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Westlake Legal Group > Posts tagged "Calhoun, David L"

Boeing, Expecting a Long Slump, Will Cut 16,000 Jobs

Westlake Legal Group 29virus-markets-briefing-boeing-facebookJumbo Boeing, Expecting a Long Slump, Will Cut 16,000 Jobs washington state Shutdowns (Institutional) Layoffs and Job Reductions International Trade and World Market Coronavirus (2019-nCoV) Company Reports Calhoun, David L Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Airlines and Airplanes

The breathtaking slowdown in global aviation is taking a huge toll on Boeing, which said on Wednesday that it would slash about 16,000 jobs after reporting that revenue tumbled by 26 percent in the first three months of the year.

“The global pandemic has changed the way we live and work,” said Boeing’s chief executive, David L. Calhoun, in a note to staff. “It is changing our industry. We are facing utterly unexpected challenges.”

Airlines around the world are trying to stay alive, with losses expected to total more than $300 billion by year’s end, according to an industry trade group. As a result, many carriers are delaying purchases, deliveries and maintenance.

Boeing said it was slowing aircraft production, including for the troubled 737 Max, the 787, 777 and 777x. The company is also exploring ways to raise more capital, either from the federal government or financial markets. The job cuts, about 10 percent of Boeing’s staff, will be even steeper for those employed in the divisions most exposed to the downturn, the commercial airplanes and services businesses. Those units will see staff cuts of about 15 percent.

“I know this news is a blow during an already challenging time,” Mr. Calhoun said in the note. “I regret the impact this will have on many of you. I sincerely wish there were some other way.”

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Boeing reported a net loss of $641 million in the first quarter, compared to $2.1 billion profit a year earlier.

The company has said that it does not expect air travel to recover to levels reached before the pandemic for three years and that it would likely take several years more for travel to return to its previous long-term growth rate.

Boeing’s commercial aircraft business was especially hard hit in the first quarter by the grounding of the Max and the pandemic, with revenues for that business down nearly 50 percent to $6.2 billion in the first quarter compared to the same period last year. Total revenue dropped to $16.9 billion. The company received just 49 new orders and had 196 cancellations between January and March.

On Tuesday, Southwest Airlines said it has been negotiating a reduction in the number of 737 Max jets it will accept this year. Southwest said it would now receive no more than 48 Max jets by the end of 2021, instead of the 107 it had previously expected to take.

Boeing said it hopes to reach its job cut targets through voluntary means, including buyouts and early retirement offers. Employees who take the buyout will receive three months of health care and one week of pay for every year they have worked at Boeing, up to 26 years, the company told workers last week. Employees have until Monday to signal their interest in buyouts. If approved, they would leave in early June.

Any cuts are likely to be disproportionately focused on Boeing’s facilities in Washington State and South Carolina, home to its three major commercial aircraft manufacturing facilities. A weekslong shutdown of operations at those facilities disrupted production of passenger planes, but also affected Boeing’s defense and space business.

While Boeing itself is struggling to manage the effect of the pandemic, the company this week also expressed concern for the health of its suppliers, who receive about 70 percent of the company’s revenues.

“Currently, our team is focused on the best ways to keep liquidity flowing through our industry and to our supply chain until our customers are buying airplanes and related services again,” Mr. Calhoun told shareholders on Monday.

To that end, the company has taken out a loan, cut costs and suspended dividend payments and stock buybacks, he said. Boeing has $15.5 billion in cash on hand, but plans to raise more capital soon. In an interview on CNBC on Wednesday, Mr. Calhoun did not specify whether some of that would be in the form of federal aid.

On Wednesday, Boeing also said that it had suffered more than $2 billion in one-off costs in the first quarter.

A slower than expected ramp up in production of the 737 Max, which was grounded last year after two fatal crashes, subtracted about $1 billion from its bottom line. And the company incurred a pretax charge of $827 million for the KC-46A Tanker, most of it stemming from repairs Boeing agreed to make this month following discussions with the U.S. Air Force.

The company took a $336 million charge for repairs on the 737 Next Generation aircraft and the four-week suspension of work at Boeing’s facilities in Washington State cost the company about $137 million.

Over the weekend, Boeing also announced that it was terminating its $4.2 billion deal to buy an 80 percent stake of Embraer’s commercial jet business. Embraer is contesting that move and said Monday it had begun arbitration proceedings.

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Take Government Aid? We’ll See, Some Businesses Say

Westlake Legal Group 02virus-bailoutstrings2-facebookJumbo Take Government Aid? We’ll See, Some Businesses Say United States Politics and Government United States Economy United Airlines Stocks and Bonds Southwest Airlines Company Mnuchin, Steven T Law and Legislation Kelly, Gary C Federal Aid (US) Delta Air Lines Inc Credit and Debt Coronavirus Aid, Relief, and Economic Security Act (2020) Coronavirus (2019-nCoV) Calhoun, David L Boeing Company American Airlines Airlines and Airplanes

Grants, low-interest loans and other government support might seem like manna for businesses under financial strain. But some chief executives and corporate boards might balk at the offer of billions of dollars in aid to help them ride out the coronavirus pandemic and keep the economy from sliding into a deep recession.

