Kelly Ortberg, chief executive officer of Rockwell Collins Inc., stands for a photograph at the company’s production facility in Manchester, Iowa, U.S., on Wednesday, Aug. 31, 2016.
Daniel Acker | Bloomberg | Getty Images
Boeing has named Robert “Kelly” Ortberg to replace CEO Dave Calhoun, picking a longtime aerospace veteran from outside the company as the manufacturer struggles to regain its footing from its safety and manufacturing crises. He will start Aug. 8.
Ortberg previously led major aerospace supplier Rockwell Collins, which later became Collins Aerospace after it was sold to United Technologies. He led major acquisitions, including one early in his tenure. Collins Aerospace is now part of industry behemoth RTX. Ortberg retired in 2021, though he was most recently on RTX’s board and resigned on Wednesday.
The appointment of the more-than-three-decade aerospace veteran shows Boeing is seeking a steady hand that knows the industry — but also a company outsider. Jefferies analyst Sheila Kahyaoglu said in a July 29 note that at Collins, Ortberg was a “tough negotiator dealing with a diverse set of customers and suppliers and managing the complexity of its diverse customer base,” including Boeing.
Ortberg, who has a mechanical engineering degree, will face a host of challenges to turn Boeing around: persistent losses, additional regulator scrutiny, supply chain strains, a crisis of confidence from airline customers whose planes are delayed, cost overruns in its defense unit, and tense labor talks that now include the threat of a strike.
“There is much work to be done, and I’m looking forward to getting started,” Ortberg said in Boeing’s news release. Ortberg will be based in the Seattle area, where the bulk of Boeing’s aircraft production is located, a sign that he will work close to factory floors than his predecessors.
Boeing will pay Ortberg an annual base salary of $1.5 million, as well as incentives for next year valued at $20.5 million, according to a company securities filing. This year, Ortberg is set to receive $1.25 million in cash and other compensation valued at $16 million.
Boeing waived the company’s mandatory retirement age of 65 for Ortberg, who is 64, which it also did for Calhoun.
Boeing said in March that Calhoun would step down by year’s end, part of a broader company shake-up that also included the departure of its then-chairman and the replacement of its head of commercial aircraft unit. The changes came after a door plug blew out of a nearly new 737 Max 9, heightening federal scrutiny of Boeing just as it was trying to move on from two fatal crashes of its bestselling plane.
Boeing announced Ortberg’s appointment alongside a wider-than-expected quarterly loss and a 15% drop in sales, but the company’s shares rose 2% in late afternoon trading, a sign that investors were relieved by Ortberg’s appointment, which ended months of uncertainty over Boeing’s leadership.
Boeing’s stock price
“Kelly is an experienced leader who is deeply respected in the aerospace industry, with a well-earned reputation for building strong teams and running complex engineering and manufacturing companies,” Boeing chairman Steven Mollenkopf said in note to employees on Wednesday.
Ortberg will also join Boeing’s board. Calhoun will continue to serve as a senior advisor until he retires in March.
Calhoun told analysts on Wednesday’s earnings call that he didn’t expect big management changes under Ortberg.
“I don’t think he’s coming in with a notion he wants to change a lot of folks,” Calhoun said. “My guess is he’s going to put his arms around [Boeing commercial airplane chief] Stephanie [Pope] and the rest of the team in a big way and just try to support their work. He knows full well that we’re in a recovery mode.”
Boeing has in recent months tried to move past its production and safety crises, including the continued fallout from two deadly crashes of its Max planes in 2018 and 2019 that killed 346 people.
Earlier this month it pleaded guilty to a federal fraud charge that said it misled regulators about the Max planes before they were certified. The agreement requires an independent corporate monitor at the company for three years.
As CEO, Ortberg will have to ensure quality of Boeing’s products that depend on a strained and massive supply chain. The company, which employs some 170,000 people, has to train thousands of new employees who replaced more experienced staff who left in the pandemic, a challenge Boeing’s suppliers are also facing.
The midair door plug blowout put Boeing’s leaders back in crisis mode, though there weren’t any serious injuries among passengers or crew. Bolts to hold the door panel in place weren’t installed at Boeing’s Renton, Washington, factory, according to early accident reports.
That accident was the most serious of a host of manufacturing flaws that also included misdrilled holes and incorrect spacing on fuselages, problems that have slowed deliveries, depriving the company of cash and customers of new planes.
Boeing reached a deal earlier this month to buy Spirit AeroSystems, its fuselage supplier it previously owned. Many of the recent problems originated there and Boeing’s leaders have said the acquisition Boeing’s leaders have said will help them get a better handle on quality after years of outsourcing, a practice that outgoing CEO Calhoun said earlier this year likely went “too far.”
“One person cannot turn around a company, but Kelly should be able to cast a wider net for talent than a Boeing insider could,” Bank of America aerospace analyst Ron Epstein said in a note Wednesday. “Also, we note that Rockwell Collins fostered a strong culture, something that we think Boeing is in dire need of now.”
Boeing is working to get Federal Aviation Administration certification on its long-delayed new 777 jetliner. The company earlier this month began flight testing the 777-9 model with the FAA on board, a major milestone. It’s also trying to get the FAA’s blessing for the long-awaited 737 Max 7 and Max 10, the largest and smallest models in the Max family.
Calhoun wrapped his last earnings call as Boeing’s CEO on Wednesday answering an analyst question about whether new Max certification work could be completed in the first half of next year. He was careful not to step on the FAA’s toes, something that contributed to Boeing’s previous CEO Dennis Muilenburg losing his job in 2019.
Next year “sounds realistic to me,” Calhoun said, quickly adding, “but they’re in charge.”
