Shares of Boeing rose 3.0 percent around noon. (File)
New York:
Boeing named former aerospace veteran Robert “Kelly” Ortberg as its new CEO on Wednesday, as the aerospace giant reported a hefty loss due to ongoing operational problems.
Ortberg, 64, helped lead aerospace communications and electronics supplier Rockwell Collins and integrated it into United Technologies, which then merged with Raytheon to become RTX. He retired from RTX in 2021.
He is an engineer and an outsider at Boeing, who, in the eyes of some aviation insiders, fits the CEO’s most important requirements.
His appointment, effective Aug. 8, comes as Boeing tries to recover from a series of safety and quality control problems that have tightened scrutiny of the company.
These difficulties were immediately visible in Boeing’s second-quarter results released Wednesday, a loss of $1.4 billion, compared with a loss of $149 million in the same period a year ago.
Sales fell by 14.6 percent to $16.9 billion.
The quarterly results reflected continued resistance at Boeing’s commercial division, where it has cut production while improving safety and quality control practices under close scrutiny from regulators.
The latest results also showed significant weakness in its defense business due to a number of fixed-price contracts, where it has incurred large losses due to supply chain issues, as well as higher engineering costs and technical issues.
Boeing recorded four defense contracts that caused an operating loss of $913 million in the quarter.
– Shake-up in leadership –
Boeing has been in trouble since a January incident in which an Alaska Airlines 737 MAX made an emergency landing after a fuselage panel blew out mid-flight.
That incident sparked new scrutiny of Boeing and the MAX after two fatal crashes in 2018 and 2019 that led to a lengthy grounding of the plane.
Outgoing leader Dave Calhoun unexpectedly rose to CEO in January 2020 after ousting predecessor Dennis Muilenburg amid the fallout from the MAX crashes.
Calhoun appeared set to stay on as CEO until 2028, until the Alaska Airlines incident sparked outrage on Capitol Hill and concern among Boeing’s airline customers. Calhoun announced on March 25 that he would resign at the end of this year.
Aviation experts had hoped that Boeing’s next CEO would ideally have an aerospace background, experience managing major manufacturing projects, strategic smarts, a hands-on approach to safety and the ability to navigate congressional hearings.
In Wednesday’s statement, Boeing Chairman Steve Mollenkopf described Ortberg as “an experienced leader who is deeply respected in the aerospace industry.”
Ortberg said he was “extremely honored and humbled to join this iconic company,” adding, “There is a lot of work to do and I look forward to getting started.”
Some analysts have suggested that Boeing’s next CEO could overhaul the company’s leadership ranks.
But Calhoun indicated he doesn’t expect any significant personnel changes, saying, “I don’t think this is intended to be a major leadership overhaul.”
Ortberg “knows very well that we are in a recovery mode,” Calhoun said, adding that he was not deeply involved in the CEO selection process.
– ‘Very challenging course’ –
Among the immediate priorities facing Ortberg are negotiations with a machinists and aerospace union amid a potential strike threat in September; and restoring MAX and 787 Dreamliner production levels to meet Boeing targets by the end of 2024.
Analysts at JPMorgan Chase praised the appointment, while noting that the CEO position “remains a very challenging job,” according to a note.
“We believe he is highly respected in the industry, that he has significant operational and technical experience, and we think he has the potential to do some of the things Boeing needs most, including restoring relationships with customers, suppliers, regulators and legislators.” said JPMorgan’s note.
Third Bridge analyst Peter McNally said Ortberg’s aviation experience at Boeing will help, but said “he and the organization have a long road ahead.”
Ortberg will take office just after a two-day hearing organized by the National Transportation Safety Board in Washington on the Alaska Airlines incident.
Boeing has agreed to plead guilty to a fraud charge as part of a plea deal with the U.S. Department of Justice over the two fatal MAX crashes, according to a lawsuit filed last week.
The deal must be approved by a federal judge.
Shares of Boeing rose 3.0 percent around noon.
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