Five things Boeing should do to get back on track: Bill George

Boeing (BA) stock is under pressure, amid the aftermath of an aircraft door plug flying off mid-flight and the company’s upcoming earnings report on Thursday. Former Medtronic CEO and True North author Bill George joins Yahoo Finance Live to weigh in on the company’s woes—and outlook for 2024.

“Here is a company that is in trouble, but America can’t afford to have it be in trouble,” insists George who suggests an urgency for the company to recover. George cites five ways Boeing could get back on track—including: enhanced focus on quality, closer examination of the supply chain, and relocate its headquarters to Seattle.

George does not appear hopeful about speedy adoption of improvement strategies, noting “they’re fixing a piece at a time.” Referring to CEO Dave Calhoun’s competency George states plainly “he’s [Calhoun] acting like a short-term CEO.”

George believes that the culture of the company has shifted from “a quality, aviation design culture” to “a short-term, finance-based culture,” and believes the suitable person for the CEO role should be an expert in aviation.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Eyek Ntekim

Video Transcript

JULIE HYMAN: Well, one stock that is not green this year is Boeing. The stock, of course, getting clobbered to start the year, as the company faces the fallout of a door panel blowing off a jet mid-air. And the company's gearing up for earnings on Wednesday.

But our next guest says the issues at Boeing go back 20 years. For more on the culture and leadership at Boeing, we're bringing in Bill George, former Medtronic CEO and author of "True North, Emerging Leader Edition." Good to see you, Bill. So as you look at this situation at Boeing, you recently wrote about the leaders that led up to Dave Calhoun, the current CEO. Where did the problem start, briefly, if you can summarize, and how does he fix it?

BILL GEORGE: You know, we've had five CEOs that have played the short-term game for the last 25 years, starting back with Phil Condit, who instead of gaining share, he bought out McDonnell Douglas, which led him into a lot of trouble, and more importantly, moved the headquarters away from Seattle. And then you had a succession of CEOs.

And if you just look at the stock over the last five years, it's down 44%. Cost investors about $100 billion. So these CEOs have gotten away from what Boeing's all about. In the last five years, they have bought back 121% the dividends and stock buybacks, 121% of their earnings. Of course, they've lost money for the last three years.

So here's a company that's in trouble, but America can't afford to have it be in trouble. This is an American icon that must be restored. And so I think they've got to get back to longer term focus.

Now I've got five ideas on how to do that. Number one, they've got to restore their whole quality system. If I were Dave Calhoun, I would shut down the entire factory for a week and have everyone focus on quality. They've got to change not just quick fix-- or let's fix this door plug. No, they've got to fix their whole system.

Second, they've got to redo the whole supply chain. They keep farming out things to unreliable suppliers, like Spirit Aero. And they can't even keep the bolts on a plane. And it's ridiculous. Third, they need to design a new single-aisle aircraft.

The 737, their workhorse aircraft, is spent-- it was designed 60 years ago. Think how much technology has changed in 60 years, and they don't update. They just keep changing bits and pieces. And they create more problems as they go. And frankly, if I were they, I would move the headquarters back to Seattle, and Dave Calhoun should move back there himself.

And finally, they need to really take a look at their balance sheet. They've bought back so much stock, they have negative shareholders' equity. They've got $54 billion in short- and long-term debt. And they're in trouble. And they need to restore the balance sheet to a healthy balance sheet and generate some cash flow, which they haven't done for a long time.

JOSH LIPTON: And so, Bill, so you've laid out the strategy here, what you think Dave Calhoun and his team there need to do. Any evidence, Bill, to you that Calhoun and the C-suite of Boeing are going to take on any of these measures you're suggesting?

BILL GEORGE: Not so far. Well, he said he's going to fix quality. But see, they're fixing it a piece at a time. They're not fixing the quality system. But no, he said, he's been in office now-- this is his fifth year. And he said, we're not going to have a new aircraft this decade.

Well, why not? They had the former head of commercial aviation, Alan Mulally, had a new single-aisle aircraft that they canceled after he left and went to Ford and turned around Ford. They've not gone ahead with that. They need to do that. And that's going to take seven or eight years. But they just need to get with that right now.

They're on the verge of losing longtime customers like United Airlines. United Airlines CEO is in Toulouse this week, talking to Airbus about can they get more production out of them. American, Southwest, very loyal. They are all threatening now to say, if you don't get your act together, we're out of here. And in fact, one of them said this is a straw that breaks the camel's back. So they've got to restore themselves as America's leading aviation supplier.

JULIE HYMAN: Bill, is Dave Calhoun the right guy?

BILL GEORGE: Well, so far, he seemed like he was, but he has not demonstrated it. He is-- he's not-- he once ran GE's jet engine business. But he has got to really step up to the long-term issues. He's acting like a short-term CEO. And that's not going to get it. They're not going to cut it. Yes, he's got to do the short-term things, but he's got to have a long-term strategy in place, and he hasn't done that yet.

So I'm waiting to see, will he come forward with that on Wednesday? I'm not optimistic. But that's going to be a key time for him to face down investors. It's not just about door plugs. There's a lot more to it than that.

JULIE HYMAN: Yeah, most definitely. Bill, as you mentioned, he is a GE alum. And a number of those other leaders you mentioned were also veterans of GE. Is this yet another sort of hit to GE's one-time reputation as a factory for quality executives?

BILL GEORGE: No doubt. Harry Stonecipher, the former CEO that got him in a lot of this trouble, came out and publicly said-- 20 years ago, he said, we're not going to act like an engineering firm anymore. We're going to act like-- we're going to run this like a business. What an insult to people that have generated tens of billion dollars in profits.

But he said that, and that changed the whole culture to a short-term, finance-based culture instead of a quality aviation design culture. And that was the key. And then they passed over Alan Mulally, called him back-- Stonecipher back. Mulally should have had the job, frankly. That would have changed everything.

So I think Mike Calhoun needs to surround himself with someone, maybe get in a COO if he can-- or maybe just be chairman and bring in a CEO who really is a top aviation expert.

JOSH LIPTON: And Bill, I'll get you out of here on this. If you're a viewer watching this right now, maybe you have capital committed to Boeing, how worried do you think you should be, Bill, about Boeing's business and the reputational hit it's taken and potential impact to orders here in the quarters and years ahead?

BILL GEORGE: I think you ought to be very worried if you'd invested-- five years ago, if you had $1,000 invested in Boeing, it'd be worth three times as much as if you'd put it into the-- just into the S&P 500. So yeah, I think one should be very concerned about the long-term issues, not just the short term. So you can get short-term fixes, but they don't solve fundamental problems of a culture that's moved away from design and quality and safety. And they've got to get back to that. That's number one. And if they don't do that, they aren't going to have a future.

America needs them, though. So we can't just sit back and say, oh, well, Boeing's going to go the route of GE. That can't happen. We have to ensure we have a great company in Boeing. And I think that's essential. And so I'm not giving up on them at all. But I do feel like they've got to get back to fundamentals of how you run a business.

JULIE HYMAN: Bill George, we always really appreciate your insight here at "Yahoo Finance." Thanks so much for joining us.

BILL GEORGE: Thank you for having me. It's great to be back with you.

JULIE HYMAN: Take care.