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Boeing (BA) CEO Dave Calhoun Steps Down Amid Quality Concerns and Production Woes

AInvestMonday, Mar 25, 2024 11:05 am ET
2min read

The aerospace industry has been witnessing a turbulent period for Boeing (BA), as the company's CEO, Dave Calhoun, has decided to step down at the end of the year. This announcement came after a series of production and quality control issues, with one of its 737 MAX 9 aircraft losing a panel in mid-flight earlier this year. Calhoun's departure marks a challenging time for Boeing, as it continues to address issues that have arisen this year. 

Last week, the company's CFO, Brian West, revealed that Boeing would experience cash outflows of up to $4.5 billion in the current quarter as it works to improve its production lines. 

Despite these setbacks, Boeing's stock saw a 2.5% increase following the news of Calhoun's departure, after losing over 27% of its value this year. 

In addition to Calhoun's departure, Boeing also announced that Larry Kellner, the chairman of its board, will not stand for re-election at the company's annual shareholders meeting. Steve Mollenkopf, former CEO of Qualcomm and a Boeing board member since 2020, will replace Kellner and lead the search for the company's next CEO. Stan Deal, the CEO of Boeing's Commercial Airplanes segment, will also retire from his position. 

Dave Calhoun assumed the role of CEO at Boeing in January 2020, when the company was still reeling from the fallout of two 737 MAX crashes in 2018 and 2019. Calhoun's exit, four years later, reflects the ongoing crisis at Boeing, as the manufacturer continues to struggle with quality issues in its planes.

The January 5 midair blowout incident on an Alaska Airlines flight and subsequent production problems have led to growing dissatisfaction among airlines and regulators. In response to these concerns, the Boeing board of directors met to address their leadership plans ahead of a meetings with airline CEOs. Steve Mollenkopf, the new board chair, will attend these meetings and lead the search for a new CEO. 

Investors and airline operators have been putting pressure on Boeing to address its quality issues, as the company's delays in delivering 737 jets have forced a reduction in flight schedules for some airlines. Michael O'Leary, CEO of Ryanair, welcomed the announced leadership changes, acknowledging the need for a turnaround at the manufacturer. 

Boeing's shares have suffered a significant decline, falling 27% since the start of the year, as persistent production problems dim investor confidence. The stock, showed resilience in 2023, indicating a potential leveling off when it approached its 20-week average price of $182 in October. This price point served as a launching pad for a surge to $267 by year-end, buoyed by a broad market rally that made Boeing's stock look like an attractive buy. 

The uplift in shares was abruptly disrupted following the January 5 incident involving an Alaskan Air flight. 

Last week, Boeing's stock dipped to $177, teetering just above the October low of $176, but managed to recover somewhat, boosted by a positive reaction to poor free cash flow forecasts which implied that the market may have already accounted for the negative news. 

The announcement of management changes further spurred a rally, with investors having anticipated such moves. Despite this uptick, the stock faces notable hurdles near the $198 mark, where its 200-simple moving average lies, and the psychologically significant $200 level. 

Investors are now likely to adopt a watchful stance, awaiting the outcomes of Boeing's discussions with airline executives and speculation about the incoming CEO, which will inevitably capture market attention. For now, with selling pressure easing off, the stock might oscillate within the $175 to $200 range, as market participants seek clearer signals about Boeing's trajectory moving forward.

The departure of Dave Calhoun and other senior executives at Boeing marks a significant turning point for the company, as it grapples with a multitude of issues related to quality control and production. The ongoing crisis at Boeing presents challenges for investors and analysts seeking to assess the company's growth potential and investment value. As the search for a new CEO begins, it remains to be seen whether Boeing can regain the trust of airlines, regulators, and investors, and return to the path of profitability and growth.


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