Can New CEO Kelly Ortberg Successfully Turnaround Boeing?

Boeing has tapped industry veteran Kelly Ortberg as its new CEO and President, effective August 8th. Ortberg will succeed David Calhoun, who is stepping down after a turbulent 4.5-year tenure marked by the 737 MAX crisis and more recent quality control issues.

At first glance, the 64-year-old Ortberg seems like a solid choice to right the ship at Boeing.

He brings over 35 years of aerospace experience, most recently as CEO of avionics maker Rockwell Collins (Collins Aerospace) from 2013 to 2020. There, he oversaw the company's merger with United Technologies.

Ortberg is well-respected as an operations-focused leader who builds strong teams and isn't afraid to speak hard truths. He once publicly called Boeing "delinquent" over its payment practices with suppliers.

But make no mistake, Ortberg is inheriting a colossal mess at Boeing.

The company's reputation and financials are in tatters after a nightmarish decade headlined by the 737 MAX disasters. Calhoun made some progress in stabilizing things, but Boeing continues to be dogged by production problems, unhappy customers, and a demoralized workforce.

Just this year, a panel flew off a 737 MAX mid-flight, reigniting safety concerns.

The numbers paint a bleak picture. In Q2 2024, Boeing's revenue declined 15% year-over-year as losses ballooned to $1.4 billion. Operating cash flow was an awful negative $3.9 billion.

For the first half of 2024, Boeing bled through $7.29 billion in cash as total debt swelled to nearly $57.9 billion.

Not exactly an ideal starting point for a turnaround.

So, what should be at the top of Ortberg's daunting to-do list? I see a few key priorities:

• Relentlessly focus on product quality, safety, and operational excellence. Boeing's brand was built on trust and it needs to execute flawlessly to win that back from airlines, passengers and regulators.
• Repair fractured relationships with key stakeholders like the FAA, suppliers, and labor unions. Boeing can't succeed as an island unto itself.
• Make the tough decisions to rightsize and restructure as needed. The defense business, in particular, looks ripe for cuts, given recent fixed-price contract losses.
• Articulate a clear vision for the future. What will Boeing's product lineup look like 10-20 years out as technologies like hydrogen and electric propulsion take hold?

None of this will be easy or quick.

Ortberg himself acknowledges Boeing has "substantial work ahead" to rebuild trust. Calhoun will stay on as an advisor until March 2025, but this is now Ortberg's show to run.

The stakes couldn't be higher. Boeing still remains a key linchpin of the U.S. economy and a strategic asset for the country's defense and trade interests.

While Airbus has pulled ahead in the near term, robust competition in the global duopoly is vital for continued innovation.

I'm cautiously optimistic Ortberg is up for this monumental challenge, given his track record and reputation. But it will likely take years, not months, to nurse Boeing back to health.