Boeing taps Kelly Ortberg, former Rockwell Collins head, as new CEO

WASHINGTON — Boeing has chosen former Rockwell Collins CEO Robert “Kelly” Ortberg as its next chief executive, bringing in a 35-year aerospace veteran from outside Boeing to run the embattled company.

Ortberg will replace current CEO Dave Calhoun on August 8, 2024.

“The Board conducted a thorough and extensive search process over the last several months to select the next CEO of Boeing and Kelly has the right skills and experience to lead Boeing in its next chapter,” Steven Mollenkopf, Boeing’s chair of the board, said in a statement announcing the news.

“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,” Mollenkoph said. “We look forward to working with him as he leads Boeing through this consequential period in its long history.”

Ortberg will be tasked with leading Boeing out of an ongoing safety and manufacturing crisis, which escalated in January after a piece of a 737 MAX fuselage broke off from the jet in mid-flight. The incident prompted investigations from the Federal Aviation Administration and the National Transportation Safety Board, and Boeing has slowed commercial jet production as it tries to stabilize its production lines.

Last week, Boeing finalized a guilty plea to a criminal fraud conspiracy charge, agreeing to pay $243.6 million for falsely representing technologies associated with the MAX to the FAA, Reuters reported.

Calhoun announced his intention to retire earlier this year amid leadership upheaval in the wake of the mid-flight fuselage blow out. Calhoun had served on Boeing’s board since 2009, and was named chief executive in 2020 after two fatal crashes of the 737 MAX in 2018 and 2019.

With Boeing mired with a series of crises since 2018, analysts viewed the optimal CEO candidate to be a Boeing outsider with a background in aerospace engineering or manufacturing.

Ortberg, aged 64, ticks many of those boxes, having gotten his start as a mechanical engineer at Texas Instruments. After joining Rockwell Collins in 1987, he rose through the ranks from a program manager to the executive vice president of both its commercial and government business divisions, where he oversaw the development and production of key systems used on Boeing and Airbus jetliners as well as avionics used aboard military aircraft.

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He became CEO of Rockwell in 2013 and saw the company through its acquisition by United Technologies Corp. — as well as that company’s subsequent acquisition by current parent company RTX, formerly known as Raytheon.

“I’m extremely honored and humbled to join this iconic company,” Ortberg said. “Boeing has a tremendous and rich history as a leader and pioneer in our industry, and I’m committed to working together with the more than 170,000 dedicated employees of the company to continue that tradition, with safety and quality at the forefront. There is much work to be done, and I’m looking forward to getting started.”

TD Cowen analyst Cai Von Rumohr said the CEO announcement was “a bit earlier than expected,” but “we think investors will like the change (and timing),” especially if it can help Boeing achieve a labor deal with its Seattle-area machinists union this fall.

Robert Stallard, an analyst at Vertical Research Partners, said Ortberg is a “very good hire” by the Boeing board.

“What he brings to the party is not only a wealth of A&D experience, but also a track record of running a company with an excellent corporate culture,” he wrote in a note to investors. “Clearly there are a massive number of problems at Boeing, but with Kelly as CEO we think there is at least a chance of fixing them.”

Democratic Rep. Rick Larsen, who represents one of the districts in Washington state where Boeing is based, said he was “encouraged” by the appointment of Ortberg, but that the new CEO would need to ensure Boeing commits to safety and quality and reaches a fair deal with its machinists union.

“Mr. Ortberg is a mechanical engineer. I hope that means he will ensure that his top message for everyone is building the best airplane means building the safest airplane in the world,” Larsen said on social media platform X.

Ortberg intends to relocate to the Seattle area to be close to Boeing’s commercial headquarters, The Seattle Times reported today, citing a source familiar with the decision. The gesture could endear Ortberg to Boeing’s local workforce, who have largely criticized the movement of the company’s corporate headquarters from Seattle to Chicago and then to its current location of Arlington, Va.

Ortberg was selected from a pool of candidates that included Patrick Shanahan, a former deputy defense secretary and Boeing executive who is now the CEO of Spirit AeroSystems, as well as Stephanie Pope, Boeing’s chief operating officer and head of its commercial airplanes arm.

The Air Current reported on Sunday that Ortberg had emerged as a late contender for the job.

A Tough Second Quarter For Boeing defense

The naming of the new CEO is certain to overshadow a bad quarter for Boeing Defense Space and Security unit, which announced $1 billion in losses in second-quarter results this morning.

They included a $391 million overrun on the KC-46 tanker program, “largely driven by a slowdown of commercial production and supply chain constraints” as well as additional losses on the T-7A trainer, new Air Force One jets and NASA’s Starliner program that reflected “higher estimated engineering and manufacturing costs, as well as technical challenges,” Boeing said in a statement.

During an earnings call this morning, Chief Financial Officer Brian West added that the slow down of commercial aircraft production also resulted in “margin compression” of its profitable P-8 submarine hunting aircraft.

Margins for the defense unit were negative this quarter after veering positive the first quarter. West said the plan to get back to high single digit margins in the medium to long term remains unchanged, but in the near future “additional losses at BDS” will “continue to weigh on near term cash flow.”

Calhoun said Boeing remains “cautiously optimistic about the longterm prospects of our defense business.”

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Boeing defense CEO Ted Colbert had warned that the division would book heavy losses during a press conference last week.

“We had a good start to the year, but this quarter you’ll see to be significantly challenged. It’ll look like it looked the third quarter of last year,” Colbert told reporters ahead of Farnborough Airshow.

UPDATED on 7/31/24 at 12:27 pm ET with details from the Boeing earnings call.