Posted on

‘It’s More Than I Imagined’: Boeing’s New C.E.O. Confronts Its Challenges

FLORISSANT, Mo. — In his eight weeks on the job, Boeing’s chief executive, David L. Calhoun, has come to one overriding conclusion: Things inside the aerospace giant were even worse than he had thought.

In a wide-ranging interview this week, Mr. Calhoun criticized his predecessor in blunt terms and said he was focused on transforming the internal culture of a company mired in crisis after two crashes killed 346 people.

To get Boeing back on track, Mr. Calhoun said, he is working to mend relationships with angry airlines, win back the confidence of international regulators and appease an anxious President Trump — all while moving as quickly as possible to get the grounded 737 Max back in the air.

“It’s more than I imagined it would be, honestly,” Mr. Calhoun said, describing the problems he is confronting. “And it speaks to the weaknesses of our leadership.”

Boeing’s previous chief executive, Dennis A. Muilenburg, was fired in December after presiding over a series of embarrassing setbacks that culminated in the shutdown of the 737 factory this year.

Mr. Calhoun formally took over in January, but he has been involved in this mess from the beginning. A protégé of Jack Welch from his time at General Electric, Mr. Calhoun has been on Boeing’s board since 2009, and was elevated to chairman late last year.

Before becoming the chief executive, he vigorously defended Mr. Muilenburg, saying in a CNBC appearance in November that Mr. Muilenburg “has done everything right” and should not resign. One month later, the board ousted Mr. Muilenburg and announced Mr. Calhoun as his replacement.

“Boards are invested in their C.E.O.s until they’re not,” Mr. Calhoun said, sitting in a dim conference room at the Boeing Leadership Center, a corporate campus outside St. Louis where Mr. Muilenburg’s photo is still displayed prominently.

“We had a backup plan,” he added. “I am the backup plan.”

Credit…Mandel Ngan/Agence France-Presse — Getty Images

Now that he’s in charge, Mr. Calhoun has become more willing to openly criticize Mr. Muilenburg. He said the former chief executive had turbocharged Boeing’s production rates before the supply chain was ready, a move that sent Boeing shares to an all-time high but compromised quality.

“I’ll never be able to judge what motivated Dennis, whether it was a stock price that was going to continue to go up and up, or whether it was just beating the other guy to the next rate increase,” he said. He added later, “If anybody ran over the rainbow for the pot of gold on stock, it would have been him.”

Mr. Muilenburg declined to comment.

Mr. Calhoun and the rest of Boeing’s board never seriously questioned that strategy, in part because before the first Max crash off the coast of Indonesia in October 2018, the company was enjoying its best run in years. What’s more, the board believed that Mr. Muilenburg, an engineer who had been at Boeing for his entire career, was so deeply informed about the business that he was a good judge of the risks involved in ramping up production.

“If we were complacent in any way, maybe, maybe not, I don’t know,” Mr. Calhoun said. “We supported a C.E.O. who was willing and whose history would suggest that he might be really good at taking a few more risks.”

It was only after the Max was grounded last March following a crash in Ethiopia that Mr. Muilenburg’s optimistic approach became viewed as a liability. Airlines grew livid after he repeatedly voiced overly optimistic timetables about when the Max would return to service. The head of the Federal Aviation Administration, Stephen Dickson, was so frustrated that he reprimanded Mr. Muilenburg in a private meeting and publicly told F.A.A. employees to resist pressure from the company.

“They felt like they were being pushed into a timeline,” Mr. Calhoun said of the F.A.A., adding that the “regulator was never there alongside of us, but apparently our team didn’t quite come up to grips with that.”

One of Mr. Calhoun’s initial tasks as chief executive was to go on an apology tour, holding a series of what he called “greet-and-mend opportunities.” The first stop was the White House.

At a private meeting with Mr. Trump on Mr. Calhoun’s third day on the job, the president told him that he liked Mr. Muilenburg but believed a leadership change had been needed. The president said he hoped Boeing was investing all of its resources into getting the plane back in the air.

“He wants us to get back on our horse,” Mr. Calhoun said. “He wants us to get the Max flying again, safely.”

