Boeing announced Robert “Kelly” Ortberg, former CEO of Rockwell Collins, as its new CEO, effective August 8. Ortberg will succeed Dave Calhoun, who is retiring amid ongoing criticism over the company’s issues.
“I’m extremely honored and humbled to join this iconic company,” said Ortberg in a statement from the company. “Boeing has a tremendous and rich history as a leader and pioneer in our industry, and I’m committed to working together with the more than 170,000 dedicated employees of the company to continue that tradition, with safety and quality at the forefront.”
Ortberg, acknowledging that “there is much work to be done” at Boeing, brings a background that may resonate with employees critical of the company’s focus on finance over engineering quality. With a college degree in mechanical engineering, Ortberg’s technical expertise could be a reassuring shift for staff concerned about the company’s management priorities.
Challenges Ahead for Ortberg and Boeing
However, Ortberg’s appointment does not guarantee that the new leadership will make the right decisions for Boeing. Despite Calhoun’s financial background, his predecessor Dennis Muilenburg, who led the company during the troubled development of the 737 Max and its subsequent grounding, also had an engineering background.
Ortberg began his career in the aviation industry in 1983 as an engineer at Texas Instruments, later joining Rockwell Collins in 1987 as a program manager. He served as CEO of Rockwell Collins from 2013 until his retirement in 2021.
READ MORE: 31 Tornadoes Hit Chicago: Unpacking The Causes Behind Extreme Weather
“Kelly is an experienced leader who is deeply respected in the aerospace industry, with a well-earned reputation for building strong teams and running complex engineering and manufacturing companies,” said Boeing Chairman Steven Mollenkopf in a statement. “We look forward to working with him as he leads Boeing through this consequential period in its long history.”
Financial Struggles and Production Issues
Rockwell Collins, known for its avionics, electrical systems for aircraft, and aerospace information technology, was acquired by United Technologies in 2018 and now operates as Collins Aerospace. Ortberg remained with the company for three years during its integration into United Technologies before retiring. Even one of Boeing’s most vocal critics expressed optimism about Ortberg’s appointment.
Robert Clifford, attorney for the families of the 737 Max crash victims, commented, “The arrival of a new CEO at Boeing could not have happened at a more crucial and necessary time for the safety of the traveling public around the world.” He added that under Muilenburg, Calhoun, and Boeing’s “do nothing” board, the company has been in a “nosedive.”
“While this man is an industry insider, he comes from outside Boeing and, on the face of it, has a well-regarded reputation in the industry,” Clifford added. “Maybe he can bring the company back to the stature it once held before it criminally and preventively killed 346 people.”
Broader Issues and Market Response
Ortberg will face a formidable challenge in addressing Boeing’s issues, as the company has not posted a profitable year since 2019. Since then, it has accumulated core operating losses totaling $33.3 billion, including the recent loss announced on Wednesday, which was significantly larger than analysts had predicted. Boeing’s path to profitability will be difficult until it can reassure regulators that it has resolved the safety and quality issues with its aircraft.
The company has acknowledged that the two fatal crashes of the 737 Max in October 2018 and March 2019, which resulted in the deaths of 346 people, were due to a design flaw. The crashes and the lengthy process to rectify the design have cost Boeing over $20 billion.
Boeing recently agreed to plead guilty to charges that its employees defrauded the Federal Aviation Administration (FAA) during the original certification of the 737 Max. As part of the plea agreement, the company will operate under the oversight of a court-appointed monitor.
The company is also under increased scrutiny following an incident in January when a 737 Max plane’s door plug detached shortly after takeoff. Over a dozen whistleblowers have informed Congressional investigators about problematic practices at Boeing, including the use of substandard parts and alleged retaliation against employees who raised safety concerns.
In response to an FAA demand, Boeing has agreed to limit 737 Max production until it can address safety and quality concerns to the regulator’s satisfaction. However, this will likely exacerbate the company’s financial losses as it cannot generate revenue at its current production levels.
Ortberg’s most immediate challenge will be negotiating with about 36,000 hourly workers at Boeing’s commercial airplane plants in Washington state, who may strike in September. Calhoun had indicated that the Machinists union, which represents these workers, is expected to make significant wage demands. Boeing is committed to rewarding its employees and is making every effort to prevent a strike.
Analysts Respond Positively to Ortberg’s Appointment
“One person cannot turn around a company, but Kelly should be able to cast a wider net for talent than a Boeing insider could,” said Ron Epstein, aerospace analyst for Bank of America.
“Demand for commercial aircraft remains strong, and in a duopoly, Boeing should be a beneficiary, in our view,” Epstein added. “We do note that Ortberg is walking into a Boeing with a potential production strike in September, a defense business that is limping along, and commercial business that has lost the trust of regulators and the public. Boeing overall has a long road ahead if the underperformance in this quarter is an indicator of what’s to come.”
Boeing has seen several top executive changes this year, but Calhoun indicated that he does not anticipate additional leadership changes under Ortberg.
“He knows full well that we’re in a recovery mode,” Calhoun told investors. “I don’t think this is intended to be a large personnel overhaul.”
Boeing’s challenges extend beyond the 737 Max issues. The company is also grappling with difficulties in its defense sector, which saw losses of $913 million in its defense, space, and security unit—almost double the $527 million loss from the previous year.
The Starliner spacecraft, which completed its first crewed flight during the quarter, encountered problems after docking at the International Space Station, leaving the two astronauts onboard with no confirmed return date.
Additionally, Boeing reported further losses related to its contract to deliver two new 747 jets for the Air Force One program. This contract has already cost Boeing over $2 billion. The company attributed its increased losses to higher engineering costs for this contract and the Starliner program.
Boeing’s shares initially dipped in premarket trading following the financial results but rose over 1% after the announcement of Ortberg as CEO. However, shares are down 28% year-to-date as of Tuesday’s market close.
ALSO READ: Iran Asserts Ismail Haniyeh’s Death ‘Will Not Go In Vain’ And Threatens Israel
