Boeing CEO Dennis Muilenburg faces increasing pressure from 737 MAX accident

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Dennis Muilenburg has carved out a reputation as an energy-hungry CEO, traveling 140 km biking a week, sometimes leading employee groups during high-speed bonding sessions. Aged 55, he may need every ounce of energy needed to cope with one of the worst Boeing crises in 50 years: two accidents that claimed the lives of 346 people, related to 737 MAX automated flight controls and resulting in grounding of the company's best-selling aircraft.

The stakes for Boeing and his CEO are enormous. The 737 accounts for 33% of Boeing's business revenue and nearly 50% of its profits, according to Andrew Gollan, an analyst at Berenberg. & Nbsp; Deliveries have been interrupted since the decommissioning of the aircraft in the world after the crash of an Ethiopian Airlines plane on March 10 The airlines are demanding compensation, and Congress a Department of Transportation investigation and a federal criminal investigation are under consideration. The stock (BA) fell by 10%. Litigation by relatives of victims and shareholders could take years to succeed.

In the past few weeks, the 34-year-old Boeing veteran has traveled extensively to strengthen support for airline and investor customers. An aerospace engineer by training, Muilenburg kept a close eye on the Boeing team rewriting the defective flight control program; last week, he boarded a plane that tested the efficiency.

But many observers give Boeing and Muilenburg bad credit for their public takeover of the crisis. Until late last week, Muilenburg was largely invisible and the public statements of the company, while expressing sympathy for the family and friends of the deceased, lacked substance.

"I give them a B," says Jeffrey Sonnenfeld, professor of leadership at the Yale School of Management. Muilenburg needs to give a human face to Boeing, he says, and to get informed in public and engage with the media to try to correct misconceptions and answer the many questions of what's wrong not even if he does not have the answers ready to offer. & nbsp;

Muilenburg did not show the media sophistication of his predecessor, Jim McNerney, who had previously led GE's and 3M's aircraft engine division. "He has a disaster as a training ground," says Sonnenfeld.

Preliminary reports According to investigations into the crashes of the 610 flight of Lion Air in October and the 302 flight of Ethiopian Airlines last month, suggests that the pilots of the two planes have had a hard time countering a control program of flight called MCAS, which improperly pushed the nose of planes because of a malfunction of the angle of view anti-attack sensors. After Ethiopian investigators released their report last Thursday, Boeing aired a video statement from Muilenburg In which he stated that Boeing had accepted responsibility for the role played by MCAS as one of the "links in the chain" in both accidents.

Aviation regulators in other countries have questioned the Federal Aviation Administration's certification of the MCAS system and its initial reluctance to put the 737 MAX out of service. many said they would ignore the FAA's word that it would be safe to fly again, which made it uncertain when the plane would return around the world.

With the prospect of a speedy resolution, Boeing has announced last Friday it would cut production by 737 to 42 a month instead of 52 – a net reversal from its plans to increase production to 57 by the summer.

Bank of America / Merrill Lynch analyst Richard Epstein downgraded the stock to neutral on Monday, saying Boeing would probably not be able to resume shipments before six months and not resume its pace until the end of the month. 2021, thus reducing its profits until 2023 before interest and taxes of $ 13.7 billion.

Whether Muilenburg's job is threatened or not may depend on the share price, said Richard Aboulafia, an aerospace analyst at Teal Group.

Observers say the council is loyal to Muilenburg and his record has given no reason to doubt after signing the decision of President and Chief Executive Officer McNerney to promote him to the post of prime minister in 51 years old.

Engineer focused on financial discipline

This rudimentary, detail-oriented engineer contrasted sharply with McNerney, a liberal arts student from Yale and Harvard M.B.A who rose through the ranks at General Electric when it was a flagship factory run by Jack Welch. Originally from Iowa, Muilenburg grew up every morning on a dairy farm and graduated from the state of Iowa before going straight to work in Boeing. Conscious of his health and caring little about his health, he drinks Diet Mountain Dew for a dose of caffeine without calories and is known for ordering turkey sandwiches without mayo.

Although he has a smaller workforce, Muilenburg has cultivated a more positive relationship with the workforce than McNerney, who opposed the machinists' union and made an infamous joke that the workers "are frightened." " from him.

However, Muilenburg followed in McNerney's footsteps with a laser focus on financial discipline, including increasing profits by taking discounts from suppliers. Muilenburg even left one more step, seeking to manufacture more components in-house and aiming to triple the turnover, passed from maintenance and lucrative after-sales services, to 50 billion dollars a year.

