Wall Street wanted an outsider with engineering and manufacturing experience to be Boeing’s next CEO. The embattled company’s board of directors delivered Wednesday, announcing that former Rockwell Collins CEO Robert “Kelly” Ortberg will take the reins on August 8. He will replace outgoing CEO David Calhoun, who struggled to lead the company through confidence-shaking problems with the quality of its airplanes and lingering dislocations from the steep drop in production during the Covid pandemic.
Analysts and aerospace consultants praised the appointment of Ortberg, 64, who built Rockwell Collins into one of the industry’s dominant avionics suppliers, growing revenue from $4 billion in 2013 when he became CEO to $9 billion in 2018, when the Cedar Rapids, Iowa-based company was acquired by United Technologies.
Loren Thompson, a longtime aerospace and defense consultant who worked with Rockwell Collins, described Ortberg as one of the most impressive CEOs he’s dealt with. “He’s so competitive it’s scary,” Thompson told Forbes. “He’s an exceptionally focused, detail-oriented executive.”
Ortberg, an Iowa native who earned a mechanical engineering degree from the University of Iowa, built a positive corporate culture and a strong leadership team at Rockwell, Sheila Kahyaoglu, an analyst with Jefferies, wrote in a note. “He was well liked by employees and direct reports and very personable. This was while being a tough negotiator dealing with a diverse set of customers.”
His biggest customer: Boeing.
Ortberg’s deep background with parts makers makes him a good pick at a time when the aerospace and defense supply chain is struggling to meet airplane and weapon makers’ demands to raise production, Richard Aboulafia, a managing director at AeroDynamic Advisory, told Forbes. It should also help Boeing improve relations with suppliers who have felt squeezed by the company’s attempts to wring cost savings out of them over the past decade, he said.
“Most of Boeing’s problems are rooted in two dysfunctions: how they treated their workforce and how they treated their supply chain,” said Aboulafia. “I think he’ll really understand what needs to be done with both of them.”
At Rockwell, Ortberg’s focus on technology development was key to building an outperformer in a place not known for corporate world-beaters, said Thompson. Under Ortberg, Rockwell “pioneer[ed] the idea of a connected aircraft across avionics, auxiliary power units, controls, flight decks, and more,” wrote Kahyaoglu.
Ortberg was chosen over Stephanie Pope, an insider with a finance background whom Calhoun had championed, and Pat Shanahan, a former Boeing executive and CEO of key supplier Spirit AeroSystems, which Boeing agreed to buy earlier this month.
One of the first challenges Ortberg will face is contract negotiations with the union representing Boeing’s machinists and assembly workers at its factories in Washington State, which will get under way in earnest next month.
They’re expected to be contentious: Boeing workers are still angry over the terms the company negotiated in 2013, including the end of their pension plans. Meanwhile Boeing took a hard line in contract talks earlier this year with its firefighters and pilots. The 32,000 members of the International Association of Machinists District Council 751 voted earlier this month to authorize their leaders to call a strike.
“We wonder if management and the board will seek to avoid a high-profile strike so early in the tenure of a new CEO who is intended to help Boeing turn over a new leaf,” Seth Seifman, an analyst with JPMorgan, wrote in a note.
Ortberg faces a host of other issues. Boeing has slowed production of its best-selling airliner, the 737 MAX, as it seeks to eliminate long-festering manufacturing problems spotlighted in January in the wake of the shocking midair blowout of a panel on an Alaska Airlines plane. The company has agreed with federal prosecutors to plead guilty to a felony charge of defrauding the U.S. government by failing to abide by the terms of a deferred prosecution agreement it struck over its role in two deadly 737 MAX crashes in 2018 and 2019. And in tandem with announcing Ortberg’s appointment, Boeing reported a wider than expected net loss of $1.44 billion for the second quarter. It hasn’t posted an annual profit since 2018.
“Clearly there are a massive number of problems at Boeing, but with Kelly as CEO we think there is at least a chance of fixing them,” wrote analyst Robert Stallard of Vertical Research.
Investors reacted positively to the news: Boeing shares were trading up 3% to $193 shortly after noon Wednesday.
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