Why Boeing is Dismissing a Top Executive

Last weekend Boeing announced that its CEO of Defense, Space, and Security 'had left the company,' according to Barrons. 'Parting ways like this, for upper management, is the equivalent to firing,' they write — though they add that setbacks on Starliner's first crewed test flight is 'far too simple an explanation.'

Starliner might, however, have been the straw that broke the camel's back. [New CEO Kelly] Ortberg took over in early August, so his first material interaction with the Boeing Defense and Space business was the spaceship's failed test flight... Starliner has cost Boeing $1.6 billion and counting. That's lot of money, but not all that much in the context of the Defense business, which generates sales of roughly $25 billion a year.... [T]he overall Defense business has performed poorly of late, burdened by fixed price contracts that have become unprofitable amid years of higher than expected inflation. Profitability in the defense business has been declining since 2020 and started losing money in 2022. From 2022 to 2024 losses should total about $6 billion cumulatively, including Wall Street's estimates for the second half of this year.

Still, it felt like something had to give. And the change shows investors something about new CEO Ortberg. 'At this critical juncture, our priority is to restore the trust of our customers and meet the high standards they expect of us,' read part of an internal email sent to Boeing employees announcing the change. 'Why his predecessor — David Calhoun — didn't pull this trigger earlier this year is a mystery,' wrote Gordon Haskett analyst Don Bilson in a Monday note. 'Can't leave astronauts behind.'
'Ortberg's logic appears sound,' the article concludes. 'In recent years, Boeing has disappointed its airline and defense customers, including NASA...

'After Starliner, defense profitability, and the strike, Ortberg has to tackle production quality, production rates, and Boeing's ailing balance sheet. Boeing has amassed almost $60 billion in debt since the second tragic 737 MAX crash in March 2019.'

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