Mr. Calhoun said he had recently asked Boeing employees to “lay out in gory detail what needed to be done” to get the plane certified. “And then when they told me exactly what that was, I added a day or two to it,” he said.

His conclusion was that the Max might be approved sometime this summer, pushing back again the likely return of the plane by six months.

“Restoring credibility with the F.A.A. was not as hard as people think,” he said. “They just didn’t want to be boxed in anymore. They were sick of it.”

While he has been contrite about damaging internal messages released in January, Mr. Calhoun stopped short of saying the company has systemic cultural problems. He called the messages, in which Boeing employees ridiculed the F.A.A. and denigrated their own colleagues, “totally unacceptable,” but said they were not representative of Boeing more broadly.

“I see a couple of people who wrote horrible emails,” he said.

He also delicately maneuvered between accepting responsibility for the two crashes and pointing the finger elsewhere.

When designing the Max, the company made a “fatal mistake” by assuming pilots would immediately counteract a failure of new software on the plane that played a role in the Lion Air and Ethiopian Airlines accidents. But he implied that the pilots from Indonesia and Ethiopia, “where pilots don’t have anywhere near the experience that they have here in the U.S.,” were part of the problem, too.

Asked whether he believed American pilots would have been able to handle a malfunction of the software, Mr. Calhoun asked to speak off the record. The New York Times declined to do so.

“Forget it,” Mr. Calhoun then said. “You can guess the answer.”

He dismissed concerns about the board’s decision to give him a $7 million bonus based in part on whether the Max returned to service. “The objective is to get the Max up safely,” he said. “Period.”

When asked why he didn’t elect to forgo his salary altogether, he said, “’Cause I’m not sure I would have done it.”

Pulling Boeing out of the hole it has dug will take years, Mr. Calhoun said. He said that he would focus on insulating engineers from business pressures and that he wasn’t done shaking up the company’s leadership. At a meeting with his senior leadership team on Tuesday, Mr. Calhoun introduced a new set of values intended to guide the company, which he hopes will inspire employees still working on getting the 737 Max back in service.

“You don’t just win this one,” he said. “You don’t just go out and fight and win and now you’re a hero. One airplane at a time.”

In the meantime, Mr. Calhoun is focused on the basics: producing jets at a pace the factory can handle, instilling discipline up and down the company, and hunting for bad news and acting on it.

“If I don’t accomplish all that,” he said, “then you can throw me out.”

Posted on

It’s Not Just Software: New Safety Risks Under Scrutiny on Boeing’s 737 Max

Even as Boeing inches closer to getting the 737 Max back in the air, new problems with the plane are emerging that go beyond the software that played a role in two deadly crashes.

As part of the work to return the Max to service, the company and regulators have scrutinized every aspect of the jet, uncovering new potential design flaws.

At the request of the Federal Aviation Administration, Boeing conducted an internal audit in December to determine whether it had accurately assessed the dangers of key systems given new assumptions about how long it might take pilots to respond to emergencies, according to a senior engineer at Boeing and three people familiar with the matter.

Among the most pressing issues discovered were previously unreported concerns with the wiring that helps control the tail of the Max.

The company is looking at whether two bundles of critical wiring are too close together and could cause a short circuit. A short in that area could lead to a crash if pilots did not respond correctly, the people said. Boeing is still trying to determine whether that scenario could actually occur on a flight and, if so, whether it would need to separate the wire bundles in the roughly 800 Max jets that have already been built. The company says that the fix, if needed, is relatively simple.

The company informed the F.A.A. about the potential vulnerability last month, and Boeing’s new chief executive discussed possible changes to the wiring on an internal conference call last week, according to one of the people and the Boeing engineer, who spoke on the condition of anonymity to discuss internal deliberations.

The company may eventually need to look into whether the same problem exists on the 737 NG, the predecessor to the Max. There are currently about 6,800 of those planes in service.

The senior Boeing engineer said that finding such problems and fixing them was not unusual and not particular to the Max or to Boeing.

