Boeing named a longtime aerospace industry veteran on Wednesday as its next chief executive, who will take over a company that has been rocked by legal, regulatory and production issues.
Robert “Kelly” Ortberg, former CEO of aerospace supplier Rockwell Collins, will succeed David Calhoun, 67, as CEO and president effective August 8, the company said. Calhoun announced in March that he would retire at the end of the year.
Boeing named a new CEO as it reported a loss of more than $1.4 billion due to a drop in revenue during the second quarter. The losses were wider and earnings were lower than Wall Street had expected, as Boeing’s commercial aircraft business and defense unit lost money.
The disappointing results come at a tumultuous time for Boeing. The company agreed to plead guilty this month to federal fraud charges related to the 737 Max jetliner and two crashes that killed 346 people. The Federal Aviation Administration increased its scrutiny of the company after a panel explosion on an Alaska Airlines jet caused manufacturing quality problems.
Boeing Chairman Steven Mollenkopf said Ortberg was selected after a “thorough and extensive search process” and “has the right skills and experience to lead Boeing in its next chapter.” Ortberg has earned a reputation for running complex engineering and manufacturing companies, Mollenkopf said.
The company dropped the mandatory retirement age of 65 for Ortberg, a spokeswoman said. Boeing is doing the same for Calhoun the day after he turns 64 in 2021.
Ortberg emerged as a leading candidate only recently. Others reported for the job include Patrick Shanahan, a former Boeing executive and now CEO of its most important supplier, Spirit AeroSystems, and longtime Boeing executive Stephanie Pope, who recently took over the commercial aircraft division.
Like Calhoun, who took over as CEO after Max’s two accidents, Ortberg will inherit a company leader facing crisis and criticism both externally and internally. It is pushing back against whistleblower allegations of manufacturing shortcuts that crimp safety.
The company, based in Arlington, Virginia, is also dealing with supply chain issues that have hampered production, which it hopes to fix by reacquiring Spirit AeroSystems, the prime contractor. It is still trying to persuade regulators to approve two new models of the Max and a larger version of the two 777 jetliners. And faced with a multi-billion dollar decision when designing a new single-aisle plane to replace the Max.
Quarterly earnings reported Wednesday reflect significant challenges at Boeing. The company reported a loss of $1.44 billion for the second quarter, compared with a loss of $149 million a year earlier.
Excluding special items, the loss could be $2.90 per share. Analysts had expected a loss of $1.90 per share, according to a FactSet survey.
Revenue fell 15%, to $16.87 billion, short of Wall Street’s average forecast of $17.35 billion.
The commercial aircraft division had an operating loss of $715 million and profit fell 32% as Boeing delivered fewer passenger jets to airlines – 92 aircraft, compared to 136 a year earlier.
The FAA has limited the production of Boeing Max jetliners since shortly after the Alaska Airlines incident, but Boeing has not even reached the FAA limit as it seeks to improve its manufacturing process. The company said on Wednesday that it still plans to increase Max production to 38 per month by the end of the year.
Boeing took a $244 million charge to cover fines it will pay as part of an agreement with the Department of Justice to admit fraud related to the development of the Max. A federal judge in Texas will consider whether to approve the deal, which has been opposed by many of the families of those killed in Max’s two crashes.
Boeing’s defense and aerospace unit lost $913 million due to a $1 billion setback for four fixed-price government contracts, including a deal to build two new Air Force One presidential jets. Smaller services businesses earned $870 million.
Boeing shares added 2% in pre-market trading.
