Dave Calhoun was brought in as Boeing’s chief executive officer to steer it through a crisis that unfurled after the crashes of two of its 737 MAX jets. Yet so far during his tenure, problems just keep piling up.
The company’s stock has plunged 58% since his January 2020 arrival as Boeing has struggled to execute on key programs such as the 787 Dreamliner and Air Force One. Investors are unnerved by the $28 billion in cash the company burned through during the pandemic, as well as its blown deadlines and quality lapses. Calhoun has even endured public tongue-lashings from Boeing customers — a rare spectacle that suggests they are unusually exasperated.
That track record has led some on Wall Street to call for Calhoun’s ouster and has raised questions about his leadership style. The CEO prefers empowering top lieutenants rather than getting in the weeds himself, a sharp turn from the details-obsessed approach of his predecessor, Dennis Muilenburg.
“I haven’t talked to one investor who thinks Calhoun is doing a good job, not one,” said Ron Epstein, analyst with Bank of America and former Boeing scientist.
Even with all the frustration with Calhoun, some 20 analysts have buy ratings on Boeing’s stock, according to data compiled by Bloomberg, a reflection of some upcoming openings to change the company’s momentum and image.
The Federal Aviation Administration is close to clearing Boeing to deliver the first 787 jets in more than a year, a step toward unlocking nearly $10 billion in badly needed cash that is tied up in a stockpile of Dreamliners. The manufacturer is also expected to showcase a flurry of 737 MAX orders at the Farnborough International Airshow this month, a display of might at the first major industry trade expo since the pandemic struck.
That may create a path for a turnaround that helps shareholders forgive Calhoun’s stumbles. But the embattled CEO will still face profound challenges, including rebuilding the trust of U.S. regulators and contending with punishing competition from Airbus.
The new CEO has made sweeping management changes that pushed accountability and decision-making back to the heads of Boeing’s main businesses, an approach that draws on his years in senior leadership at General Electric. He has been compared to a private equity fund manager minding a portfolio of companies, focusing on the numbers while leaving it to division leaders to deliver the results. In fact, that was Calhoun’s role at Blackstone Group before he took over the top job at Boeing.
At every turn, Calhoun has sought to differentiate himself from Muilenburg, an engineer by training who was ousted in 2019 for bungling the response to the MAX crisis. Some contend he’s too hands-off, noting how minor issues can quickly blow up into debacles when building airplanes from hundreds of thousands of parts.
When a challenging issue flares in a Boeing factory, Calhoun doesn’t jet in to quiz workers, as Muilenburg often did. Calhoun also resisted suggestions to hold daily reviews when tiny structural flaws kept cropping up around the frames of the company’s marquee 787 Dreamliners, said three people familiar with the matter. Eventually, regulators halted deliveries of the jets as more of the so-called nonconformities were found.
A person close to the company counters that a hovering CEO would’ve been an unwelcome distraction that made things worse. Calhoun holds reviews weekly — and sometimes more often — on hot issues like the 787.
He has also rethought the monthly executive council reviews where previous CEOs had grilled their deputies in grueling daylong sessions. Instead, the “exco” meets just once a quarter, where updates from the company’s main divisions are allotted 20 minutes apiece.
Some see the changes as fruitful. The quarterly exco sessions are now more of a working meeting than a performance, said a person close to the company. Calhoun instead relies on frequent, impromptu check-ins with his deputies by phone.
“A lot of people have called me up and asked, ‘What is Dave Calhoun delivering and why is he in that seat?'” said Robert Spingarn, analyst with Melius Research. “While his style may not resonate with everybody at Boeing and may not resonate with the investment community, it does sound like changes have been made. He’s a hard-liner and is taking a no-nonsense role internally.”
Others have wondered why Calhoun has not done more to cushion Boeing against financial shocks in an industry prone to them. Nick Cunningham, an analyst with Agency Partners, says the company urgently needs to sell equity to fund a new airplane to counter Airbus, which is widening its lead in the lucrative market for single-aisle jets.