The emergence of new troubles with the Max threatens to extend a crisis that is consuming one of America’s most influential companies and disrupting the global aviation business. The Max has been grounded since March, after two crashes killed 346 people. The crashes were caused in part by new software on the Max, MCAS, which triggered erroneously and sent the planes into nose dives. Boeing has developed a fix for the software, but it has not yet been approved, and the process of returning the plane to service has taken much longer than Boeing expected.

The Max is Boeing’s most important plane, with about 5,000 ordered by airlines around the world. But as the grounding has dragged on, Boeing said it would temporarily shut down its 737 factory, jolting thousands of suppliers and stoking the concern of President Trump.

Boeing abruptly fired its chief executive late last month after he alienated the F.A.A. and airline customers. His successor is now contending with the fallout, as Boeing’s share price has fallen by 21 percent and the company faces tens of billions of dollars in charges related to the grounding.

Regulators have suggested that the Max could be approved to fly again by the spring, a timetable that could still hold. The company says that even if it needs to fix the wiring issue, it would only take one to two hours per plane to separate the wiring bundles on the Max using a clamp.

“We are working closely with the F.A.A. and other regulators on a robust and thorough certification process to ensure a safe and compliant design,” Gordon Johndroe, a Boeing spokesman, said in a statement. “We identified these issues as part of that rigorous process, and we are working with the F.A.A. to perform the appropriate analysis. It would be premature to speculate as to whether this analysis will lead to any design changes.”

Investigations by international regulators into the cause of the two Max crashes determined that pilots of those flights did not respond as quickly or effectively as Boeing and the F.A.A., using accepted industry standards, presumed they would when designing and evaluating the MCAS software.

So in developing a software update for the Max, Boeing and the F.A.A. recognized that the previous industry assumptions should be changed, and that they needed to consider what would happen if it took crews much longer to act in the face of emergencies.

Using that new set of assumptions about pilot reactions, Boeing discovered that if two wire bundles placed close together toward the rear of the plane caused an electrical short, it could lead to a catastrophic accident. The wiring connects to the motor that controls the stabilizer, the horizontal fin on a plane’s tail, sending signals from the flight control computer that can push the nose down or lift it up.

If pilots did not recognize the problem and quickly take appropriate action, the plane could go into a nose dive, the senior Boeing engineer said. Under those circumstances, a short could bring a plane down in the same way that the MCAS software did on both doomed flights, forcing the stabilizer’s motor to run uncontrollably.

Boeing is still working to determine how likely it is that the wires could actually short circuit. The company does not want to make changes to the plane’s wiring if it doesn’t have to, fearing that additional damage could be done during a repair.

The engines on the Max have also become a focus of scrutiny for regulators. CFM International, the joint venture between General Electric and Safran that manufactures the engines, has told the F.A.A. it discovered a possible weakness in one of the engines’ rotors, which could cause the part to shatter. The likelihood of that failure is remote and regulators aren’t requiring an immediate fix, though they are looking to require that airlines inspect as many Max engines as possible before the plane returns to service, an F.A.A. official said.

Boeing also recently told the F.A.A. that it had discovered a manufacturing problem that left the plane’s engines vulnerable to a lightning strike.

While assembling the Max, workers at Boeing’s Renton, Wash., factory had ground down the outer shell of a panel that sits atop the engine housing in an effort to ensure a better fit into the plane. In doing so, they inadvertently removed the coating that insulates the panel from a lightning strike, taking away a crucial protection for the fuel tank and fuel lines. The F.A.A. is developing a directive that will require the company to restore lightning protection to the engine panel and Boeing is already in the process of resolving the issue.

“The F.A.A. and Boeing are analyzing certain findings from a recent review of the proposed modifications to the Boeing 737 MAX,” an F.A.A. spokesman, Lynn Lunsford, said in a statement. “As part of its continuing oversight, the agency will ensure that all safety-related issues identified during this process are addressed before the aircraft is approved for return to passenger service.”

The new issues pose additional challenges for Boeing’s leadership. Late last month, the company’s board fired the chief executive, Dennis A. Muilenburg. He is being replaced on an interim basis by Greg Smith, the former chief financial officer. Next week, David Calhoun, until recently the nonexecutive chairman of Boeing’s board, will take over as chief executive.

