U.S. Markets closed

Boeing Always Seems to Be in Reaction Mode

Brooke Sutherland
1 / 2

Boeing Always Seems to Be in Reaction Mode

(Bloomberg Opinion) -- Someone had to take the fall for the latest disastrous turn in Boeing Co.’s 737 Max crisis and that someone appears to be commercial airplanes chief Kevin McAllister. 

Boeing abruptly announced on Tuesday afternoon — less than 24 hours before it's due to report third-quarter results — that McAllister is stepping down. He joined in 2016 from General Electric Co. and oversaw the unit responsible for the troubled Max, which has been grounded for seven months following two fatal crashes. He will be replaced by Stan Deal, formerly head of Boeing’s services division, effective immediately. 

The leadership shakeup comes as Boeing tries to counter the reputational damage from a bombshell release last week of instant messages that appeared to indicate internal hesitation over a flight-control system on the Max years before that same software would be implicated in the accidents. The messages have raised concern that it will be politically difficult for the Federal Aviation Administration to agree to put the plane back in the air by the end of the year, even as Boeing makes progress on a fix. Boeing has pushed back on the interpretation that the messages show it misled regulators, but its explanations are unlikely to curb the ire of angry lawmakers, some of whom have already called for the ouster of CEO Dennis Muilenburg.

I would like to believe that Boeing is making a serious effort at holding itself accountable. But at the end of the day, like all of the company’s efforts at redemption in the wake of the Max crisis, it appears to be reacting to criticism, rather than doing the right thing on principle. The company last month unveiled an organizational overhaul meant to help insulate its engineers from profit concerns and the board stripped Muilenburg of his chairman title on Oct. 11. But those two changes book-ended an unflattering report from the Joint Authorities Technical Review (a body of experts including international and NASA delegates) that contended regulators lacked the resources and necessary information to properly evaluate the Max’s complex design and that Boeing exerted “undue pressures” on employees that had FAA authority to approve changes.  

This seeming inability to embrace full accountability and transparency remains the company’s biggest problem. Until it rectifies that, it will be impossible for Boeing to truly move on from this crisis. One cynical read of this leadership change is that McAllister is simply more expendable than Muilenburg right now, with the CEO reportedly set to testify before the Senate on Oct. 29, one day before a scheduled appearance in front of the House of Representatives. I would imagine Muilenburg has spent hours preparing for that grilling, and Boeing may not have time at this point to get a replacement ready.

With regard to those troubling messages, Boeing has countered that the description of the Maneuvering Characteristics Augmentation System flight-control software as “egregious” was meant to refer to a bug in a flight simulator that was being tested. The Seattle Times reports that this explanation checks out, based on three experts’ perspective. However, the FAA has rightly taken issue with the fact that Boeing reportedly turned over these documents to the Department of Justice in February – one month before the second Max crash – and yet only recently gave the information to the regulator. Boeing’s claims that the regulator was informed “multiple times” about the expanded role of the flight-control software run counter to reporting from the Seattle Times and others, as well that JATR report.

Meanwhile, all major Max customers have now pulled the plane from their schedules through at least January 2020, giving up hope that it will be recertified in time for the holiday season. In his job as head of the commercial unit, McAllister was tasked not only with helping oversee the development of a fix for the flight-control system, but with managing Boeing’s relationship with customers. He appears to have fallen short on both fronts. The New York Times published a damning portrayal of McAllister last week as not being proactive enough in addressing the Max crisis with airlines and unwilling to accept criticism for the plane’s issues, which he blames on his predecessors.

He is unlikely to be the last Boeing executive to be shown the door.

To contact the author of this story: Brooke Sutherland at bsutherland7@bloomberg.net

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.

For more articles like this, please visit us at bloomberg.com/opinion

©2019 Bloomberg L.P.