The Muddle at Boeing as Big Choices Loom

"The ouster this week of Boeing CEO Dave Calhoun as well as Stanley Deal, head of its commercial airliner production, won't actually fix any problem.

Both had been placed in their jobs to cope with the aftermath of the MAX crashes. Both had stuck around as the challenges dragged out.

The last thing the market wanted is muddle and uncertainty in the executive suite and boardroom; it wanted a clear line of succession, but that's not what it got. Instead, Mr. Calhoun will leave at year-end with no idea who will replace him.

The best explanation for the sudden shake-up was a deluge of bad signals from the U.S. government, from the National Transportation Safety Board's scathing criticism of Boeing's inability to supply maintenance records related to the Alaska Airlines door-plug replacement, to a scathing FAA audit of its 737 production process, to the Justice Department and FBI suggesting a criminal violation may be implicated in the Alaska Airlines blowout, which luckily didn't lead to serious injury or damage to the plane.

The Boeing story, till now, is a story of two bad decisions and one fluke accident. The first bad decision, circa 2016, was a last-minute, inadequately vetted change to its MCAS software that introduced an unrecognized risk of a catastrophic accident when a plane is climbing away from the ground.

The fluke was the second crash of an MCAS-equipped Boeing Max airplane at the hands of Ethiopian Airlines pilots. By then, pilots, carriers and national aviation authorities had been thoroughly instructed on simple steps to restore control of the plane. As America's own NTSB concluded in a sharp report, Ethiopian's crew appears not to have been adequately advised of the new procedure. They also committed an additional unforced error in a completely avoidable tragedy.

All this took time to figure out, though, leading to a global grounding of the MAX, an extended manufacturing halt, and Boeing's second bad decision. In their hurry to restart production, as they themselves now recognize, Messrs. Calhoun and Deal allowed Boeing's assembly process to become chaotic, with workers from two factories crawling over each other to complete what the company calls "out of sequence" work.

This was likely at least an approximate cause of the failure of Boeing employees properly to reinstall an Alaska Airlines door-plug after removing it to fix improper riveting by a subcontractor in Wichita, Kan.

Mr. Deal was replaced this week by insider Stephanie Pope, previously seen as CEO-in-training. This leaves Boeing with no clear plan for Mr. Calhoun's top job. Wall Street seems partial to Boeing lifer Patrick Shanahan, who left in 2017 for the Trump Pentagon. This fall's election may yet be a factor in one of the most complex decisions Boeing's board will ever make.

Which brings us to a new chapter in the company's story. Its production snafus can be fixed. The big call for its next boss is whether to launch a $50 billion bet on a 737 replacement. Analysts are eager for a decision, citing Boeing's rivalry with Airbus, possible new competitors from China and elsewhere, and a brain drain of Boeing engineering talent that will worsen if they don't get a new project to test their mettle against.

The case for a new commercial jet is premised on the next 20 years being like the past 20 years, with the global fleet expected to double to nearly 50,000. The risk? The trend lines that produced several decades of stunning travel growth, from the march of economic globalization to the resilience of the U.S.-led international order, may be about to reverse themselves.

Meanwhile, Boeing's defense business, now larger than commercial aircraft, is plagued with the same worker and supply chain shortfalls that plague Boeing's commercial airliner business. Ditto the rest of the defense industry. These problems are rapidly becoming a frustration to the U.S. and its allies as they seek increased deliveries of missiles, drones, refueling aircraft, etc.

Washington may have to decide what it wants from Boeing. FDR, whom Joe Biden has lately adopted as role model, likely wouldn't be giving priority right now to a criminal investigation over a nonfatal door-plug blowout. He'd be dispatching financier and confidante Bernard Baruch to Seattle to whip the defense industrial base into shape.

Understandably, after the 737 MAX woes, the media have been plumping for a new CEO with a head-down, engineering orientation. This may be too backward-looking in the circumstances. If the world in the next couple of decades is destined to become a lot less peaceful and less focused on economic progress for humanity, Boeing's next mistake may be hiring a leader who isn't ready for an entirely new list of priorities." [1]

If there are no engineers in the driver's seat, so planes won't fly, ships won't sail, then nothing will help. Walking on foot across the ocean will not take you anywhere. Moses is not here today.

1. The Muddle at Boeing as Big Choices Loom. Jenkins, Holman W; Jr.  Wall Street Journal, Eastern edition; New York, N.Y.. 30 Mar 2024: A.13.