On an internal conference call last Thursday, the question of changing the wiring on the Max came up, according to the senior Boeing engineer and another person familiar with the matter. At one point, a Boeing employee asked about whether the fix would need to be made to every plane in the fleet if the issue was found to be low risk. Mr. Smith replied that if changes were needed, they would have to be comprehensive.

Mr. Smith’s sober response served as an immediate contrast to Mr. Muilenburg, who repeatedly made overly optimistic projections about what was needed to get the Max back into service.

Boeing was already confronting a number of problems with the 737 Max and its predecessor.

In recent simulator tests with crews from American, Southwest and United Airlines as well as Aeromexico, many pilots did not use the prescribed emergency procedures to handle problems with the flights, raising the possibility that regulators could mandate flight simulator training or change the procedures before clearing the plane to fly. The F.A.A. is evaluating Boeing’s analysis of the testing.

Still, there are signs that Boeing is making progress toward getting the Max flying again. Regulators from Europe plan to fly to Seattle this week to test the new software in a flight simulator, a sign that international authorities believe the company is far enough along that its fix is ready for serious evaluation, according to two people familiar with the matter.

Government officials believe that the plane may be cleared for a certification test flight as soon as this month, where the company must demonstrate the plane meets all the safety requirements. The flight — the regulator’s final exam for the Max — is a significant milestone and one of the last hurdles the company needs to clear for regulators to lift the grounding.

American Airlines and Southwest Airlines are currently planning to use the Max for commercial flights in April, while United Airlines has scheduled Max flights for June.

“Our highest priority is ensuring the 737 Max meets all safety and regulatory requirements before it returns to service,” said Mr. Johndroe, the Boeing spokesman.

Posted on

At Boeing, C.E.O.’s Stumbles Deepen a Crisis

In a tense, private meeting last week in Washington, the head of the Federal Aviation Administration reprimanded Boeing’s chief executive for putting pressure on the agency to move faster in approving the return of the company’s 737 Max jet.

This was the first face-to-face encounter between the F.A.A. chief, Stephen Dickson, and the executive, Dennis A. Muilenburg, and Mr. Dickson told him not to ask for any favors during the discussion. He said Boeing should focus on providing all the documents needed to fully describe the plane’s software changes according to two people briefed on the meeting.

It was a rare dressing-down for the leader of one of the world’s biggest companies, and a sign of the deteriorating relationship between Mr. Muilenburg and the regulator that will determine when Boeing’s most important plane will fly again.

The global grounding of the 737 Max has entered its 10th month, after two crashes that killed 346 people, and the most significant crisis in Boeing’s history has no end in sight. Mr. Muilenburg is under immense pressure to achieve two distinct goals. He wants to return the Max to service as soon as possible, relieving the pressure on Boeing, airlines and suppliers. Yet the company and regulators must fix an automated system known as MCAS found to have played a role in both crashes, ensuring the Max is certified safely and transparently. Caught in the middle, Mr. Muilenburg has found himself promising more than he can deliver.

After the crashes, but before the plane was grounded, Mr. Muilenburg called President Trump and expressed confidence in the safety of the Max. He has repeatedly made overly optimistic projections about how quickly the plane would return to service, pushing for speedy approval from regulators. The constantly shifting timeline has created chaos for airlines, which have had to cancel thousands of flights and sacrifice billions of dollars in sales.

In his few public appearances, Mr. Muilenburg’s attempts to offer a sincere apology for the accidents have been clumsy, prolonging Boeing’s reputational pain. His performance has left lawmakers irate. The families of crash victims, convinced the company does not care about their loss, have repeatedly confronted him with posters of the dead.

The missteps led Boeing to one of the most consequential decisions in its 103-year history, when it announced on Monday that it was temporarily shutting down the 737 factory, a move that has already begun rippling through the national economy.

The Max is Boeing’s best seller, with tens of billions of dollars in future sales at stake. Boeing stock has fallen by 22 percent in this crisis, costing the company more than $8 billion and spreading pain throughout a supply chain that extends to 8,000 companies. On Friday, Spirit AeroSystems, which makes the Max fuselage, said it would stop production of the part next month.

