Boeing fires CEO as 737 MAX crisis deepens after horror year

The world’s largest plane manufacturer has fired its CEO with a “brutal” statement after a nightmarish year for the company.

The world’s biggest aircraft manufacturer, Boeing, has dramatically fired its chief executive officer Dennis Muilenburg after a year of crisis and intense scrutiny for the company.

Technically, Mr Muilenburg resigned. But in a statement described as “brutal” by a senior industry insider, Boeing made it clear he was forced out.

“The board of directors decided that a change in leadership was necessary to restore confidence in the company moving forward as it works to repair relationships with regulators, customers and all other stakeholders,” it said.

“Under the company’s new leadership, Boeing will operate with a renewed commitment to full transparency, including effective and proactive communication with the Federal Aviation Administration, other global regulators and its customers.”

One industry source said the decision was inevitable after spiralling pressures, from the 737 production halt to a public slap-down from the Federal Aviation Administration, topped off by an embarrassing space launch snafu on Friday.

Mr Muilenburg’s resignation is effective immediately, ending a tenure that started in 2015. Boeing’s chairman David Calhoun will take over as CEO on January 13.

David Calhoun will replace the now former Boeing CEO Dennis Muilenburg. Picture: Toru Yamanaka and Olivier Douliery/AFP

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Board member Lawrence Kellner described Mr Calhoun as a man with “deep industry experience and a proven track record of strong leadership”.

“He recognises the challenges we must confront. The board and I look forward to working with him and the rest of the Boeing team to ensure that today marks a new way forward for our company,” he said.

However Ms Calhoun has already faced scrutiny from the industry, after acknowledging Mr Muilenburg had done “everything right” in the wake of two deadly MAX aircraft crashes, which killed 346 people.

Paul Njoroge, whose wife, three small children and mother-in-law all were killed in the Ethiopian Airlines crash in March, said Mr Calhoun’s words were “an insult to humanity”.

“How can he dare say that [Muilenburg] did ‘everything right’ while it’s so apparent that the company executives knew about” the flawed design of the flight control system that contributed both crashes, Njoroge told NPR.

“Calhoun’s words were disrespectful to me, and to all the flying public.”

A TOUGH YEAR FOR BOEING AND CEO DENNIS MUILENBURG

In what has been a horror year for the airline manufacturer, the leadership change comes a week after Boeing said it planned to suspend production of its troubled 737 MAX planes in 2020.

The decision to ground every single MAX 8 in the world began in March, after two plane crashes involving the model happened within six months of each other. Both incidents killed 346 people.

In October of last year, Lion Air Flight 610 crashed off the coast of Indonesia, killing 189.

That was followed by the demise of Ethiopian Airlines Flight 302 on March 10.

Since the grounding, shares have gained roughly 4 per cent this year but have fallen 21 per cent since March.

Boeing’s 737 MAX aircraft has been grounded worldwide since March. Picture: Mark Ralston/AFP

The company’s shares rose nearly 4 per cent in early trading following the CEO announcement.

The 737 MAX grounding was the biggest crisis of Mr Muilenburg’s 34-year time at Boeing, where he started as an intern in 1985, rising through the company’s defence and services ranks to the top job.

In July. the company reported a massive second-quarter loss of US$2.9 billion — its worst ever. In October, Boeing’s third-quarter results revealed that the airline’s profits had fallen 95 per cent in the first nine months of 2019.

The sacking comes just weeks after Mr Muilenburg announced he’d considered stepping down form the top job in the aftermath of the two 737 MAX plane crashes, but said quitting was not in his “character”.

Boeing, has dramatically fired its chief executive officer Dennis Muilenburg after a year of crisis and intense scrutiny for the company. Picture: MANDEL NGAN / AFP.

“I think it’s fair to say I’ve thought about it,” he said in November at a business conference in New York. “But to be frank, that’s not what’s in my character. I don’t see running away from a challenge, resigning, as the right solution.”

Taking home more than AU$33mil in salaries and bonuses in 2018, Mr Muilenburg gave up his bonuses this year as the company continued to battle with gaining back consumer confidence.

With passengers no longer trusting the MAX aircraft, and carriers no longer wanting to use the model, the crisis for Boeing has called into question the future of the aircraft and the manufacturer’s credibility.

In November, Dennis Muilenburg said resigning was not in his “character”. Picture: Johannes EISELE / AFP.

“The public doesn’t have any trust in it, the client can’t use it. It has no value to them,” Steven Marks, a lawyer representing aircraft leasing company Avia Capital Services who is suing Boeing, told Business Insider.

Since the grounding, Boeing has repeatedly said that it will be the safest plane ever to fly when it returns.

However, a June poll found that 41 per cent of Americans would still not want to fly on the plane until it was safely back in service for at lest six months.

Speculation Mr Muilenburg would be fired had been circulating in the industry for months, intensifying in October when the board stripped him of his chairman title.

Aerospace analyst Richard Aboulafia said the appointment of Mr Calhoun, who previously served as head of Blackstone Group’s private equity portfolio operation, would provide needed short-term stability, but not the long-term “emphasis on engineering” the company needed.

“Calhoun is respected in the industry,” Mr Aboulafia said yesterday.

“But long-term, does he bring the right tool kit? Private equity leans companies out. That’s not Boeing’s problem right now.”

Mr Kellner will become non-executive chairman of the board, effective immediately, the company said.

Chief financial officer Greg Smith will serve as interim CEO during the brief transition period.

Boeing says it parted ways with its CEO in part because its customers and regulators no longer trusted the company’s decision-making. Picture: Jason Redmond/AFP

In keeping Mr Muilenburg in the job as long as Boeing had, the company ignored elements of the classic crisis communications playbook used by other companies, said Paul Argenti, a professor at Dartmouth’s Tuck School of Business.

“You want to bring somebody from the outside to bring fresh perspective to save the day,” Mr Argenti said.

“He should have been gone a long time ago. He is part of the problem.”

– with Reuters