Like its two predecessors, Muilenberg continued to soften the pan of investors, devoting approximately 95% of its operating cash flow to the steady growth of the company's dividend and share repurchases.

The stock took off and quadrupled from February 2016, peaking at $ 446 in early March, compared with 63% for Dow's industrials over the same period. The March sale only brought the stock back to its end-January level.

But for Aboulafia, the flawed design of the MCAS flight control system, coupled with the persistent problems with the KC-46 tanker and the delays in the crewed space launch program, is further proof of the criticism it has addressed to Boeing for almost two years. Decades: The company's focus on shareholder benefits is accompanied by a "depriorization, or even a lack of engineering resources."

Boeing said it is keeping its R & D spending stable and relying on a healthy body of 56,000 engineers.

The question of how MCAS was certified has raised concerns as to whether Boeing has acquired an overly comfortable relationship with the FAA. The next step is to determine whether any evidence of wrongdoing will appear.

If the whistleblowers had damaging information, we probably would have heard them already, says Mark Dombroff, an aviation lawyer with LeClairRyan and former head of the aviation division of the Department of Justice. He expects the Department of Justice to determine within 90 to 120 days whether to proceed.

Aviation experts are optimistic that the bug fixes and changes to Boeing's training will solve the safety concerns of the 737 MAX. Boeing's revelation this week that she had not posted any orders for the MAX in March had generated negative headlines, but with a total of 15,000 narrow-body orders in the last seven years, he has are there really airlines have significant needssaid Aboulafia, with the notable exception of Chinese carriers. Any trade agreement between the United States and China that would change the trade balance would likely include Boeing sales.

The last major Boeing crisis occurred in 2013, when the 787 was stalled for three months due to battery fires, two years after the aircraft went into service, after years of rampant production and costs. exorbitant. Although the financial stakes are high, no life has been lost. The last time Boeing was faced with a security crisis comparable to the one we are experiencing today, it is in the mid-1960s, when four new 727 jet aircraft crashed in the mid-1960s. four months space.

As at the time, Boeing must convince a frightened audience that the MAX will be safe. Sonnenfeld says Muilenberg must take a page from James Burke, the late Johnson & amp; Johnson, who managed to convince the Americans that Tylenol was still safe after seven people were killed by cyanide-containing capsules in 1982. "The CEO will have to be present."

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Dennis Muilenburg has carved out a reputation as an energy-hungry CEO, traveling 140 km biking a week, sometimes leading employee groups during high-speed bonding sessions. Aged 55, he may need every ounce of energy needed to cope with one of the worst Boeing crises in 50 years: two accidents that claimed the lives of 346 people, related to 737 MAX automated flight controls and resulting in grounding of the company's best-selling aircraft.

The stakes for Boeing and his CEO are enormous. The Berenberg analyst, Andrew Gollan, estimates that these 737 account for 33% of Boeing's revenue and nearly 50% of its profits. Deliveries have been halted since the decommissioning of the aircraft worldwide after the crash of an Ethiopian Airlines plane on March 10. Airlines require compensation. The company is under the control of Congress, an investigation by the Department of Transportation and a federal criminal investigation. The stock (BA) fell by 10%. Litigation by relatives of victims and shareholders could take years to succeed.

In the past few weeks, the 34-year-old Boeing veteran has traveled extensively to strengthen support for airline and investor customers. An aerospace engineer by training, Muilenburg kept a close eye on the Boeing team rewriting the defective flight control program; last week, he boarded a plane that tested the efficiency.

But many observers give Boeing and Muilenburg bad credit for their public takeover of the crisis. Until late last week, Muilenburg was largely invisible and the public statements of the company, while expressing sympathy for the family and friends of the deceased, lacked substance.

"I give them a B," says Jeffrey Sonnenfeld, professor of leadership at the Yale School of Management. Muilenburg needs to give a human face to Boeing, he says, and to get informed in public and engage with the media to try to correct misconceptions and answer the many questions of what's wrong not even if he does not have the answers ready to offer.

Muilenburg did not show the media sophistication of his predecessor, Jim McNerney, who had previously led GE's and 3M's aircraft engine division. "He has a disaster as a training ground," says Sonnenfeld.

The preliminary reports of the investigations into the 610 Lion Air flight in October and the 302 flight of Ethiopian Airlines last month suggest that the pilots of the two aircraft struggled to counter a flight control program called MCAS, which improperly pushed the nose of planes towards the ground due to a malfunction of the angle. anti-attack sensors. After Ethiopian investigators released their report last Thursday, Boeing issued a video statement from Muilenburg in which he stated that Boeing had accepted responsibility for the role played by MCAS as one of the "links in the chain" in both accidents.

