By DAVID KOENIG
Boeing named an aerospace industry veteran with a background in mechanical engineering as its next chief executive Wednesday, looking to open a new chapter at a company rocked by legal, regulatory and production problems and mounting financial repercussions.
Robert “Kelly” Ortberg, a former CEO at aerospace manufacturer Rockwell Collins, will succeed David Calhoun as CEO and president effective Aug. 8, the company said. Calhoun said in March that he would retire at the end of the year, and analysts generally praised the quicker transition.
“There is much work to be done, and I’m looking forward to getting started,” Ortberg said in a statement issued by Boeing.
Boeing announced its new CEO as it reported a loss of more than $1.4 billion on falling revenue during the second quarter. The loss was wider and the company’s revenue lower than Wall Street’s dismal expectations, as both Boeing’s commercial-airplanes business and defense unit lost money.
The disappointing results came at a tumultuous time for Boeing, which is the subject of multiple investigations into its safety culture and manufacturing quality.
The American aerospace giant agreed to plead guilty this month to a federal fraud charge in connection with its 737 Max jetliner and two crashes that killed 346 people. The Federal Aviation Administration increased its oversight of the company and limited the number of planes it could produce after a panel blew off an Alaska Airlines Max flying at an altitude of 16,000 feet. No one was seriously hurt, but the frightening incident and subsequent scrutiny have damaged Boeing’s reputation.
Boeing Chairman Steven Mollenkopf said Ortberg was chosen after a “thorough and extensive search process” and “has the right skills and experience to lead Boeing in its next chapter.” Ortberg has earned a reputation for running complex engineering and manufacturing companies, Mollenkopf said.
Calhoun, who said he wasn’t involved in the hiring decision, is expected to serve as a special adviser to Boeing’s board of directors until next March. He suggested that Ortberg would support Boeing’s current executives instead of bringing in his own team.
“I don’t think he’s coming in with a notion to want to change a lot of folks,” Calhoun said on a call with analysts. “He knows full well we’re in recovery mode, and he knows full well that we’ve got to complete the recovery mode and we’ve got to get this thing stable and move forward.”
Ortberg emerged as a leading candidate only recently. Others who were reportedly considered for the job included Patrick Shanahan, a former Boeing executive and now CEO of its most important supplier, Spirit AeroSystems, and another longtime Boeing executive, Stephanie Pope, who recently took over the commercial airplanes division.
Ortberg led Rockwell Collins from 2013 to 2018. The company, which developed electronics and other equipment for commercial and military planes, then merged with United Technologies and wound up as part of RTX, formerly known as Raytheon. He retired from RTX in 2021.
Richard Aboulafia, a longtime aerospace analyst and consultant and recently a harsh critic of the company, said the hire is great news for Boeing.
“He is a deeply respected leader in the aerospace industry, and brings more hope for a better future than the company has enjoyed in decades,” Aboulafia said.
Ortberg, who has a background in both commercial and defense aerospace, “was probably on a relatively short list of people that are qualified to take on this challenge,” Jeff Windau, an analyst for financial advising company Edward Jones, said.
The new CEO’s first task, Windau said, will be working with the FAA to help Boeing reach its goal of increasing production of Max jets.
The company waived the mandatory retirement age of 65 for Ortberg, a spokesperson said. Boeing did the same for Calhoun days after he turned 64 in 2021.
Like Calhoun, who took over as CEO in the wake of the two Max crashes, Ortberg inherits the leadership of a company facing ongoing crises and criticism from inside and outside the company.
Boeing, based in Arlington, Virginia, is pushing back against whistleblower allegations of manufacturing shortcuts that crimp on safety. It is dealing with supply-chain problems that are hindering production, which it hopes to fix in part by re-acquiring Spirit AeroSystems, a key contractor. It faces a threatened strike this fall by its largest union, the International Association of Machinists.
The company is still trying to persuade regulators to approve two new models of the Max and a bigger version of its two-aisle 777 jetliner. And it faces a multi-billion-dollar decision on when to design a new single-aisle plane to replace the Max.
Its reputation took another hit recently when thruster failures and helium leaks on Boeing’s new Starliner capsule prompted NASA and Boeing to keep two astronauts at the International Space Station until engineers finish working on the problems.
The quarterly earnings reported Wednesday reflected the scope of Boeing’s challenges. The reported loss of $1.44 billion for the second quarter compared with a loss of $149 million a year earlier. Since the start of 2019, Boeing has lost more than $25 billion.
Excluding special items, the second-quarter loss worked out to $2.90 per share. Analysts expected a loss of $1.90 per share, according to a FactSet survey.
Revenue dropped 15%, to $16.87 billion, falling short of Wall Street’s average forecast of $17.35 billion. The commercial airplanes division had an operating loss of $715 million, and revenue plunged 32% as Boeing delivered fewer passenger jets to airlines — 92 planes, compared with 136 a year earlier.
The FAA limited Boeing’s production of Max jetliners shortly after the Alaska Airlines incident, but Boeing hasn’t even hit the FAA limits as it seeks to fix its manufacturing process. The company said Wednesday that it is sticking with its plans to boost production of the Max to 38 per month by year end.
Boeing took a charge of $244 million to cover a fine it agreed to pay as part of its plea deal with the Justice Department in connection with development of the Max. A federal judge in Texas will soon consider whether to approve the agreement, which also calls for the appointment of an independent compliance monitor and for Boeing to invest at least $455 million “in its compliance, quality, and safety programs.”
Many families of the people who died in the two Max crashes, which took place off the coast of Indonesia in 2018 and in Ethiopia less than five months later, oppose the deal and plan to ask the judge to reject it.
Boeing’s defense and space unit lost $913 million because of $1 billion in setbacks to four fixed-price government contracts, including a deal to build two new Air Force One presidential jets. The smaller services business earned $870 million.
Boeing shares rose 4% in afternoon trading.
Originally Published:
