This year has been tough for Boeing. Last week, the aviation giant announced that due to ongoing safety issues, it was pausing production of the 737 Max, its fastest-selling plane ever. On Monday, the company’s board of directors fired CEO Dennis Muilenburg. John Yang talks to CNBC’s Phil LeBeau about a year of crisis, where Muilenberg went wrong and how incoming CEO David Calhoun must "reset."
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Boeing is not likely to look back fondly on 2019.
In October, lawmakers grilled now former chief executive Dennis Muilenburg at a hearing into the company's response to the disastrous 737 Max crashes. Last week, the company took the rare step of shutting down production of that aircraft, which was the company's fastest-selling passenger plane ever.
On Friday, a new space capsule Boeing designed for NASA failed to reach the correct orbit. And finally, today, announcing Muilenburg's firing, the Boeing's board of directors said it was time for a change.
John Yang examines the company's turbulent year and what's ahead.
Judy, even though Boeing's directors stripped Muilenburg of his title as chairman in October ahead of his congressional testimony, as recently as last Friday, they backed him as CEO.
So what happened between then and this morning?
Phil LeBeau covers the aviation industry for CNBC. And he joins us from his base in Chicago.
Phil, great to see you. Thanks for joining us.
So, Muilenburg and Boeing have really been on the shot seat since March, since the second 737 Max crash. What was the last straw? What brought this event today about?
John, it's great to be with you.
And I would say the last straw really happened within the last two weeks. It is when Dennis Muilenburg was called to Washington, D.C., for a face-to-face meeting with Steve Dickson, the head of the FAA.
But make no mistake, this wasn't a friendly discussion. This was Steve Dickson laying out in very straightforward ways that Boeing was no longer calling the shots or shouldn't be expect to be calling the shots in terms of when the 737 Max would be recertified.
This was a public dressing down. This was Boeing immediately afterwards saying, we take back any guidance that we had previously issued that the Max might be recertified this year, that it might be in commercial service by the end of January.
And then, remember, it was just four days later that Boeing made the decision to completely suspend 737 Max production starting in January.
That is a monumental decision, something the company has never done. And those two, those two events together, going to Washington, being dressed down by the head of the FAA, along with suspending 737 Max production, that was the final straw for the board. They realized they had to make a change, and they did.
And what brought us to that point? Was his departure inevitable from March, from that second crash, when he defended the 737 Max as being a safe aircraft, or could something have been done differently?
Well, it was a culmination of things.
And, really, look, if they had gotten the Max back in the air, got it recertified, and they got regulators around the world to say, look, we think we have identified the problem right away, and let's get it back into operation with a few changes, I think Dennis Muilenburg might have survived this crisis.
But as the weeks turned into months, turned into constantly pushing back dates when we might see the Max recertified, his credibility went away, John. He lost his credibility, not just with airline customers, the key to Boeing's cash flow, but also with regulators on Capitol Hill.
I mean, there was nobody you could turn to who would say, look, Dennis Muilenburg is the man to see Boeing through this crisis.
He's going to be replaced in January by David Calhoun, who is currently chairman.
What can he do — what is doing or what can he do to repair those relationships? You talked about the regulators. You talked about the airlines, the customers…
… and also the confidence of the flying public.
I call it the three R's. And that's what he did today.
His first day, after being named incoming CEO, because he doesn't really take over his January 13, but make no mistake, he's already putting his fingerprints all over reshaping Boeing.
And the three R's are, rebuild the relationship with the FAA. Completely broken. What does he do this morning? One of the first phone calls after the news come out that he's going to be CEO, he calls Steve Dickson, head of the FAA.
Not only does he call him. He says during the conversation, we welcome rigorous sight and we want to be regulated.
Those are two quotes we heard from people who are familiar with the conversation. So that's the beginning of changing the tenor and tone at Boeing.
Also a reset on the 737 Max. And, by that, I'm not talking about stripping away all the work that's been done up until now to fix the plane, but essentially going in and sitting down with the engineers, with all of the people who were involved in getting this plane back in the air, and saying, where are we? What, realistically, can we expect? What steps still need to be completed?
Under Muilenburg, this was a company that was much more focused on increasing production, increasing cash flow, and really as much as possible taking this company to a new level of manufacturing.
Well, you can only go so far if the basics are not being covered. And the basics were not being covered, clearly, with the 737 Max. So you will see much more of a reset, if you will, in terms of, let's focus on safety. Then we can start rebuilding our relationships with our suppliers.
And that's the last one, the last R, which is rebuilding those relationships with airline executives, key stakeholders in Washington, D.C., members of Congress, who are really furious at Boeing.
To that end, Calhoun and his management team were on the phone with members of Congress. They were on the phone with CEOs of airlines. I mean, I talked with one executive who said, we haven't heard from Dennis Muilenburg in weeks.
Calhoun gets on the phone today. That's an indication that, at a minimum, he realizes the company has to change its public stance and how it deals with people when it comes to the 737 Max.
Phil LeBeau of CNBC in Chicago, thank you very much.