Boeing CEO Dave Calhoun Departs. Investors Need More For A Turnaround.

Boeing shareholders are breathing a sigh of relief this morning as the company announced CEO Dave Calhoun is leaving at the end of 2024. The stock has steadily been losing ground, but does this management shakeup, including some of the board, solve their bigger problems? Personally, I doubt it. Following Calhoun's resignation, Boeing announced Larry Kellner would not seek re-election as independent board chair, with Steve Mollenkopf set to take over the role. Additionally, Stan Deal, head of Boeing Commercial Airplanes, will retire, with COO Stephanie Pope stepping in immediately as his replacement and essentially going to the top of the tree.

Boeings Problems

Boeing has experienced a multitude of hurdles in recent times, resulting in a perfect storm of setbacks. The 737 MAX's grounding following catastrophic crashes caused significant financial harm and ruined the company's brand. Production issues on other models resulted in delays and cancellations, weakening public trust in Boeing's safety culture. Frequent leadership changes exacerbated the company's volatility as it sought to reestablish its footing. This convergence of challenges has stressed Boeing's finances, resulting in job losses and reducing investor confidence. The leadership has been less vocal in reassuring investors about the issues too, which led some to call for the CEO’s resignation.

The CEO Conundrum

With extensive experience as an investor, I am acutely aware of the critical role that CEOs play in determining the success of a public company, molding its culture, and propelling its operational outcomes. Their capacity to innovate and manage, as well as their strategic decisions, have a substantial influence on the firm's growth and, as a result, its appeal to potential investors. In my opinion, Calhoun has done none of this so his resignation this morning is peripheral, but it’s a start. It’s a long way back for Boeing and this is a band-aid fix. As soon as investors see past this very short-lived honeymoon period, they will want to be reassured of the safety issues that are plaguing the company. Moreover, they will want a leader to steady the ship. Incoming Stephanie Pope has been overseeing the performance of Boeing's three business units, focusing on driving supply chain, quality, manufacturing, and engineering excellence across the company. Pope may be the current contender for the top spot, but she may not be the visionary leader investors expect from such a prominent company if it comes to that. A successor has yet to be formally announced.

Keith Rosenbloom, Founder and Managing Member of Cruiser Capital, who previously called for Calhoun’s resignation, said, “This is an important first step. But make no mistake, this is going to be a process that must take solid execution to find a rockstar CEO. I would think that an outsider is critical.”

What Needs To Happen?

I can tell you with certainty, there are several critical efforts that must be completed before Boeing can regain the faith of its investors. These days, nothing is more important than ensuring the highest standards of quality and safety. Consumers demand it. Boeing must prove it is dedicated to aviation safety and quality by taking steps and being transparent about its mistakes so that it may learn from them and reach unsurpassed standards.

Financial stability and strategic understanding are the bedrocks of investor confidence. Boeing must optimize its operations, show extreme fiscal restraint, and guarantee a profitable and competitive product lineup. Not only must costs be cut, but strategic investments in emerging technology and areas with growth and sustainability potential must also be made if this is to be achieved. If the aerospace giant doesn’t want to go the same way as General Electric GE before its magical revival and wants to lay out a path to financial wellness and expansion, it needs to show that it is investing in innovations that can keep up with the demands of a rapidly growing worldwide market with the huge added element of safety.

Furthermore, there has never been a better time for corporate governance and ethical behavior. Investors need evidence that Boeing has strengthened its corporate governance, created systems to guarantee responsibility, and promoted a culture that values ethics and compliance. They have little or none of this now. Just avoiding making the same mistakes over and over again isn't enough; they must also approach the future with transparency and honesty.

No matter the situation, it is essential to have effective communication and be proactive while dealing with all shareholders, customers, investors, and regulatory bodies. Boeing must consistently update its investors on its progress, issues, and strategies, and it must keep these channels of communication open. To build trust, it is crucial to communicate openly. Boeing currently has an air of superiority about it. This must change.

Finally, if you are an investor or potential investor, your trust in Boeing should hinge on the corporation delivering a comprehensive and successful plan that tackles these vital areas. The waiting game has begun. I remain short the stock at the time of writing.