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Boeing’s new CEO, Robert “Kelly” Ortberg, will take office on August 8.

Boeing is currently in the midst of a safety credibility crisis and suffered a huge loss of $1.4 billion in the second quarter. After Boeing made the decision to "change leaders", can Ortberg, who has an engineering and technical background rather than a financial background, satisfy the outside world and restore confidence in Boeing?

Yves Doz, professor of global technology and innovation at INSEAD, who has long studied Boeing, said his research on global innovation and corporate governance failures showed that two major strategic changes in the early 2000s affected the company's future.

He told the reporter from China Business Network that the biggest challenge facing the company is how to overcome the quality control problems caused by the complexity and dispersion of its supply system. "Only time will tell whether Boeing can free itself from the challenges it faces."

The 64-year-old veteran was appointed in a time of crisis

As mentioned earlier, Boeing suffered a loss of $1.4 billion in the second quarter, which is almost 10 times the loss of $149 million in the same period last year. Boeing delivered 92 aircraft in the second quarter, a sharp drop of 32% year-on-year.

The reason is that increasing scrutiny over the safety and quality of Boeing's aircraft has prevented the troubled company from producing enough aircraft to return to profitability.

In this context, on July 31, Boeing announced that aviation industry veteran Ortberg will take over as Boeing CEO from August 8.

Ortberg, 64, was a mechanical engineer with more than 30 years of experience in aerospace and defense. He has been working in the aviation industry since 1983, when he worked as an engineer at Texas Instruments. In 1987, he joined Rockwell Collins as a project manager and became the company's CEO in 2013. During his tenure, he facilitated the merger of Rockwell Collins with United Technologies and Raytheon to form Raytheon Technologies. After the merger, Ortberg will leave Raytheon Technologies in 2021.

According to a report by Xinhua News Agency citing foreign media, Boeing canceled the mandatory retirement age of 65 for Ortberg.

“I am deeply honored and humbled to join this iconic company,” Ortberg said in the statement. “Boeing has a proud and rich history as a leader and pioneer in our industry, and I am committed to continuing that tradition with the company’s more than 170,000 dedicated employees with a focus on safety and quality.”

"Ortberg is an experienced leader who is deeply respected in the aerospace industry and has a reputation for building strong teams and running complex engineering and manufacturing companies," Boeing Chairman Steven Mollenkopf said in a statement. "We look forward to working with him as he leads Boeing through this important period in its long history."

On the one hand, even one of Boeing's harshest critics sees hope in Ortberg's appointment.

Robert Clifford, an attorney for the families of the victims of the Boeing 737 Max crash, said: "The appointment of a new Boeing CEO could not come at a more critical and necessary time for the safety of travel for the public around the world."

He said Boeing had "fallen precipitously" under the leadership of previous CEOs and Boeing's "do-nothing" board.

Clifford added: "While Ortberg is an industry insider, he comes from outside Boeing and, by all appearances, has a good reputation within the industry."

The selection of Ortberg has also been generally praised by Boeing analysts. Bank of America aerospace analyst Ron Epstein said: "One person can't turn the company around, but choosing Ortberg should be a better way to recruit talent than choosing Boeing insiders."

Indeed, Ortberg's background as a mechanical engineer may encourage some employees who have criticized Boeing management for focusing too much on finances rather than engineering quality.

Dong Si told the First Financial reporter that previous investigations showed that Boeing did not have a board member responsible for safety, which was contrary to the standard practice of all airlines and most other aerospace companies.

He explained that Boeing has a safety personnel committee, but the body is not connected to the CEO or the board. Until 2019, Boeing's board was full of retired (US) government officials, but lacked aerospace expertise, and "financial engineering took precedence over aerospace engineering."

"Dave Calhoun, who took office in early 2020, recognized these shortcomings and renewed half of the board members. However, transformational changes in corporate culture take time to permeate the company's operations. The newest directors on Boeing's board are likely only now starting to hit their stride," said Dongs.

He also gave an example that after Boeing acquired McDonnell Douglas in 1997, the mainstream culture it inherited from McDonnell Douglas led it to tend to compromise in product design, development and commercialization.

“Boeing had begun a fundamental shift in its business model: from being an American aircraft designer and manufacturer, Boeing was trying to coordinate an increasing number of partners and subcontractors around the world. The company’s leaders did not realize this, and they were taking risks that were perhaps greater than they had taken decades earlier when developing the 747,” he explained.

The thorny issues facing new officials

It should be noted that Boeing has not made a profit since 2019.

Since then, its core operating losses have totaled $33.3 billion, far exceeding analysts' forecasts, and it will be difficult for Boeing to return to profitability unless it can convince regulators that it has addressed safety and quality issues with its aircraft.

Boeing has acknowledged this year that two crashes of its 737 Max jets, in October 2018 and March 2019, that killed a total of 346 people, were caused by design flaws. The crashes and the time it took to fix the design cost the company more than $20 billion.

Just recently, Boeing has agreed to plead guilty. On July 24, the U.S. Department of Justice submitted a plea agreement reached with Boeing to a federal court. In the agreement, Boeing admitted to "conspiring to defraud" the U.S. government in the process of seeking airworthiness certification for its 737Max model and accepted a fine of US$243.6 million.

Boeing also promised to invest at least $455 million in compliance rectification over the next three years. The plea agreement also requires the appointment of an independent monitor for a three-year term to report to the public annually on Boeing's rectification progress.

However, analysis generally shows that this will cause Boeing to continue to lose money because it cannot make a profit at its current production levels.

The most pressing issue for Ortberg is that about 36,000 hourly workers at its commercial aircraft plant in Washington state may go on strike in September. Earlier, Boeing said it knew that the machinists union representing these workers would make "high demands" for wages, but the company was willing to reward workers and was doing everything it could to avoid a strike.

Epstein believes Ortberg is walking into a Boeing that could face a production strike in September. "Its defense business is struggling, and its commercial business has lost the trust of regulators and the public. If this quarter's poor performance is an indicator of the future, Boeing as a whole has a long way to go," he said.

However, "demand for commercial aircraft remains strong, and in a duopoly (Boeing and Airbus), we believe Boeing should be the beneficiary," Epstein said.

As Epstein analyzed, Boeing's defense business also had problems, causing its defense, space and security business unit to lose $913 million, almost double the $527 million loss it suffered a year ago.

In addition, Boeing's Starliner spacecraft carried out its first manned flight, but problems occurred after docking with the International Space Station, leaving two astronauts stranded at the International Space Station with an undetermined return date. Boeing also said that the increase in the cost of the Starliner project led to the expansion of Boeing's losses.

Dong Si told the First Financial reporter that as Boeing became more and more dependent on its partners, it once focused on system integration and assembly, thus losing some of its deep industrial competitiveness. "In the face of increasingly fierce competition from its competitors, Boeing's shift to composite materials made this transformation more difficult, while also imposing a culture of cost-saving on itself. Poor corporate governance, full orders, and an unreasonable board of directors and a lack of information made it impossible to realistically perceive and assess the various dangers Boeing faced."