Boeing has frequently released information that “will be licensed to resume flights in the near future”, but NASA has always said that “there is no specific timetable for the review of the 737 Max.” For its part, the space agency believes that Mr. Millenberg has the intention of pressuring regulators through public opinion.
“It’s clear that Dennis Millenberg should have been fired long ago,” said Peter DeFazio, chairman of the U.S. House Transportation and Infrastructure Committee. Under his leadership, a prestigious corporation made a series of fatal mistakes. Interests are more important in his eyes than in the life of life.”
Two crashes have killed more than 300 people; 737Max has not been allowed to resume flights; Boeing has announced an indefinite shutdown of the 737 Max aircraft from January; and the unmanned launch experiment on the Starliner, seen as Boeing’s “turn over”, failed to successfully dock with the International Space Station. This series of negative news was the main reason for Boeing’s decision at the end of the year to make a wide-ranging change in leadership.
From 2015 to 2018, when Boeing was at the helm, Mr. Millenberg will receive more than $70 million (about $490 million) in compensation, and he will still receive $30 million to $40 million ($210 million to 280 million) in compensation, plus $11 million (about $77.1 million) in supplementary executive pensions. The money could add up to more than the price of a Boeing 737 Max, the report said.
It is worth noting that Boeing’s shareprice jumped 2.91% on the day of the announcement of the decision to change the company’ board. Still, the company’s shares have fallen nearly 20 percent since the second crash of the Boeing 737 Max in March.
Will the new CEO take Boeing out of the crisis?
David Calhoun, the current chairman of the board, will officially succeed Mr. Millenberg as the company’s new CEO on January 13, according to a statement released by Boeing on Wednesday.
Analysts believe that Boeing’s personnel overhaul is a belated crisis response, to reshape the company’s image and management adjustment opportunities, conducive to Boeing early to achieve the re-launch of Boeing 737 Max aircraft.
Some analysts also question that, despite his illustrious career, Mr. Calhoun has a background in financial management and corporate strategy, not his engineering and security policies, and may be a transitional leader.
After graduating with an accounting major at Virginia Tech and State University, Calhoun joined GE’s audit team in 1981 and later served as vice chairman and CEO of GE Infrastructure Group. He left GM in 2006 as CEO of Nielsen and head of Blackstone’s portfolio operations team.
Calhoun has been a director of Boeing since 2009. In a 2017 interview with Bloomberg, he said he preferred to let the leadership team “attack rather than defend.”
With Boeing in crisis in the 737 Max crash, can Calhoun continue to lead Boeing through the low ebbs in the future?
Some analysts say Mr. Calhoun faces multiple challenges of leading the company in improving its relationship with regulators, dealing with tight cash flow and achieving a 737Max re-fly.
Just last week, Boeing announced that it would suspend production of the 737 Max aircraft from January.
Jpmorgan’s latest report says the move will drag down U.S. GDP growth by 0.5 percentage points in the first quarter of next year. If so, the outlook for U.S. economic growth in the first quarter of next year will be very bleak, perhaps only about 1 per cent, rather than the 1.6 per cent previously forecast.
At the same time, J.P. Morgan believes That even after the shutdown, Boeing still needs to burn more than $1 billion a month on the 737 Max. Now, Boeing spends about $2 billion a month on the 737Max, and the costs will not immediately zero out after the shutdown: on the one hand, it still has to pay internal management and labor costs;
In addition, it is estimated that Boeing 737Max has a total of 680 suppliers worldwide, many of which offer very small products, making it difficult to find alternatives in a short period of time.
Some industry experts predict that the 737Max suspension and subsequent problems will cost Boeing $14 billion, or about 98 billion yuan, but the final amount is likely to be higher. The 737Max was reported lying the best-selling and fastest-selling aircraft product ever by Boeing before the global suspension. Goldman Sachs had predicted that a third of Boeing’s revenue over the next five years would come from the 737 Max.