“You can’t sail into a crisis with $45 billion in net debt,” he said. “And you need to replace the MAX.”
Behind the scenes, Boeing is laying plans for its next airplane, said a person close to the company, even if executives are not emphasizing them publicly.
The criticism of Calhoun built to a crescendo after the company reported dismal first-quarter earnings in April, revealing $1.3 billion in cost overruns on defense programs and a new, two-year delay for its 777X jetliner. On CNBC, fund manager Jim Lebenthal gave the results a failing grade, declaring, “This is just frankly the worst execution I’ve ever seen in my life. I’m going to be blunt: Calhoun has to go.”
Michael O’Leary, the CEO of Boeing customer Ryanair Holdings, ripped the planemaker’s management as “headless chickens” in a profanity-laced tirade. Other customers waiting for late airplanes vented to directors that they know socially, said four people familiar with the matter, who asked not to be identified as the discussions were private.
Inside Boeing, executives winced at the criticism. “I take those complaints very seriously. It will always give me pause. We’ve had serious discussions inside our company,” Calhoun told Bloomberg in June. “And in a supply-constrained world, we are going to have to face that music.”
Calhoun, to be sure, stepped into an exceedingly difficult job: The company was reeling from a global grounding of the 737 MAX and a torched relationship with the FAA. The challenges were compounded when COVID-19 flattened travel demand, and in turn, airplane sales. Now, the planemaker faces a talent exodus and parts shortages.
An accountant by training, 65-year-old Calhoun made fortunes as a Jack Welch protégé who rose to the vice chairman’s role at GE and, most recently, as head of Blackstone’s private equity portfolio operations. He’s a longtime member of the Conquistadores del Cielo, a secretive club of aviation and aerospace executives.
At Boeing, Calhoun’s playbook appears closer to that of GE’s current chief, Larry Culp, than the legendary Welch. “He’s taken CliffsNotes from Culp: Decentralize, stand alone, get rid of the layers, be self-accountable, sell peripheral businesses and de-lever,” said Nick Heymann, a longtime GE analyst with William Blair & Co.
Calhoun moved quickly to streamline Boeing, deciding early on to jettison the Chicago headquarters, although the move to Arlington, Virginia, wouldn’t be announced for another two years, he told Bloomberg TV. He’s shaken up senior leadership, installing new chiefs at two of the three main businesses this year.
Boeing’s board appears willing to wait for the changes to deliver results. It extended Calhoun’s retirement age to 70 last year as a potential successor exited.
To employees, Calhoun has stressed making engineering once again the heart of Boeing and rebuilding a safety culture that the MAX crisis revealed to be deficient. Within weeks of his arrival, Calhoun asked Boeing’s top engineer, Greg Hyslop, to ditch his Chicago office and work in Seattle closer to the people designing planes.
Calhoun’s success on culture issues will depend on whether employees feel empowered to speak up without fear of reprisal — and how quickly bad news travels up from the factory floor. Winning over skeptical workers hasn’t been easy, especially after Boeing shrank the ranks of its Seattle-area engineers and undermined their union by shipping work to other states while Calhoun was a director.
“We’ve heard some good intentions from the company, and we’re hopeful they’ll result in implementations that will help workplace morale,” said Bill Dugovich, a spokesperson for Society of Professional Engineering Employees in Aerospace, the engineers’ union.
Calhoun noted in the Bloomberg TV interview that the steady drip of bad news that has dispirited Boeing investors had recently dried up. The manufacturer could provide a jolt of good news next week: Cowen & Co. expects it to reveal the highest monthly MAX deliveries since regulators grounded the plane in March 2019. Cai von Rumohr, a Cowen analyst, predicts Boeing is “near an upturn.”
“Right now, everyone is down on them,” said Seth Seifman, analyst with JPMorgan Chase. “But if there is good news on deliveries, and if cash flow and leverage start moving in the right direction, then the conversation can evolve and Boeing is hard to ignore.”
Bloomberg’s Guy Johnson and Siddharth Philip contributed to this report.