Boeing fired CEO Dennis Muilenburg, saying Monday it replaced him with the company’s chairman as the nation’s biggest manufacturing exporter struggles to regain the trust of regulators, customers and the public in the wake of two fatal crashes of its bestselling plane, the 737 Max.
Muilenberg is out immediately, and Chairman David Calhoun will become CEO on Jan. 13. The transition period will allow Calhoun to exit his non-Boeing commitments. Board member Lawrence Kellner will become Boeing’s nonexecutive chairman, effective immediately, a sign that the company wants to keep the CEO and chairman roles separate, after taking that step with Muilenburg in October.
Boeing declined to comment on Muilenburg’s severance, but a filing earlier this year showed he could be eligible for around $39 million.
The moves come as Boeing has flailed in its attempts to contain one of the biggest crises in its more than 100-year history, disrupting relationships with the very airline customers that fueled Boeing’s sales boom in recent years to the pilots who have complained about broken trust. Airlines have lost millions of dollars in revenue and curbed growth without access to the fuel efficient planes, which regulators grounded in mid-March.
Earlier this month, the Federal Aviation Administration took the rare step of publicly admonishing Boeing for pushing an unrealistic timeline for the planes’ return to service. The two crashes — in Indonesia in October 2018 and in Ethiopia last March — claimed 346 lives. A flight-control program has been implicated in both crashes, and regulators haven’t yet signed off on software changes for the planes, forcing airlines to rejigger their schedules well into 2020.
“The Board determined that a change in leadership was necessary to restore confidence in the company moving forward and that we will proceed with a renewed commitment to full transparency, including effective and proactive communications with the FAA, other global regulators and our customers,” CFO Greg Smith, who became interim CEO, said in a note to employees announcing the shakeup.
Boeing shares were up nearly 3% on Monday after Boeing announced the changes.
The FAA declined to comment on Muilenburg’s firing but said the agency continues to work with other international aviation safety regulators to review the proposed changes.
“Our first priority is safety, and we have set no time frame for when the work will be completed,” the agency said in a statement.
“We expect that Boeing will support that process by focusing on the quality and timeliness of data submittals for FAA review, as well as being transparent in its relationship with the FAA as safety regulator.”
Dave Calhoun, Chairman of Boeing
Adam Jeffery | CNBC
The resulting turmoil from the crashes has consumed Boeing. The two crashes sparked numerous investigations, including a federal criminal probe, about the aircraft’s development and certification by the Federal Aviation Administration in 2017. Earlier this month, Boeing said it would suspend production of the 737 Max early next year, the latest sign of how the crisis is rippling through the company’s supply chain.
Boeing had for months resisted calls to replace Muilenburg. The board removed him as chairman in October saying he could better focus on bringing the Max back to service, a process that has been delayed by additional questions from regulators. Earlier this month, the FAA’s chief said he would not rule out fining Boeing for failure to make disclosures about the 737 Max.
Muilenburg, an engineer, became CEO in 2015 and had been with the company since he was an intern.
Boeing replaced the head of its commercial airplane unit, Kevin McAllister, shortly after removing Muilenburg as chairman. Stan Deal, a three-decade Boeing employee who most recently led its global services business, replaced McAllister.
In addition to the Max problem, Boeing suffered a major embarrassment this weekend with its Starliner space capsule. Its autonomous flight control system fired at the wrong time shortly after launch, putting Starliner in the wrong orbit. A planned docking with the International Space Station to deliver supplies had to be aborted. The craft did safely return to Earth on Sunday.
Calhoun has been on Boeing’s board since 2009. In October, he took on the role of non-executive chairman. Calhoun has been a senior managing director at Blackstone, and previously worked at General Electric for more than two decades, including a stint as head of its aircraft engines business.
Kellner, who now will become chairman, is the former CEO of Continental Airlines. He has been on Boeing’s board since 2011. Since 2010, he has been the president of private equity firm Emerald Creek Group.
Here is the text of Smith’s note to employees:
Colleagues, This morning, Boeing announced leadership changes made by our Board of Directors:
Dave Calhoun, currently Chairman of the Board, will become Chief Executive Officer of Boeing on January 13, 2020.
Larry Kellner, currently a Board director, will become Chairman of the Board effective immediately.
Dennis Muilenburg has resigned from his positions as CEO and Board director effective immediately.
I will serve as interim CEO during the brief transition period as Dave Calhoun prepares to assume leadership of the company.
The Board determined that a change in leadership was necessary to restore confidence in the company moving forward and that we will proceed with a renewed commitment to full transparency, including effective and proactive communications with the FAA, other global regulators and our customers.
On a personal note, I want to extend my deep gratitude to Dennis for his deep and abiding commitment to Boeing as CEO over these past four years, and for his nearly 35 years of service to the company. Dennis gave his all to the company under extraordinarily difficult circumstances. I look forward to working closely with Dave Calhoun, whom I have known for a very long time.
Dave and I share a mutual respect for one another, and I know we will work well together as we chart a new direction for Boeing. This has obviously been a difficult time for our company, and our people have pulled together in extraordinary ways. Over the next few weeks as we transition to new leadership, I am committed to ensuring above all that we meet the needs of our stakeholders – especially our regulators, customers and employees – with transparency and humility.
I am confident in our new leadership and I believe in our team — we have a plan in place, and it is very important that all of us remain focused on the tasks at hand. While this has been an extremely difficult year for all of us at Boeing, I firmly believe we are taking the right steps to reinforce the best in our values and to put the Company on the right path for a strong future. While today brings important changes for our company, I am also reminded of the many things that will remain exactly the same.
We will continue to operate according to our purpose and values in service of our customers, business partners, regulators, and other stakeholders. I want to thank you for going above and beyond expectations during what has been an extremely challenging year. I hope you are able to enjoy some time with loved ones and friends during these holidays. I am so proud to work alongside you all as part of this great company.