“Throughout this process our No. 1 priority has been safety,” Gordon Johndroe, a Boeing spokesman, said in a statement. “We have learned a lot this year and our company is changing.”

Last week, when Mr. Trump called Mr. Muilenburg to discuss Boeing’s problems, the chief executive assured the president that a production shutdown would only be temporary.

But Boeing still faces serious hurdles. The company has not delivered a complete software package to the F.A.A. for approval. In recent simulator tests, pilots did not use the correct emergency procedures, raising new questions about whether regulators will require more extensive training for pilots to fly the plane or whether the procedures needed to be changed, according to two people briefed on the matter.

And on Friday, a new space capsule Boeing designed for NASA failed to reach the correct orbit, another blow to company morale and a setback for the United States space program.

“If it was my call to make, Muilenburg would’ve been fired long ago,” Rep. Peter DeFazio, Democrat of Oregon and the chairman of the House Transportation Committee investigating Boeing, said in an email. “Boeing could send a strong signal that it is truly serious about safety by holding its top decision-maker accountable.”

From the earliest days of the grounding in March, shortly after the crash of Ethiopian Airlines Flight 302 and months after the first Max crash, off Indonesia, Mr. Muilenburg tried to put the episode behind him as swiftly as possible, telling airlines it would last just weeks.

“By the time April rolled around, Boeing was telling us next week, next month,” Gary Kelly, the chief executive of Southwest Airlines, said in an interview. “We were a week away, weeks away, three weeks away.”

That misplaced optimism made it impossible for airlines including Southwest, which is Boeing’s biggest 737 customer, to reliably plan their routes. “It was really creating havoc,” Mr. Kelly said.

In August, regulators from Europe, Canada and Brazil flew to Seattle and joined F.A.A. officials for a meeting with Boeing. They were expecting to review reams of documentation describing the software update for the Max. Instead, the Boeing representatives offered a brief PowerPoint presentation, in line with what they had done in the past. The regulators left the meeting early.

“We were looking for a lot more rigor in the presentation of the materials,” said Earl Lawrence, the head of the F.A.A.’s aircraft certification office. “They were not ready.”

With delays mounting, Mr. Muilenburg missed a chance to smooth things over with key customers. In September, he attended a gathering of a club of aviation executives called Conquistadores del Cielo at a ranch in Wyoming, according to two people familiar with the trip. As the group bonded while throwing knives and drinking beers, Mr. Muilenburg took long bike rides by himself. It was typical behavior for Mr. Muilenburg, an introverted engineer who prefers Diet Mountain Dew to alcohol, but it left other executives baffled.

October brought a string of bad news for Mr. Muilenburg. The board stripped him of his title as chairman, a stinging rebuke of his leadership. The decision, the board said, would allow him to focus on the single most important job at the company: bringing the Max back to service.

About two weeks before Mr. Muilenburg testified in front of Congress for the first time, the company disclosed to lawmakers instant messages from 2016 in which a Boeing pilot complained that the system known as MCAS, which was new to the plane, was acting unpredictably in a flight simulator. Boeing discovered the instant messages in January, but Mr. Muilenburg did not read them at the time, instead telling the company’s legal team to handle them.

The messages included the pilot saying he “basically lied to the regulators (unknowingly).”

When Mr. Dickson learned of the messages in October, he sent a one-paragraph letter to Mr. Muilenburg demanding an explanation for “Boeing’s delay in disclosing the document to its safety regulator.”

Mr. Muilenburg and Mr. Dickson, who took over the F.A.A. this summer, spoke for the first time later that day. Mr. Muilenburg said Boeing hadn’t told the F.A.A. about the messages out of concern that doing so would interfere with a criminal investigation being conducted by the Justice Department, according to two people briefed on the call.

Mr. Dickson said the lack of transparency would only increase the regulator’s scrutiny of the company.

Still, Mr. Muilenburg continued to project confidence, telling investors on an earnings call in October that he expected regulators to begin approving the Max by the end of the year. The company had just fired Kevin McAllister, the chief executive of Boeing’s commercial division who had been overseeing work on the Max.

