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By Andrew Tangel and Doug Cameron
Boeing Co. shuffled the ranks of top management on Tuesday, replacing the head of its jetliner business as it struggles to shore up confidence among customers, investors and lawmakers in the company's handling of the 737 MAX crisis.
The removal of Kevin McAllister with immediate effect marks the first high-level ouster from Boeing since the second crash of a MAX in March triggered a global grounding of its best-selling jet and billions of dollars in losses at the company.
Boeing, the nation's largest exporter, has already lost about $40 billion in market value since the crisis erupted, and analysts expect it to take more charges when it reports quarterly earnings on Wednesday. Chief Executive Dennis Muilenburg, who was stripped of his chairman's role earlier this month, will face investor questions as well as a grilling by congressional lawmakers next week.
The management change comes just days after the disclosure of internal messages by a former Boeing pilot that suggested he unknowingly misled regulators in his work on the MAX. The messages angered regulators and lawmakers, driving fresh calls for leadership changes.
Boeing's board met on Sunday and Monday as the pressure intensified. The disclosure of the internal messages sent Boeing's stock tumbling, spurred analyst downgrades and sparked a firestorm that threatened to further delay the grounded 737 MAX's return to passenger service.
Mr. McAllister had enjoyed the support of the board's new chairman, fellow General Electric Co. alumnus Dave Calhoun, people familiar with the matter said. But as the crisis deepened over the weekend, board members realized that the removal of Mr. Muilenburg as chairman wouldn't be enough to stem the fallout, one of these people said. The board isn't ruling out other high-profile personnel changes, this person said.
Boeing has repeatedly pushed back the expected return of the MAX, as airlines and passengers count the cost of delays in the company's delivery of a backlog of more than 4,500 planes. Most carriers don't expect the aircraft to return to service until early next year. Mr. McAllister was responsible for the commercial-airplane unit's still-unfinished work to fix the airplane's systems and win regulatory approvals.
The executive changes, with Boeing services chief Stan Deal succeeding Mr. McAllister, came the same day the plane maker accomplished something it had been striving for since spring. The Federal Aviation Administration said the company handed over to the agency a complete description and safety analysis of the package of software fixes intended to get the MAX fleet back in the air.
Vetting the fixes, subjecting them to simulator tests and then implementing related training adjustments and new cockpit procedures are expected to take several weeks for the U.S. fleet.
Conducting certification flights, completing maintenance on stored planes and then phasing the bulk of those aircraft back into airline schedules is likely to stretch into January, according to government and industry officials.
Mr. McAllister moved to Boeing just three years ago, lured from GE with a big stock package as part of the aerospace company's push to wrestle more business from its suppliers by expanding its offerings of plane parts and services.
Much of Boeing's design and certification of the MAX preceded Mr. McAllister's tenure. But he oversaw the internal response to the first 737 MAX accident in Indonesia, on Oct. 29, 2018, including his division's work to fix a MAX flight-control system also implicated in the second crash, in Ethiopia.
At the same time, he took a less public role than Mr. Muilenburg in dealing with the crisis.
Attempts to reach Mr. McAllister weren't successful. In a statement, he said: "Boeing is a great company with a commitment to safety I have seen firsthand working side-by-side with many thousands of tremendously talented and dedicated employees."
His tenure has been marked by problems that extend beyond the MAX at the world's largest aerospace company by sales. Various Boeing airplane programs have suffered setbacks, including the delayed introduction of the wide-body 777X and U.S. Air Force criticism of the company's KC-46A military tanker, which is based on a commercial jetliner.
In an interview in June, Air Force procurement chief Will Roper called out a Boeing commercial facility in the Seattle area as particularly beset by problems.
"We've seen issues across Boeing but the Everett facility, I would say, is the most advanced of those," Mr. Roper said. "But we've seen issues across Boeing and that just tells me that there's a lapse of culture."
A Boeing spokesman has said the plane maker has ramped up efforts to improve its manufacturing. "Although we've made improvements to date, we can do better," the spokesman said over the weekend.
Mr. McAllister at times defended his tenure internally by arguing he was dealing with a mess he had inherited, people familiar with the matter said. He also came under scrutiny internally for not visiting Boeing customers in Indonesia and Ethiopia after their two fatal 737 MAX accidents, these people said.
The MAX crisis has put considerable strain on Boeing's planning. Executives have been mulling whether to further cut or halt production at its Renton, Wash., 737 factory, as finished planes pile up.
Mr. Deal is a 33-year company veteran who was picked by Mr. Muilenburg to lead the new services unit with a target of more than tripling annual sales to $50 billion. In that role, he has irked some of Boeing's biggest partners as the company looks to boost its role in the most profitable parts of the business.
Mr. Deal's arrival is expected to trigger a broader review of Boeing's jetliner business, including whether it presses ahead with an all-new jetliner that it had hoped to introduce by 2025, said analysts. It also faces headwinds on orders for its 787 and 777X jetliners because of a cooling in demand from airlines that could trigger production cuts.
Before Mr. Muilenburg lost his dual role as chairman, the board approved an overhaul of how Boeing handles engineering and safety, effectively centralizing his control over matters under the purview of the commercial airplane unit in the Seattle area.
Mr. Muilenburg, who is based in Chicago, will remain in the spotlight in the MAX crisis next week when he appears before Congress. He is slated to testify with John Hamilton, the chief engineer in what was Mr. McAllister's division, as well as chief 737 pilot Jennifer Henderson. Mr. McAllister hadn't been scheduled to appear.
--Andy Pasztor contributed to this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com and Doug Cameron at email@example.com
(END) Dow Jones Newswires
October 22, 2019 19:35 ET (23:35 GMT)
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