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Max jet crisis big challenge for new CEO

By SCOTT REEVES | China Daily | Updated: 2020-01-13 09:46

A Boeing 737 Max aircraft is seen parked in a storage area at the company's production facility in Renton, Washington, Jan 10, 2020. [Photo/Agencies]

Calhoun takes office as Boeing deals with fallout from two deadly crashes

Fifteen years ago, Boeing considered David Calhoun for its chief executive officer. He didn't get the job.

But on Monday, the 62-year-old executive will assume the top slot amid the toughest crisis the world's largest aircraft manufacturer has faced: fallout from the crashes of two 737 MAX jets that killed 346 people.

The MAX, Boeing's top-selling plane, was grounded worldwide in March 2019. Boeing temporarily suspended production of the jet this month and has lost orders to Airbus, its chief rival.

It's unclear when MAX production will resume, a decision that could ripple through the aircraft industry's supply chain and, some analysts believe, cut as much as 0.4 percent off the nation's gross domestic product in 2020.

Airlines around the world have sued Boeing for lost revenue, pilots have sued for lost wages, families of those killed in the crashes have sued for wrongful death and some stockholders have sued because the share price fell after the worldwide grounding of the MAX.

The MAX grounding has cost Boeing nearly $10 billion-and counting, analysts said.

Boeing named Jim McNerney CEO in 2005, but kept in touch with Calhoun, who then worked for a General Electric division with annual sales of $47 billion that included the manufacture of aircraft engines. Calhoun left GE a year later to head Nielsen, a media and data company.

Clearly, Boeing liked what they saw in Calhoun and named him to the board of directors in 2009. On December 23, 2019, Boeing named him CEO.

Calhoun's management skills get rave reviews from his peers.

"Having seen him run GE's aviation business after 9/11, I know he can execute under pressure," former GE CEO told Jeff Immelt told Reuters.

Candor is key

Calhoun, who co-wrote a business book titled How Companies Win believes candor is key to leadership, an element that critics said was absent from former CEO Dennis Muilenburg, who Calhoun replaced in the corner office.

Muilenburg was sharply criticized for his testimony before Congress following the crashes of MAX jets in Indonesia and Ethiopia and for his dealings with family members of those killed in the crashes.

Calhoun, according to media reports, has sought to do better. He has spoken privately with the Federal Aviation Administration, or FAA, and taken a less aggressive tone in getting the MAX back in the air.

In a major policy reversal, Calhoun agreed that pilots should receive additional training on a flight simulator before flying the MAX with its updated anti-stall system. But there may not be enough of the ground-based, computer-driven mock-ups of the plane's cockpit to train pilots in a timely manner.

In a video published in 2014, Calhoun said, "The second you get into the office until the second you leave, every interaction is judged. You try to hide anything from everybody and through your body language it becomes perfectly apparent."

Many business observers credit Calhoun with the swift-and deft-handling of the departure of Kevin McAllister as head of Boeing's aircraft manufacturing division last October. It appears McAllister's firing foreshadowed the quick ouster of Muilenburg.

So far, the only major criticism of Calhoun is that he's not an engineer. He studied accounting at Virginia Polytechnic Institute and State University, commonly called Virginia Tech, and began his career as a member of GE's corporate audit team.

"Short term, (Muilenburg's firing) is an olive branch," Robert Mann, president of R.W. Mann & Co, an aviation consulting firm in Port Washington, New York said. "But it appears to be the end of engineers on the Boeing board of directors for now. Given the nature of the company in its commercial aviation, defense and space roles, I don't know that a well-intentioned board made up of accountants and lawyers have the skills to be informed decision-makers."

Design of the MAX's anti-stall system is at the center of Boeing's current problems.

Boeing updated an existing plane, the 737 NG, because designing, building and securing approval for an entirely new plane could take as long as 10 years and Boeing was pressed by a new plane from Airbus, the A320neo. But the larger, more fuel-efficient engines on the MAX forced designers to place them closer to the fuselage and farther forward on the wing. This changed the plane's handling characteristics.

To solve the problem, Boeing developed an automated anti-stall device, called Maneuvering Characteristics Augmentation System. Investigators believe the anti-stall system erroneously pointed the nose of the planes down to avoid a mid-air stall and into a fatal plunge.

Safety experts and members of Congress have faulted Boeing for not adequately informing pilots of the system and how to override it in an emergency. However, the MAX flew without incident for about two years prior to the crashes in Indonesia and Ethiopia.

Rebuild image

Rebuilding Boeing's image by emphasizing safety will be a key problem Calhoun must overcome to secure recertification of the MAX and return it to the air.

James Hall, managing partner of Hall & Associated in Washington and former chairman of the National Transportation Safety Board said Muilenburg's firing was long overdue.

"Boeing needs to reset the table and put safety first," he told China Daily. "The whole thing was blown up when Boeing lobbied Congress to self-certify the MAX. There were a lot of missteps."

Boeing took another hit last week with the release of in-house emails that show employees boasting about bullying regulators and customers.

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