news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

Source: Global Times

[Global Times reporter Ni Hao, Global Times special correspondent Wang Pinzhi] Boeing, which has been plagued by scandals due to frequent safety accidents, announced on July 31 that the company's net loss in the second quarter of 2024 reached US$1.44 billion, an increase from the net loss of US$149 million in the same period last year. However, as of the close of the day, its stock price rose by nearly 2%. This is all due to a new card played by Boeing on the 31st: appointing Kelly Ortberg as the new chief executive officer (CEO) and president. As soon as the news came out, the media heatedly discussed whether replacing the CEO at this juncture could save Boeing's recent decline?

Who is Ortberg?

The Arlington-based aircraft manufacturer said on July 31 that Ortberg will become the next CEO and president on August 8, succeeding Calhoun, who has held both positions since January 2020, Bloomberg reported.

Boeing's current CEO Calhoun is interviewed by the media

Ortberg, 62, has been working in the aerospace industry for 35 years. Before joining Boeing, he served as CEO of Rockwell Collins, a US company known for producing aircraft cockpit displays and other electronic systems. Its customers include Boeing and Airbus.

The report said that the market is optimistic about Ortberg's rich industry experience and his background as a mechanical engineer trained at the University of Iowa, and believes that Boeing's decision to appoint an outsider to change the corporate culture will give the company a chance to re-build safe and reliable aircraft. "We think this is a strong and safe choice," Ken Herbert, an analyst at RBC Capital Markets, wrote in a report.

The difficulties facing him

However, taking over Boeing was not an easy task for Ortberg.

Boeing has been mired in quality and safety scandals in recent years. According to the BBC, there were two fatal crashes of Boeing 737 MAX aircraft before. After the second accident, regulators banned the aircraft from flying worldwide. In January this year, it was revealed that the door panel of a Boeing passenger plane operated by Alaska Airlines burst shortly after takeoff, causing the plane to make an emergency landing, which once again raised questions about Boeing's production process. The regulatory agency, the Federal Aviation Administration, has asked Boeing to make comprehensive rectifications and issued a ban to restrict Boeing from increasing production of the 737 MAX series of passenger aircraft, with a monthly production cap of 38 aircraft, and the duration of the ban is not clear.

Bloomberg said that the first problem facing Ortberg is to improve productivity: Boeing's frequent accidents exposed its shortcomings in quality control. Since then, Boeing has been gradually increasing the output of its commercial aircraft factories, but the company is facing strict scrutiny. The financial report data released on July 31 showed that Boeing's second-quarter aircraft deliveries were 92, a sharp drop of 32% year-on-year.

When the production can be restored to pre-pandemic levels depends on when Ortberg and his team can rebuild the trust of regulators to lift their restrictions on narrow-body aircraft production, and how quickly Boeing's suppliers can overcome their own labor and material shortages. According to CBS News, the company is facing supply chain problems that are hindering production and is currently hoping to solve some of the problems by reacquiring its main contractor, Spirit Aerosystems.

Bloomberg said that only by revitalizing the production of the MAX series of aircraft can the company solve its precarious cash flow problem. Boeing's Chief Financial Officer Brian West said in a conference call on July 31 that the company had consumed $4.33 billion in free cash flow in the second quarter and would continue to "burn money" in the third quarter, and it is expected that cash usage this year will exceed expectations. High inventory and prepayments to suppliers to support future production expansion are affecting Boeing's working capital.

In addition, the new CEO needs to quickly repair its balance sheet, including selling shares to raise cash and repay Boeing's $57.9 billion in debt, as well as spinning off or selling businesses. Subsequently, in order to replace the cash cow 737 MAX, Ortberg also needs to mobilize cash and engineering resources to launch a new aircraft series.

Qi Qi, a Chinese civil aviation expert, said in an interview with the Global Times on August 1 that with Boeing facing numerous doubts from all walks of life and fierce competition with Airbus, Boeing does not have much time left and is not allowed to make mistakes in the transformation. Therefore, the new CEO will face a huge test.

It takes time to achieve success

"The leadership change heralds a radical transformation for the aircraft maker. But it will not be easy to escape its troubled corporate culture and resolve its growing debt burden," commented The Wall Street Journal.

Qi Qi also believes that although the change in management has provided Boeing with an attempt to reverse the severe situation and released some confidence to the outside world, winning the confidence of airlines, government regulators and the public again and strengthening the control of the supply chain is a systematic project that cannot be achieved immediately by changing the leadership.

Qi Qi believes that it remains to be seen whether Ortberg can turn the tide and put Boeing back on the right track of development in the face of Boeing's deep-rooted problems such as its corporate culture.