Why Boeing is Dismissing a Top Executive (barrons.com) 42
Last weekend Boeing announced that its CEO of Defense, Space, and Security "had left the company," according to Barrons. "Parting ways like this, for upper management, is the equivalent to firing," they write — though they add that setbacks on Starliner's first crewed test flight is "far too simple an explanation."
Starliner might, however, have been the straw that broke the camel's back. [New CEO Kelly] Ortberg took over in early August, so his first material interaction with the Boeing Defense and Space business was the spaceship's failed test flight... Starliner has cost Boeing $1.6 billion and counting. That's lot of money, but not all that much in the context of the Defense business, which generates sales of roughly $25 billion a year.... [T]he overall Defense business has performed poorly of late, burdened by fixed price contracts that have become unprofitable amid years of higher than expected inflation. Profitability in the defense business has been declining since 2020 and started losing money in 2022. From 2022 to 2024 losses should total about $6 billion cumulatively, including Wall Street's estimates for the second half of this year.
Still, it felt like something had to give. And the change shows investors something about new CEO Ortberg. "At this critical juncture, our priority is to restore the trust of our customers and meet the high standards they expect of us," read part of an internal email sent to Boeing employees announcing the change. "Why his predecessor — David Calhoun — didn't pull this trigger earlier this year is a mystery," wrote Gordon Haskett analyst Don Bilson in a Monday note. "Can't leave astronauts behind."
"Ortberg's logic appears sound," the article concludes. "In recent years, Boeing has disappointed its airline and defense customers, including NASA...
"After Starliner, defense profitability, and the strike, Ortberg has to tackle production quality, production rates, and Boeing's ailing balance sheet. Boeing has amassed almost $60 billion in debt since the second tragic 737 MAX crash in March 2019."
Thanks to Slashdot reader Press2ToContinue for sharing the news.
Still, it felt like something had to give. And the change shows investors something about new CEO Ortberg. "At this critical juncture, our priority is to restore the trust of our customers and meet the high standards they expect of us," read part of an internal email sent to Boeing employees announcing the change. "Why his predecessor — David Calhoun — didn't pull this trigger earlier this year is a mystery," wrote Gordon Haskett analyst Don Bilson in a Monday note. "Can't leave astronauts behind."
"Ortberg's logic appears sound," the article concludes. "In recent years, Boeing has disappointed its airline and defense customers, including NASA...
"After Starliner, defense profitability, and the strike, Ortberg has to tackle production quality, production rates, and Boeing's ailing balance sheet. Boeing has amassed almost $60 billion in debt since the second tragic 737 MAX crash in March 2019."
Thanks to Slashdot reader Press2ToContinue for sharing the news.
Boeing needs an lot to trun it around! (Score:2)
Boeing needs an lot to trun it around!
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Management is appointed by the board, and the board is appointed by the stockholders. There is relatively new but now mainstream business ethics theory that management's *sole* responsibility is maximizing shareholder value. Since future income is always discounted in economics, believing this theory means that the managers who set Boeing's feet on the road to eventual catastrophe were doing the only ethically defensible thing, since they maximized the *present* value of shareholder stock.
So let me get this straight... (Score:5, Insightful)
So let me get this straight. This guy took over one year ago. Starliner had three launches prior to him starting, two of which were declared successes despite things going substantially wrong (parachute failure, thruster failure), the third of which was declared a failure because it couldn't dock with ISS, having entered the wrong orbit because of a computer programming/configuration error. And out of the 25 months since the last failure, he had been over the project for just 10 of those months.
One can only assume that Boeing's engineers assured him that they had worked the kinks out, and that Starliner was ready to launch. They obviously had not. And when things went wrong, he presumably did the right thing and decided to scrub the human landing and not take chances with astronaut safety.
So now, they're holding him accountable for the failure, even though the project had already been a train wreck for almost four years by the time he took over, thus firing the one person who is still new enough to actually have a prayer of responding to the latest failure and forcing some actual accountability, and we're supposed to believe that this is going to make things better for Boeing?
Yikes. At this rate, the jokes about Boeing being the sound it makes when it hits the ground are going to stop being jokes.
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Re:So let me get this straight... (Score:5, Informative)
So let me get this straight.
You don't have it straight. But it isn't your fault. TFS is extremely poorly written.
The new CEO, Kelly Ortberg, isn't being fired. He's the person doing the firing.
The person being fired, Ted Colbert, isn't even named in TFS.
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So let me get this straight.
You don't have it straight. But it isn't your fault. TFS is extremely poorly written.
The new CEO, Kelly Ortberg, isn't being fired. He's the person doing the firing.
The person being fired, Ted Colbert, isn't even named in TFS.
Oh. Oof. I didn't even notice that it was the same person's name down below, and assumed that the "new CEO" was actually... you know, new, not 13 months into the job.
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He has not been the CEO for 13 months. He has been the CEO for 51 days.
Wow. Somehow I read that as last August. *sigh*
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> he presumably did the right thing and decided to scrub the human landing and not take chances with astronaut safety.
no. Boeing's position was that starliner was safe to land with the astronauts. NASA disagreed and they have the final call.
Seems like (Score:5, Insightful)
Re: Seems like (Score:2)
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Well,
incompetent management is easy to identify - ha ha ha.
This could have happened 20 years ago (Score:4, Interesting)
and would still have been very late. The behaviour from the top, of crushing anyone for reporting company/subcontractor procedural issues was in full swing from the late 1990's.
