Boeing Faces Senate Grilling as CEO Search Gains Momentum

(Bloomberg) -- As crisis has engulfed Boeing Co. following the near-catastrophic accident on an airborne 737 Max 9 aircraft, Chief Executive Officer Dave Calhoun has kept an increasingly low profile.

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Now he faces a very public grilling from US senators accusing Boeing of putting profit before safety. A hearing on Tuesday will put the CEO on the spot to defend his record and salvage his legacy as he prepares to step down later this year.

Investors who have endured a 32% stock slump this year and watched Boeing’s credit rating come dangerously close to junk status have already shifted their focus to Calhoun’s yet-undisclosed successor. New Chairman Steve Mollenkopf, who took over as part of a senior management shakeup in March, is leading the search for the next CEO — and the hunt has picked up speed in recent weeks, say people close to the matter.

“Everyone is focused on the next leader, hopefully someone who can redeem them from this sorry episode,” said Richard Aboulafia, a managing director with AeroDynamic Advisory.

Calhoun is expected to acknowledge shortfalls in Boeing’s culture and factories that culminated in the mid-air blowout in early January, Reuters reported earlier. And he’ll reiterate “strict policies to prohibit retaliation” against employees who flag safety issues, after whistleblowers and an expert panel described the practice as commonplace, according to written testimony viewed by Bloomberg.

“We are committed to making sure every employee feels empowered to speak up if there is a problem,” Calhoun is expected to say. “It is our job to listen, regardless of how we obtain feedback, and handle it with the seriousness it deserves.”

The CEO’s reckoning before US lawmakers comes as Boeing navigates one of the most turbulent stretches of its century-long history. The manufacturer has faced a customer revolt that spurred a board and executive shake-up. The Justice Department, Congress and other federal agencies are probing the company. Federal Aviation Administration Chief Michael Whitaker has lamented too lax regulatory oversight, vowing to keep Boeing on a tight leash until there’s real evidence of progress.

Calhoun has largely evaded the public glare in recent months. He’s given very few interviews and he missed the first launch of Boeing’s Starliner spacecraft with humans aboard earlier in June to attend the D-Day commemoration in France. That space milestone provided some much-needed good news for a company whose engineering credentials have been called into question by a series of mishaps in recent years.

Customers, investors and Boeing employees are waiting for Calhoun’s successor to provide a vision for the future — and a path out the controversy stoked by quality breakdowns in Boeing’s factories that damaged its once-sterling reputation. The US planemaker has even become a punching bag for events outside of its control, from a wheel dropping off an airborne United Airlines aircraft to the suicide of a prominent whistleblower.

Other than a few perfunctory remarks, “Calhoun has not cast much light on Boeing’s path forward,” said Jeffrey Sonnenfeld, a senior associate deal with the Yale School of Management. While Boeing’s been mindful of not overstepping its regulator, it has also created a “vacuum of public communication,” he said.

Boeing said in a statement that it welcomes the opportunity to appear before the senate hearing “to share the actions we have taken, and will continue to take, to strengthen safety and quality and ensure that commercial air travel remains the safest form of transportation.”

Boeing’s senior leadership has been in flux since March. At the time, Boeing also named Chief Operating Officer Stephanie Pope as the new chief of the commercial airplanes division, replacing Stan Deal. Pope, whom Calhoun has endorsed as a possible successor, made her public debut this month in Dubai at the annual meeting of the IATA industry lobby group, where she met with customers.

A day later, Calhoun put in a rare public appearance in Berlin, where he spoke at an aviation conference. His presentation — swinging between defiance and contrition — might offer clues how he aims to handle himself during the Washington hearing on Tuesday. During the 25-minute interview, Calhoun revisited the shocks that Boeing absorbed from the pandemic and two 737 Max tragedies in 2018 and 2019, took a shot at a predecessor’s lack of transparency and brandished his legacy.

Boeing needs to take its lumps, Calhoun said, slowing down its factories and synchronizing work with its supply chain, no matter the cost nor the clamoring for airplanes by customers.

“If we stay disciplined on that, we will put this in the rear view mirror,” he said. “There may be a point where someone says that was the most important moment in Boeing’s life.”

Behind the scenes, Boeing board members are meanwhile busy identifying a CEO candidate. They are seeking a person with experience running a public company and who can offer a fresh start for the planemaker, without any baggage, said people close to the process, who asked not to be identified discussing confidential matters.

Boeing declined to comment on the status of the successor search.

Boeing’s next leader will need to win over customers, employees, the flying public and regulators. He or she will need to revamp operations — and then launch a new airplane, said Ron Epstein, an analyst at Bank of America. And whoever takes over shouldn’t be a transition candidate and instead be prepared to lead the company into the next decade, he said.

“It’s a heavy lift, a really heavy lift,” Epstein said of the demands on the next leader. “On some level, it’s a labor of love. It’s not going to be a year, not five years, probably seven to eight years.”

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And while Calhoun may already have one eye on the door, there’s still plenty on the line for the CEO in his remaining time at Boeing. How the CEO handles the spotlight is important for his legacy, and for the company’s work to shore up confidence in its manufacturing.

A good outcome for Boeing would be for the Senate session to slip quickly out of view, said Ken Herbert, an analyst with RBC Capital Markets.

“From the investor standpoint, you’d almost want this to be a non-event,” Herbert said. “You don’t want to see headlines that he’s gone off script.”

--With assistance from Allyson Versprille and Siddharth Philip.

(Updates with comments from CEO, Yale professor)

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