Boeing CEO Dennis Muilenburg Removed After A Catastrophic Year For The Company

The CEO of US aerospace major Boeing CEO Dennis Muilenburg was replaced on Monday (Dec 23) as the board of the company, that has plunged in to turmoil over its flawed 737 Max aircraft, mounted an effort to salvage its battered reputation and rescue it from potentially catastrophic financial losses.

The board announced that its current chairman David Calhoun will take over as the new CEO of the company effective January 13. Earlier this October, Boeing had stripped Muilenburg of his chairman role and elevated Calhoun, a senior executive at private equity giant Blackstone Group and who served as a director in the board for over a decade, as the Chairman. Calhoun is a former GE executive and ex-CEO of television ratings firm Nielsen

Boeing under Muilenburg has faced huge public and customer backlash over two deadly crashes of 737 Max that killed 346 people.

Two 737 Max planes crashed within five months of each other, one in Indonesia in 2017 and another in Ethiopia in 2018. Regulators across the world orderd the Boeing planes to be grounded since the crashes. Among the reasons atrributed to the crash is said to be a poor designed piece of software written to prevent the jets from pitching up but had caused some to nosedive instead.

Besides repeatedely promising what was seen as unrealistic schedule for the 737’s return to service, Muilenburg also faced accusations that he is unwilling to accept that company’s design flaws contributed to the accidents.

The immediate trigger that led the board to replace Muilenburg was a public rebuke this month from Federal Aviation Authority (FAA), the US aviation regulator, over “unrealistic” forecasts by CEO. for getting the Max flying again.

Earlier last week the company announced that it would temporarily halt production of the 737 MAX jets beginning in January 2020 after American regulators ruled out flight clearance for the globally grounded aircraft.

Around 400 finished planes have piled up at Boeing facilities since the aircraft was grounded in the wake of the crashes. Analysts estimate that the company will lose $4.4bn in cash for each quarter the 737 Max remains grounded.

Boeing had been claiming that it is confident of regulatory winning approval from the FAA to let the plane fly again. However, the FAA, which has faced charges that it enjoys a cosy relationship with the company, has pushed back against the company’s efforts.

Ever since its 1997 merger with rival McDonnell Douglas, Boeing has faced criticism that it has departed from its core engineering culture and focussed on short-term, cost-cutting, shareholder focussed business model.. In 2001, the company shifted its headquarters from the engineering site in Seattle to Chicago.

The increasing shift away from engineering-centric approach has seen the aircraft manufacturing behemoth prioritized updating old models rather than designing new ones. Critics point out that MAX’s faulty flight-control system was only installed because of the jet’s 53-year-old design, which was less aerodynamically stable when fitted with bigger, more fuel-efficient engines.

Boeing is one of America’s largest industrial exporters. The production halt could have implications for broader US economy and its GDP growth.