They've got a lot of trust to restore - Both internally and externally.
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That does indeed appear to be the case. Boeing upper mgmt realized that he was simply not up to the task and had to face reality.
They need a scapegoat (Score:2)
Well, at least bankers got rich (Score:2)
That's how it works when the customers and shareholders lose out and executives lose their bonus and golden parachute - banks still get paid.
Obvious issue (Score:2)
The CEO who just left, Ted Colbert, was a DEI hire. That' why everything has gone so poorly with the program.
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That's an odd statement to make, did you make it up yourself or did you hear it somewhere and didn't bother to check if it was true or not??
Theodore Colbert has worked at Boeing for 15 years in different roles and he certainly wasn't a DEI hire.
Racists gonna be racist I guess...
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Whenever something goes wrong in a corporation it's blamed on DEI. So why not now? Or are you saying things can go wrong despite someone's qualifications?
Though it is funny how many times white men can absolutely destroy a company and no one blames it on DEI. I guess racism only works one way.
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I don't think that's why the program went badly; rather Boeing realized he did not have the chops to fix it.
Execs are only there to shield the board. (Score:4, Interesting)
Golden parachutes exist because the executives who burn down their own companies didn't fail - they did exactly the job the board hired them to do, and are paid accordingly. They are the inside man who unlocks the door for their accomplices to rob the joint, and if necessary take the fall with a trivial bit in a resort jail before returning to 9-figure gigs. But boards are clever enough to stay out of the headlines and investigation reports, reaping all of the benefits while paying none of the taxes and foisting all of their expenses on to society or the business.
Executives are nothing but mercenaries. Look at the boards of directors to see the real kleptocrat oligarchs.
Boeing needs a decimation (Score:2)
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It's a shell game that corporations play. The board of directors has 100% of the power, but it's very rare to see them mentioned in a corporate scandal: It's always the fault of executives who are, don't forget, merely employees they hired...typically with eyes wide open as to their agenda and intentions. When the inevitable occurs, they are shocked, shocked by the actions of their hired help, and bring in a fresh face to "reform" things. At least until the scandal fades and they can get back to business as usual.
The board is mostly just there to hire/fire the management, and through that set high level strategy. Certainly they bear a lot of responsibility for the McDonnell Douglas merger, and appointing CEOs who let the McDonnell Douglas management take over (and selling off Spirit).
But if a particular CEO just sucks? You just fire them and get a new one.
Golden parachutes exist because the executives who burn down their own companies didn't fail - they did exactly the job the board hired them to do, and are paid accordingly. They are the inside man who unlocks the door for their accomplices to rob the joint, and if necessary take the fall with a trivial bit in a resort jail before returning to 9-figure gigs. But boards are clever enough to stay out of the headlines and investigation reports, reaping all of the benefits while paying none of the taxes and foisting all of their expenses on to society or the business.
That's a little different. I don't think they're put there to fail, but boards are generally executives being hired by other executives (major investors and fund m
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The board selects the CEO but are themselves selected by the major shareholders, who are much more diversified than any executives. The golden parachutes are to make up for the fact that executives who receive only wages and company stock would be too risk averse for the major shareholders.
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The board selects the CEO but are themselves selected by the major shareholders, who are much more diversified than any executives. The golden parachutes are to make up for the fact that executives who receive only wages and company stock would be too risk averse for the major shareholders.
The better argument for golden parachutes might be that it makes executives more willing to accept a merger offer that puts them out of a job, but I think you could negotiate that separately.
As for the diversity of the shareholders, it has a few more family offices and founders than the 'executive class'. But middle class investors aren't the ones driving those decisions.
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"the diversity of the shareholders"
I made no mention of the diversity of the shareholders. I said the major shareholders are diversified, i.e. they are invested in different companies in different industries so their risk isn't very correlated.
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"the diversity of the shareholders"
I made no mention of the diversity of the shareholders. I said the major shareholders are diversified, i.e. they are invested in different companies in different industries so their risk isn't very correlated.
Ok, I think we were talking about slightly different things.
My point has nothing to do with risk but group identity.
The people who serve on boards and the people who serve as executives are fairly similar (with board members often being executives in other companies). And so when considering things like mergers they're much more likely to look at it from the perspective of the executives rather than the employees or even the shareholders.
It's not their only consideration, but it's a factor that increases ex
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Re:Execs are only there to shield the board. (Score:4, Insightful)
Absolutely. There's no question it was a deliberate stock-maximizing plan on the board's part to turn Boeing from a technological marvel into a shell corporation for selling 1970s aircraft and parts-bin tech for indefensible cost-plus contracts. Exactly what they're now pretending to be shocked and appalled by. Loot and pillage is really all these guys know.
They didn't have time in their Ivy League course schedule to learn how to build real things that do real things and sell them at an actual profit. Productivity is for bourgeois commoners. Real players only need to know finance, and really real players only need to be born with relatives on the board of a major bank.
There are people with business cards that say they're the "Senior Executive in Charge of Consulting Paradigm Strategy Synergies" or whatever, and their actual job consists of hanging out on golf courses all day. But they wear those "jobs" like the day's clothing. Those people don't need or care about golden parachutes: They own everything since birth. The ones who look forward to pay packages are wannabes, and their greed keeps them in line.
Make the executives test fly every plane (Score:2)