Boeing CEO Pushed Out as Company Reels From 737 MAX Debacle


Boeing Co.

BA 2.91%

ousted Chief Executive

Dennis Muilenburg

as the company struggles with an extended crisis caused by two fatal crashes of its 737 MAX jetliner and friction with regulators over returning the grounded planes to service.

The aerospace giant said

David Calhoun,

a longtime


BA 2.91%

director with deep ties to the aviation and private-equity industries, will become CEO next month. He was named Boeing’s chairman in October in a boardroom shake-up.

Mr. Calhoun, 62 years old, is stepping down as a senior executive at private-equity giant

Blackstone Group Inc.

An experienced corporate fixer, he is also a former top executive at jet-engine maker

General Electric Co.

The leadership decision culminated a series of setbacks for Boeing that led to its recent decision to halt production of the 737 MAX starting next year, according to a person close to the board.

Mr. Calhoun and Boeing finance chief

Greg Smith,

who will serve as interim CEO, face the same challenges as Mr. Muilenburg: winning back the confidence of government officials, suppliers, airlines and the traveling public. Mr. Calhoun spent much of Monday phoning some of those constituents, including lawmakers, a Boeing spokesman said.

In a call with one U.S. airline CEO, Mr. Calhoun signaled Boeing would be taking a different tack, a person familiar with the call said. Airlines have lost hundreds of millions of dollars as they have been forced to adjust schedules that were dependent on a MAX fleet that should have numbered about 800 jets by now, only for all to be grounded.

Regulators had criticized Mr. Muilenburg’s efforts to reassure customers and the financial community that government approval of a fix for the MAX was coming soon—optimism that repeatedly proved misplaced. The new leadership team made it clear in public statements Monday that they won’t get ahead of regulators in predicting the return to service of the 737 MAX after its grounding in March following twin crashes that claimed 346 lives.

Boeing’s board decided to oust Mr. Muilenburg on Sunday during a 5 p.m. Eastern Time conference call following weekend conversations, people familiar with the matter said. Mr. Muilenburg didn’t participate in the discussion of his fate, though before turning to that matter the board discussed other issues with him.

Mr. Muilenburg learned of his dismissal from Mr. Calhoun and another board member that evening, said a person close to the board. Mr. Muilenburg wasn’t happy with the decision but understands, said a friend who spoke to him on Monday, describing him as a professional who cares about the company. “He’s very at peace,” this friend said.

Efforts to reach Mr. Muilenburg weren’t successful Monday.

The 55-year-old executive’s ouster came a week after the board gathered in Chicago for a regularly scheduled board meeting that focused largely on complicated plans for shutting down its 737 factory in Renton, Wash., the person close to the board said.

Frustration on the board had been increasing in recent weeks after the Federal Aviation Administration signaled that the MAX wouldn’t return to service until 2020, this person said. As the need to halt production became clear, there was concern that changing leadership while planning the factory shutdown could destabilize the company, this person said

Directors, who had affirmed their support for Mr. Muilenburg in October, were also dissatisfied at times with delays by management in providing them updates, this person said. “There were some surprises along the way,” this person said, one being Mr. Muilenburg’s rosy estimates for FAA approval that repeatedly proved inaccurate.

The malfunction of Boeing’s Starliner space capsule during its maiden flight on Friday, which left it unable to dock with the international space station, added to setbacks at the Chicago-based company. Mr. Muilenburg tweeted his congratulations to the Starliner team before the problem was disclosed on Friday.

The person close to the board noted that the mission was partly successful and said the mishap wasn’t a significant factor in directors’ decision.

The company has lost about $50 billion in market value since the MAX crisis began, with the stock off 24% from its level before the second crash in March. The MAX, which went into service in 2017, is Boeing’s best-selling plane.

Boeing shares rose about 3% on Monday to $337.55.

The MAX’s return to service won’t happen until regulators approve fixes to a flight-control system implicated in the two crashes. And board members have been particularly concerned about increasing friction with the FAA, which ultimately holds the key, the person familiar with the board said, calling the tension a “very significant and negative development.”

With the leadership change, Boeing’s board wanted to signal it would improve communication, particularly with regulators and customers, the person said.

An engineer by training, Mr. Muilenburg appeared to often rely heavily on data and legal advice rather than diplomacy in formulating his response to the escalating crisis, and his approach sometimes exacerbated friction with customers and regulators. His relationship with FAA leaders deteriorated to the point that about two weeks ago agency chief

Steve Dickson

publicly called out the company’s failures to provide complete and timely data supporting proposed MAX software fixes.

After Boeing’s announcement Monday, the FAA reiterated that it has set no timetable for when the MAX would be allowed to resume carrying passengers. It also said that it expects Boeing to focus on “the quality and timeliness of data submittals for FAA review, as well as being transparent with its relationship with the FAA.”

Turbulent Tenure

Boeing shares surged during CEO Dennis Muilenburg’s tenure, with its market value peaking above $250 billion just days before the second crash of a 737 MAX.

