Good morning. Boeing again found itself on the hot seat last month after a panel from one of its 737 Max 9 airplanes operated by Alaska Airlines blew out in midair, raising further questions about the quality of its manufacturing.
On Wednesday, the company announced that Ed Clark, head of its 737 program and an 18-year Boeing veteran, would be leaving the company. Katie Ringgold, a long-time engineering and operations leader, is set to succeed him as vice president and general manager of that division.
My colleague Shawn Tully explores the plight of Boeing in a new story, pointing out how the company’s latest incident is just that: the latest.
“The 108-year-old corporate icon had been dogged by safety concerns since two fatal crashes darkened its reputation and sent its finances reeling a half-decade ago—the Lion Air and Ethiopian Airlines disasters that together killed 346 people,” Tully writes. “The response to those catastrophes got then-CEO Dennis Muilenburg fired, and current CEO David Calhoun, a 26-year GE veteran, took the helm in January of 2020. Professed Calhoun following the door blowout: ‘We’re going to approach this, number one, by acknowledging our mistake. We’re going to approach it with 100% and complete transparency every step of the way.’”
Last month, during Boeing’s earnings call for the period ending Dec. 31, Calhoun apologized again to Alaska Airlines, the crew, the passengers, and customers. “Whatever the specific cause of the accident might turn out to be,” he said, “an event like this simply must not happen on an airplane that leaves one of our factories. We simply must be better.”
At a session during the Cowen Aerospace & Defense Conference on Feb. 13, Brian West, CFO at Boeing since 2021, offered an apology and addressed production issues. West said that during the second half of this year, he “fully” expects to move toward the production of 737 airliners at a rate of 38 per month, following the company’s recent slowdown to address quality issues.
As Tully writes, on Jan. 24 the Federal Aviation Administration “capped the output for the entire Max lineup now in commercial production, consisting of the 737-8 and 737-9, at the current rate of 38 per month,” which is “a serious blow since Boeing was basing its comeback campaign on gradually raising its monthly Max output to 50 by 2025 or 2026.”
Boeing’s shortcomings are “recurring and deep-seated,” according to Tully. And there’s a glaring leadership issue.
“The problem isn’t merely that one worker on one assembly line failed to install a door screw,” Tully writes. “It was that managerial decisions, made over a period that spanned more than 20 years and four CEOs, gradually weakened a once-vaunted system of quality control and troubleshooting on the factory floor, leaving gaps that have allowed sundry defects to slip through.”
Read the complete article here.
Sheryl Estrada
sheryl.estrada@fortune.com
Leaderboard
Philip Johnson was named EVP and CFO at Jazz Pharmaceuticals plc (Nasdaq: JAZZ), effective March 1. Johnson succeeds Renée Galá, who was promoted to president and chief operating officer in October 2023. Johnson joins Jazz Pharmaceuticals with over 35 years of financial experience, most recently leading Eli Lilly and Company's treasury and investor relations operations as group VP of finance.
Evangelos Perros was named CFO at Pagaya Technologies Ltd. (Nasdaq: PGY), a global technology company, effective immediately. Perros, who has served as the company's Interim CFO since November 2023, was previously the company’s deputy CFO and head of strategic finance since joining Pagaya in 2021. Before joining the company, Perros served as managing director and head of business planning and analysis at Apollo Global Management.
Big deal
S&P Global Market Intelligence analyzed the language used during the fourth-quarter 2023 earnings calls of the four largest U.S.-listed private equity firms—Apollo Global Management Inc., Blackstone Inc., The Carlyle Group Inc., and KKR & Co. Inc. The sentiment for all four firms was an outlook of improving dealmaking and fundraising conditions. This produced a higher average net positivity score, according to the report.
The 1.14% average was a step up from the 0.86% average of the four in the previous quarter, but it still trailed the 1.24% average net positivity score for S&P 500 companies reporting earnings between Jan. 1 and Feb. 12, the research found. The net positivity score is based on the ratio of positive to negative words from the Loughran and McDonald's Sentiment Word Lists and compares that to the total number of words.
Going deeper
An episode of HBR On Strategy, "How to Build—and Maintain—Relationships with Your Shareholders," features IBM’s former CEO Sam Palmisano. It's based on a conversation from 2014 that was resurfaced this week by HBR as a case study on strategy as Palmisano says it’s essential to build relationships with your shareholders before there’s a specific problem to address. The episode addresses how to communicate with your investors to meet their needs without needing to change your strategy.
Overheard
"In the biggest moment for the market and tech sector in many years, the Godfather of AI, Jensen, and Nvidia just delivered a robust quarter and guidance crushing Street and whisper expectations that further solidifies the AI Revolution is just starting and not peaked."
—Wedbush Securities' Dan Ives wrote in a note to investors on Wednesday regarding Nvidia CEO Jensen Huang and the company's latest earnings report. The semiconductor giant, whose chips are foundational for generative AI, turned in first-quarter revenues of $22.1 billion, up 265% from a year ago, compared with analysts’ consensus forecast for a 240% jump to $20.6 billion, Fortune reported.
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