BA Boeing Co

David Calhoun's mixed messages add to woes from coronavirus, MAX

By Andrew Tangel 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 11, 2020).

With Boeing Co. facing a cash drain, Chief Executive David Calhoun went public last month to ask for government money to help the aerospace giant weather the coronavirus pandemic.

Mr. Calhoun wound up undercutting the urgency of Boeing's request in television interviews, however, asserting the manufacturer could secure private financing if the government insisted on taking an equity stake in exchange for taxpayer help.

"We'd just look at all the other options, and we have got plenty," he said.

The CEO's mixed message complicated Boeing's case for stimulus money on Capitol Hill, some lawmakers said. "It's sort of a tale of two companies -- on the one hand belittling the need for aid, but on the other hand privately pushing very aggressively for that aid," said Sen. Richard Blumenthal (D., Conn.).

In his three months on the job, Mr. Calhoun has at times made troubles worse. He first irked senior Federal Aviation Administration officials after pledging a fresh start with Boeing's most important regulator, then he antagonized his own leadership team by claiming Boeing's problems were worse than he imagined and criticizing his predecessor publicly.

Boeing had enough problems already. The massive economic shock delivered by the new coronavirus has overtaken its earlier crisis stemming from two crashes of its 737 MAX jets.

The outlook facing Mr. Calhoun "is bleak as hell, even if the damn MAX wasn't a problem," said Gordon Bethune, a former Boeing executive who went on to lead Continental Airlines as CEO. "No one needs the airplanes and if they did they couldn't afford to pay for them."

The pandemic's global fallout for airlines that buy Boeing's airplanes is expected to dwarf the primarily U.S.-centric travails the industry faced after the Sept. 11, 2001, terrorist attacks. It has led to at least a near-term drop in demand for Boeing's airplanes and prompted Mr. Calhoun to lay the groundwork for shrinking the manufacturer's workforce of some 160,000 employees. He announced last week Boeing would offer buyouts. According to people familiar with the matter, Boeing is considering a plan to reduce its overall workforce by about 10%.

The sharp drop in aircraft deliveries and sales of spare parts and services has left Boeing reliant on its military unit for cash and strained its balance sheet. Credit-rating firms expect Boeing's debt to double to as much as $45 billion by the end of the year after it drew down a $13.8 billion loan. To save cash, the dividend has been suspended alongside a cost-cutting program.

Mr. Calhoun, whom Boeing declined to make available for an interview, is expected to address investors in coming weeks when Boeing reports first-quarter earnings and holds a virtual shareholder meeting on April 27. As the company weighs whether to tap government stimulus aid, the CEO has been working remotely like much of corporate America and managing the crisis from his New Hampshire home, a company executive said. Mr. Calhoun has been on calls with top executives at airlines and suppliers as they try to estimate how long a recovery might take.

"He's going to be very honest about what he's seeing," the executive said.

Mr. Calhoun succeeded Dennis Muilenburg, who was ousted in December amid criticism of his handling of the MAX, which was grounded after two crashes linked to a faulty flight-control system killed 346 people. Mr. Muilenburg's overly optimistic projections for when the plane would fly again angered the FAA.

Soon after Mr. Calhoun started as CEO in January, Boeing issued what it thought was a more realistic estimate -- midyear 2020 -- but it surprised and irked senior agency leaders, U.S. government officials familiar with their discussions said. Whether the plane maker would need to first bring certain wiring into compliance with federal regulations hadn't been resolved. The FAA ultimately rejected company arguments that the wiring didn't need to be relocated.

Boeing's relationship with the FAA has nevertheless improved this year, according to one of the government officials and another person familiar with the matter.

Early into his tenure, Mr. Calhoun focused in large part on revamping Boeing's engineering culture after the MAX saga. He spent a day with senior engineers and has visited factories and struck up conversations with employees, some of whom didn't immediately recognize him, asking how Boeing could improve, according to current and former executives.

Mr. Calhoun's vow to make Boeing more transparent has been welcomed by company leaders, as has his tendency to make decisions quickly, the current and former executives said.

Mr. Calhoun's attempted candor, however, has also backfired. Mr. Calhoun angered colleagues when, in an interview with the New York Times, he said Boeing's problems were worse than he previously imagined, and suggested his predecessor was focused on boosting the company's stock price.

His comments called into question his own credibility internally, given that he served on the company's board for a decade and spent much of last year as its lead director and later its chairman. A person close to Boeing's senior management said: "He's known everything."

Mr. Calhoun later told senior leaders in an internal note he was embarrassed and regretful. People close to Mr. Calhoun said the CEO was having a bad day when he made those remarks. They noted his mentor Jack Welch, the former CEO of General Electric Co., where Mr. Calhoun spent much of his career, had just died.

The current Boeing executive said Mr. Calhoun's remarks reflected his preference for avoiding safe corporate language, and at any rate were "water under the bridge" as the company faces the pandemic crisis.

--Andy Pasztor contributed to this article.

Write to Andrew Tangel at Andrew.Tangel@wsj.com

(END) Dow Jones Newswires

April 11, 2020 02:47 ET (06:47 GMT)

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