July 1, 2015

Dennis Muilenburg becomes CEO

May 16, 2017

First 737 MAX delivered to Malaysia’s Malindo Air

Oct. 29, 2018

Lion Air Flight JT910 crashes

March 10, 2019

Ethiopian Airlines Flight ET302 crashes

Dec. 16, 2019

Boeing announces plans to suspend 737 MAX production

Dec. 23, 2019

David Calhoun appointed CEO

Mr. Calhoun, who is set to become CEO on Jan. 13, has been a Boeing director since 2009. He spent 26 years at GE, including running its aircraft engine business.

At Blackstone, he has confronted other major corporate crises. He is credited with turning around the fortunes of

Nielsen Holdings

PLC after being put in charge of the market research and measurement company.

He later became chairman of

Caterpillar Inc.

’s board weeks after federal agents raided the heavy machinery maker’s Illinois headquarters. Both he and Mr. Muilenburg are on Caterpillar’s board.

Directors and executives who have worked with Mr. Calhoun have said his experience should help Boeing overcome its problems. Inside boardrooms, his personality looms large, and he became increasingly assertive inside Boeing’s boardroom as problems mounted this year, colleagues have said.

Mr. Smith, who has spent most of his career at Boeing except for a stint running investor relations at

Raytheon Co.

, is well respected by the investment community. As Boeing’s finance chief, he expanded his role in recent years to reduce risk on the company’s balance sheet and focus on a raft of efficiency measures. He also has led efforts to realign production and negotiate customer compensation following the MAX grounding.

On Monday, Mr. Smith pledged to help “chart a new direction for Boeing,” in a note to staff viewed by The Wall Street Journal. Boeing isn’t expected to detail any additional strategic plans or financial fallout from the MAX until it reports full-year results on Jan. 29.

He isn’t joining the company’s board, more than half of whose members were directors when the decision was made in 2011 to proceed with the 737 MAX rather than counter rival

Airbus SE

with an all-new airplane. The board’s makeup has prompted criticism from some that Boeing needs to reset its internal culture.

U.S. Sen. Richard Blumenthal

(D., Conn.) expressed skepticism Mr. Calhoun’s appointment would bring sufficient change and called for the longtime Boeing board member to testify before Congress

“It’s more than just one person,” the senator said. “It’s the management and the culture.”

Larry Kellner, a veteran airline executive who has been on the Boeing board since 2011, will take over from Mr. Calhoun as chairman.

Mr. Muilenburg’s defense of Boeing’s development of the MAX after the second crash in March made him a target of criticism, though he subsequently apologized to victims’ families on multiple occasions and acknowledged Boeing made mistakes.

Michael Stumo, who lost a daughter in the Ethiopian crash, called Mr. Muilenburg’s departure “a good first step,” but also said several board members should resign.

Mr. Muilenburg became CEO in July 2015. Before the MAX grounding, Boeing shares had more than tripled on his watch as the company boosted jetliner production and returned a bigger portion of profits to shareholders through stock buybacks and higher dividends. He is eligible for a $39 million payout, including $6.6 million in cash as well as bonuses and stock awards, based on share price of $322.50, according to regulatory filings. Boeing declined to comment on potential severance details.

Boeing’s new leadership will have its hands full. The company is suspending production of the MAX in 2020 amid uncertainty over the aircraft’s future, which will pressure Boeing’s finances, suppliers and the U.S. economy.

The crisis has disadvantaged Boeing in its competition with Airbus to supply carriers in a fast-growing air travel market. The two plane makers have a backlog of more than 13,000 jet orders, representing seven years of production. Boeing had planned to build more than 900 aircraft this year, including almost 600 MAX jets. It will end the year delivering fewer than 400.

During a late October House hearing, former Boeing CEO Dennis Muilenburg explained three key mistakes the company made. Photo: Reuters/Sarah Silbiger (Originally published Oct. 30, 2019)

The company, which has about 5,000 MAX orders in hand, estimates the MAX crisis will cost it $10 billion in added costs and customer compensation, a figure analysts expect to at least double.

The FAA isn’t expected to approve the MAX software fixes, as well as related changes to pilot training, before February, according to people familiar with the matter.

Dennis Tajer, a spokesman for the union that represents pilots at

American Airlines Group Inc.,

said pilots are seeking “actions that are desperately needed in rebuilding trust in Boeing.”

The FAA’s own pilots may pose hurdles to the return of the MAX. Some of them contend that tests so far suggest airline crews need simulator drills to prepare for certain emergencies involving the flight-control system, according to people familiar with the details. A final decision will likely take weeks, and involve various other pilots inside and outside the agency.

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Corrections & Amplifications
David L. Calhoun

will replace Dennis Muilenburg as Boeing CEO, and

Lawrence W. Kellner

will become chairman. An earlier headline on this article incorrectly said Mr. Kellner would be CEO.

Write to Andrew Tangel at [email protected] and Doug Cameron at [email protected]

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