Oct. 14, 2019, © Leeham News: Look for Boeing CEO Dennis Muilenburg to leave in 2020.
At least this is my view.
But some aerospace analysts I spoke with over the weekend are split. Some believe Friday’s action by the Boeing Board of Directors “stripping” (as most media headlines and stories positioned it) the chairman’s title from Muilenburg, while his retaining the president and CEO titles, is the first step in easing him out the door next year. This is my view, too.
Muilenburg also remains on the Board.
Others think handing the non-executive chairman’s title to lead director David Calhoun is actually an effort to save Muilenburg’s job.
Here’s the divergent thinking. None of the analysts wanted to be identified because by investment bank policy, their remarks hadn’t been cleared for quotation and none had yet issued research notes in reaction.
Last Monday, I opined that if Muilenburg left, it will probably be with a good golden parachute.
I wrote that Boeing doesn’t typically fire people outright. They’re allowed to retire, or get transferred. To get fired, there have to be really egregious circumstances.
Nothing could be more egregious, one can argue, than the MAX development cycle culminating with two fatal accidents, killing 346 people and grounding the world fleet. The grounding in now in its seventh month. It has already cost Boeing at least $8bn and many think it will cost a lot more.
But as I wrote last Monday, Muilenburg came into the Boeing presidency 1 ½ years after CEO Jim McNerney launched the MAX. It was another two years before McNerney retired and Muilenburg fully succeeded him.
So, Muilenburg inherited a lot of the foundation and decisions of the MAX development. Just how much he was involved in subsequent cost-control policies isn’t known to us outsiders.
But it is clear how Boeing initially responded to the Lion Air MAX crash by immediately blaming the pilots and training of one of its biggest customers drew widespread condemnation.
It would come out much later that within a week of the Lion Air crash, Boeing started work to revise how MCAS worked.
Initial reaction to the Ethiopian Airlines accident also drew negative reviews: Muilenburg called President Trump to plead the case that the MAX should not be grounded, according to reports that have never been denied.
One analyst believes that how Muilenburg handled things after the crash rates his firing, not because of the decisions and paths embarked upon in the development of the MAX, which largely pre-dated his arrival in Chicago.
Muilenburg has been with Boeing his entire professional career, so retirement is certainly a good scenario.
Muilenburg has said he wants to stick around to see the MAX return to service and to right the ship (my words). Certainly this would be a better legacy than going out as things now stand.
I heard, but never confirmed, that he began talking about retirement last November—after the Lion Air crash but before the Ethiopian Airlines disaster and grounding of the 737 MAX.
On Friday, the Boeing Board of Directors stripped Muilenburg of his chairman’s title—something that some shareholders tried unsuccessfully to do at the annual meeting earlier this year.
I also heard then that despite the failed shareholders’ vote, the Board was already thinking of separating the titles. This, too, was unconfirmed.
The New York Times yesterday published the “inside story” of how the Board finally acted on Friday.
Boeing announced the news shortly before 5:30pm Chicago time (Boeing’s HQ is in Chicago) Friday. Announcing bad news late on Friday is a time-honored tactic to bury bad news.
Wall Street analysts, usually quick to put out notes, were already out of the office. As of Sunday night (Seattle time), when I wrote this column, I hadn’t received any research notes. The analysts I talked with basically didn’t know what conclusions to draw.
One analyst told me that if Muilenburg is ousted, his successor needs to come from outside the company.
The media spared no mercy in reporting the blow to Muilenburg.
One well-known observer about all things Boeing (but who is not an analyst) told LNA that, “To me, what’s interesting is there’s no comment about how and whether he can get the chairman title back. If that’s the case, is this the first step to Dennis leaving? I’m not sure he stays after getting somewhat ‘demoted.’”
Why would Muilenburg stay? One analyst points to the $20m per year he’s earning. But the greater reason, this one believes, is ego—the righting-the-ship theory.
The New York Times also pointed a finger at Kevin McAllister as potentially next on Boeing’s hit list. An unflattering portrait of McAllister was reported. I have no knowledge of this kind of detail, but I agree that on the fundamentals surrounding the MAX development, McAllister arrived too late in the process to be held accountable.
The MAX had been in flight testing 11 months before he was named CEO of Boeing Commercial Airplanes. It entered services four months after he arrived.
But, as The Times points out, he’s been invisible since the grounding.
I once sent an email to Corporate Communications asking, “Where’s Waldo?” about McAllister’s absence from public view. This comparison was not appreciated. Corp Com said McAllister was in communication with the customers.
The New York Times painted a different picture, naming names of customers unhappy with McAllister’s communication level.
This story is going to continue to play out for months to come.
Next year’s shareholders’ meeting may be a date to watch.