Aviation regulators in other countries have questioned the Federal Aviation Administration's certification of the MCAS system and its initial reluctance to put the 737 MAX out of service. many said they would ignore the FAA's word that it would be safe to fly again, which made it uncertain when the plane would return around the world.

While the prospects for a quick resolution vanished, Boeing announced last Friday that it would reduce production from 737 units to 42 units per month instead of 52, which represents a sharp turnaround from its plan to bring production to 57 units by the summer.

Bank of America / Merrill Lynch analyst Richard Epstein downgraded the stock to neutral on Monday, saying Boeing would probably not be able to resume shipments before six months and not resume its pace until the end of the month. 2021, thus reducing its profits until 2023 before interest and taxes of $ 13.7 billion.

Whether Muilenburg's job is threatened or not may depend on the share price, said Richard Aboulafia, an aerospace analyst at Teal Group.

Observers say the council is loyal to Muilenburg and his record has given no reason to doubt after signing the decision of President and Chief Executive Officer McNerney to promote him to the post of prime minister in 51 years old.

Engineer focused on financial discipline

This rudimentary, detail-oriented engineer contrasted sharply with McNerney, a liberal arts student from Yale and Harvard M.B.A who rose through the ranks at General Electric when it was a flagship factory run by Jack Welch. Originally from Iowa, Muilenburg grew up every morning on a dairy farm and graduated from the state of Iowa before going straight to work in Boeing. Conscious of his health and caring little about his health, he drinks Diet Mountain Dew for a dose of caffeine without calories and is known for ordering turkey sandwiches without mayo.

Although he has a smaller workforce, Muilenburg has cultivated a more positive relationship with the workforce than McNerney, who opposed the machinists' union and made an infamous joke that the workers "are frightened." " from him.

However, Muilenburg followed in McNerney's footsteps with a laser focus on financial discipline, including increasing profits by taking discounts from suppliers. Muilenburg has even gone a step further by preparing more in-house components and aiming to triple the turnover, which goes from maintenance and lucrative after-sales services to $ 50 billion a year.

Like its two predecessors, Muilenberg continued to soften the pan of investors, devoting approximately 95% of its operating cash flow to the steady growth of the company's dividend and share repurchases.

The stock took off and quadrupled from February 2016, peaking at $ 446 in early March, compared with 63% for Dow's industrials over the same period. The March sale only brought the stock back to its end-January level.

But for Aboulafia, the flawed design of the MCAS flight control system, coupled with the persistent problems with the KC-46 tanker and the delays in the crewed space launch program, is further proof of the criticism it has addressed to Boeing for almost two years. Decades: The company's focus on shareholder benefits is accompanied by a "depriorization, or even a lack of engineering resources."

Boeing said it is keeping its R & D spending stable and relying on a healthy body of 56,000 engineers.

The question of how MCAS was certified has raised concerns as to whether Boeing has acquired an overly comfortable relationship with the FAA. The next step is to determine whether any evidence of wrongdoing will appear.

If the whistleblowers had damaging information, we probably would have heard them already, says Mark Dombroff, an aviation lawyer with LeClairRyan and former head of the aviation division of the Department of Justice. He expects the Department of Justice to determine within 90 to 120 days whether to proceed.

Aviation experts are optimistic that the bug fixes and changes to Boeing's training will solve the safety concerns of the 737 MAX. The revelation this week by Boeing that he did not register any orders for the MAX in March generated negative headlines, but with a total of 15,000 narrow-body orders placed over the past seven years, he there are no longer any airlines with significant needs, said Aboulafia. with the notable exception of Chinese carriers. Any trade agreement between the United States and China that would change the trade balance would likely include Boeing sales.

The last major Boeing crisis occurred in 2013, when the 787 was stalled for three months due to battery fires, two years after the aircraft went into service, after years of rampant production and costs. exorbitant. Although the financial stakes are high, no life has been lost. The last time Boeing was faced with a security crisis comparable to the one we are experiencing today, it is in the mid-1960s, when four new 727 jet aircraft crashed in the mid-1960s. four months space.

As at the time, Boeing must convince a frightened audience that the MAX will be safe. Sonnenfeld says Muilenberg should take a page from James Burke, the late CEO of Johnson & Johnson, who convinced Americans that Tylenol was still safe after seven people were killed by cyanide capsules in 1982. Take the CEO to be there. "