Despite Mr. Muilenburg’s assurances, airline discontent was growing. The next day, American Airlines joined a chorus of Boeing customers complaining about the growing costs of the Max crisis. Doug Parker, American’s chief executive, said on a call with investors that he was working to “ensure that American is compensated for the lost revenue that the Max grounding has caused, the missed deadlines and extended grounding.”

“We’re working to ensure that Boeing shareholders bear the cost of Boeing’s failures,” Mr. Parker added. “Not American Airlines’ shareholders.”

In two days of congressional hearings at the end of October, Mr. Muilenburg faced withering criticism from lawmakers, who told him to resign or take a pay cut. Mr. Muilenburg said it was up to the board to make decisions about his multimillion-dollar compensation. He invoked his upbringing on an Iowa farm so many times that he elicited jeers from family members of crash victims who were present.

In an interview on CNBC after the hearings, the chairman of Boeing’s board, David Calhoun, said the board was confident in its chief executive.

“From the vantage point of our board, Dennis has done everything right,” Mr. Calhoun said. “If we successfully get from where he started to where we need to end up, I would view that as a very significant milestone and something that speaks to his leadership and his courage and his ability to execute and get us through this.”

Mr. Muilenburg continued to press the F.A.A. In early November, he called Mr. Dickson to ask whether he would consider allowing the company to begin delivering airplanes before they were cleared to fly. The administrator said he would look into it but made no commitments, according to an F.A.A. spokesman.

In an apparent misunderstanding, Mr. Muilenburg took the call as a green light. The next Monday, the company put out a statement saying it could have the plane to customers by the end of the year.

Mr. Dickson told colleagues that he had not agreed to that timeline and felt as though he was being manipulated, according to a person familiar with the matter. That week, he put out a memo and a video urging employees to resist pressure to move quickly on the Max approval.

This month, anxiety levels rose at Boeing’s factory in Renton, Wash. Several key tests had not yet been completed, and European regulators would soon leave work for the holidays and not return until the beginning of January. In calls with F.A.A. officials, Boeing engineers began to float an idea for speeding the process: Perhaps the company should ask the agency to break with its foreign counterparts and approve the Max alone?

The suggestion alarmed some F.A.A. officials, who worried that approving the Max without agreement from other regulators would be untenable, according to two people familiar with the matter. When they called Mr. Dickson to tell him of Boeing’s plans, he balked at the suggestion and eventually the company backed down.

A week later, Mr. Dickson brought Mr. Muilenburg into the agency’s Washington headquarters for their first in-person meeting.

There, Mr. Dickson said he had done the math, and there was no way the Max could fly by the end of the year.

When Mr. Muilenburg brought up the logistics of delivering Max jets to customers, Mr. Dickson would not discuss the issue, two people familiar with the matter said. Boeing’s representatives said they might need to consider temporarily shutting down production. Mr. Dickson told them to do what they needed to do, saying the agency was focused on conducting a thorough review.

Four days later, Boeing announced it would bring the 737 factory to a halt. There was no discussion of removing Mr. Muilenburg as chief executive at last week’s board meeting in Chicago where the shutdown was debated, according to three people briefed on the meeting.

The challenges facing Mr. Muilenburg extend beyond returning the Max to service and the botched space capsule launch on Friday. The F.A.A. is aware of more potentially damaging messages from Boeing employees that the company has not turned over to the agency. Other important planes are behind schedule. New defects have been found on older models of the 737. Boeing lost two major pieces of business to Airbus, its European rival, this month.

“This hasn’t been their best and finest hour,” said Mr. Kelly, the Southwest Airlines chief executive. “There’s mistakes made and they need to address those.”

With the first anniversary of the Ethiopian accident approaching in March, Boeing recently asked a representative for the families of crash victims if it would be appropriate for Mr. Muilenburg to attend the memorial. They said no.

“He is not welcome there,” said Zipporah Kuria, whose father, Joseph Waithaka, was killed in the second crash. “Whenever his name is said, people’s eyes are flooded with tears.”


NYT > Business