On top of restarting the grounded 737 Max plane after two crashes that killed 346 people — as well as repairing relationships with the Federal Aviation Administration, airline customers, other regulators and the flying public — Calhoun will face additional pressure to prove he’s changing a culture where employees mocked regulators, bragged about persuading an airline not to require training and described its airplane as “designed by clowns, who in turn are supervised by monkeys.”
Calhoun also faces anger from Congress. The communications “paint a deeply disturbing picture of the lengths Boeing was apparently willing to go to in order to evade scrutiny from regulators, flight crews, and the flying public, even as its own employees were sounding alarms internally,” said Rep. Peter A. DeFazio (D-Ore.), chairman of the House Transportation Committee.
Calhoun, who has spent the past 10 years on Boeing’s board, takes over on Monday, and because the company is the biggest component of the Dow Jones industrial average, there will be much riding on his ability to turn Boeing around. According to a Securities and Exchange Commission notice filed by the company Friday night, Calhoun is in line for an additional $7 million in compensation if he reaches a number of milestones, including the “full safe return to service” of the 737 Max.
He brings a reputation for deep operational skills, a track record of crisis management and a plain-spoken communication style that could help win over key constituencies after overly optimistic messaging stumbles by his predecessor, former chief executive Dennis Muilenburg.
But some critics have questioned whether Calhoun, who served for 26 years during General Electric’s Jack Welch era, known for its focus on managerial efficiency and cost management, is the right long-haul leader for Boeing as the aerospace giant aims to shift its focus back to its engineering roots.
“By his résumé, he looks like the second coming of Jim McNerney,” said aviation consultant Richard Aboulafia. The reference is to a former Boeing chief executive and GE Welch protege under whom labor relations were strained and, Aboulafia said, a focus grew on rewarding shareholders through buybacks and dividends.
Although he thinks Calhoun could be the right pick to stabilize things, Aboulafia said, Calhoun will need to reaffirm his commitment to Boeing engineers. They “need to change that culture to ‘engineers are our core.’ ”
George Ferguson, senior aerospace and defense analyst for Bloomberg Intelligence, said Calhoun’s aviation background at GE — Calhoun ran the conglomerate’s aircraft-engines business in the aftermath of the Sept. 11, 2001, terrorist attacks — and finance skills are positives. But he, too, says that “Boeing needs to get back to more of an engineering culture.”
“I don’t know that I see that from his background,” Ferguson said.
Some engineers have alleged in media reports that Boeing’s culture prioritized costs over safety and emphasized speed, cost-cutting and shareholder value. At the time of those reports, Boeing said the company offers employees channels for raising concerns and has “rigorous processes in place, both to ensure that such complaints receive thorough consideration and to protect the confidentiality of employees who make them.”
Regarding the messages revealed Thursday, Boeing said in a statement to Congress that “we regret the content of these communications, and apologize to the F.A.A., Congress, our airline customers, and to the flying public.”
It said that it had made significant changes and that “the language used in these communications, and some of the sentiments they express, are inconsistent with Boeing values, and the company is taking appropriate action in response. This will ultimately include disciplinary or other personnel action, once the necessary reviews are completed.”
Bill Daley, who served with Calhoun on Boeing’s board before he left to become White House chief of staff for President Barack Obama in 2011, recalled Calhoun being unafraid to disagree with those giving presentations in the boardroom. There was “a sense that he’s been around the game for a while,” Daley said in a phone interview. “He had a sense of what was BS and what wasn’t.”
Others say that although Calhoun may not be an engineer, he knows how to work with them. “He’ll give them the respect of asking smart questions and engaging them. … He won’t make decisions all by himself,” said former Amgen chief executive Kevin Sharer, a friend of Calhoun’s.
Bill Conaty, who ran human resources for GE while Calhoun was there, said he expected that the incoming chief executive “will listen to folks who know what the hell they’re talking about and has no time for people who don’t.”
Conaty said Calhoun’s time running aircraft engines also instilled a focus on safety. “Any of our leaders who got a taste of running our aviation business — it just gets in their blood,” he said.
Some questioned naming someone who was a director of the board overseeing Boeing over the past decade.
“We wonder if appointing from within, especially an insider that has been with the company for 10 years, signals more of the same from Boeing vs. an outside appointee who may have offered more of a change of pace and culture,” Bank of America Merrill Lynch aerospace analyst Ronald Epstein, who has a neutral rating on Boeing’s stock, wrote in a research report.
But management experts say that amid a crisis, bringing in someone completely new can add enormous risk and require months of ramp-up time, particularly at a company as complex and big as Boeing.
“It’s gargantuan, absolutely gargantuan,” said aviation consultant Michael Boyd of the job ahead for Calhoun. “That’s one of the reasons you had to have an insider do it. You had to have someone who knew where the keys were.”
Calhoun, who, according to an article on Virginia Tech’s website, is married and has four children, has wasted no time getting started. The day of the announcement — two days before Christmas — he made calls to administrators of the FAA and NASA, as well as lawmakers, the chief executives of airline customers and top suppliers, according to Boeing spokesman Gordon Johndroe. (The company named its chief financial officer, Greg Smith, as the interim chief executive until Calhoun’s start date on Jan. 13.)
A person familiar with the board, who spoke on the condition of anonymity to talk freely, said Calhoun was chosen for his aviation and manufacturing background, deep knowledge of the company and industry relationships that would allow him to start without a big learning curve. His focus is expected to be on restarting the 737 Max production, improving relationships with regulators and customers and simplifying the company’s culture.
The company did not make Calhoun available for comment. In a November interview with CNBC before he got the nod, Calhoun said he had not seen a culture at Boeing that was willing to sacrifice safety. But, he added, “our culture on this subject can get better.”
In the same interview, Calhoun said: “We can strengthen all the independent arms that are meant to put judgment against every decision in favor of safety. We can strengthen those, we can increase authority across the company, and those are the steps that we are going to take.”
Calhoun intends to spend more time early on in the Seattle area, the base for Boeing’s commercial aviation business, Johndroe said.
In 2001, the company moved its headquarters to Chicago, while its commercial aviation business remained in Washington state. Some critics have said the geographic separation put distance between leadership and its businesses. “The days of the CEO in an ivory tower managing assets clearly isn’t right for the team,” Aboulafia said.
Aviation analysts and consultants suggested that Calhoun green-light new airplane projects and work with the board to add more directors with engineering backgrounds — whether that’s a legacy leader like former Ford chief executive Alan Mulally, who is also a former Boeing executive, or even a union member.
“That would give direct input to the boards from the unions and help restore confidence and trust,” said Scott Hamilton, managing director of the Leeham, an aviation consultancy.