Already, some corporate leaders are bristling at the potential terms of the grants and loans authorized by the stimulus legislation President Trump signed last week. Boeing’s chief executive, David Calhoun, for one has suggested that the aerospace company could raise money elsewhere if it found the government’s terms too onerous.

The Treasury Department, led by Steven Mnuchin, a former investment banker, might try to avoid imposing conditions that companies find burdensome. But if the aid appears too lenient, popular support for the rescue could evaporate as it did with the bailout of banks and other businesses after the 2008 financial crisis. And some lawmakers and experts argue that Mr. Mnuchin ought to resist the temptation to cut businesses too sweet a deal to prevent them from walking away from the government’s offer.

“Either they don’t need money, which means they shouldn’t get the money,” Senator Elizabeth Warren, Democrat of Massachusetts, said in an interview. “Or maybe they really do need it, in which case they should agree to some restrictions on how the money is spent.”

Taking a tougher line with companies could bolster the overall economic impact of the aid. Demanding that companies maintain hiring levels, for example, might mean that more people have money coming into their bank accounts, allowing them to spend on necessities and pay the rent or mortgage, said Phil Angelides, a former treasurer of California and chairman of the Financial Crisis Inquiry Commission, which was created by Congress in 2009.

“It is more important to keep workers on the payroll, even if they’re at home — that needs to be the pre-eminent condition,” Mr. Angelides said.

Of course, with revenues falling off a cliff and losses piling up, some companies may be so desperate that their chief executives happily accept terms like a temporary ban on companies buying their own shares, a condition that airline executives have said they are willing to accept. Others may accept aid simply because the public wants them to.


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One big difference between the economic problems of today and the 2008 financial crisis is that most of the companies in need of relief are not suffering from self-inflicted wounds. “That’s obvious to most people, and a C.E.O. will have this defense at his or her disposal,” said Tony Fratto, a former assistant secretary of the Treasury and a former deputy press secretary for President George W. Bush.

Right now, policymakers are keenly watching how airlines and Boeing might respond.

Congress’s rescue legislation identified airlines as eligible for federal aid and earmarked up to $25 billion in grants and another $25 billion in loans for the industry; cargo carriers have been offered $8 billion in grants and loans. Boeing is expected to be the biggest recipient of up to $17 billion lawmakers set aside for businesses considered crucial to national security. The act also authorizes the Treasury to provide $454 billion to back loans made by the Federal Reserve, which would enable the central bank to extend an additional $4 trillion of credit to businesses in all industries.

Some of the restrictions set out by the legislation, like a temporary halt on companies using their own money to buy back stock, appear to apply to all company loans. But a commitment by companies to maintain hiring at or close to recent levels is not required across the board. It would apply to the aid for airlines and companies deemed important to national security, but only through the end of September. On Friday, United management told staff that the federal aid would prevent any substantial reductions in staff or pay through September, but suggested that layoffs may come if the recovery was as slow as the company expected.

Treasury could also demand stock in exchange for supporting airlines and companies like Boeing.

For some executives, giving the government shares in their company could be a big sticking point. In a TV interview last week, Mr. Calhoun, the Boeing chief executive, suggested he would not be interested in a rescue package that gave the federal government stock in the company.

“I don’t have a need for an equity stake,” he told Fox Business. “If they force it, we just look at all the other options, and we’ve got plenty of them.”

While the government has laid out initial guidance on terms for the $17 billion available to companies deemed essential to national security, it is expected to release more specific terms in the coming days. Until those terms are clear, Boeing is holding off on making a decision, two people briefed on the company’s deliberations said.

The airlines have not set out a clear position on giving the taxpayer stock.

On Thursday, the chief executive of Southwest Airlines, Gary Kelly, told employees that the airline planned to apply for the grants to pay workers, but a spokesman declined to say whether the airline would be willing to give the government an equity stake in exchange for the assistance. Last week, Mr. Kelly said that the legislation only “gives us another option” and that the company could also “raise capital in the private markets.”

American, which has said it would seek aid from the government, referred questions about whether the government should take a stake in airlines to Airlines for America, an industry group. The group and United Airlines declined to comment. Delta Air Lines did not respond to a request for comment.

But on Wednesday, the unions that represent flight attendants at several major airlines urged Mr. Mnuchin not to exercise his power to take stock in the airlines. They argued that if he did so, he could scare off executives from accepting the aid, which would, in turn, mean more layoffs.

Congress did not make the rules surrounding equity stakes particularly onerous. In addition to giving Mr. Mnuchin discretion about whether Treasury takes any stake at all, the legislation prohibits the Treasury from exercising “voting power with respect to any shares of common stock acquired.” That means companies don’t have to worry about the government’s participating in important shareholder decisions. And the act says the Treasury can accept senior debt instead of equity.

Of course, companies that are running low on cash don’t have much time to negotiate with the government.

Without the federal aid, three big airlines — American, Delta and United — have only about four to five months before they would have to start making deep cuts or take out new loans, Moody’s Investor Service said in a report published on Wednesday. With it, they have an estimated eight months of financial cushion.

“The federal grant money will be the most significant relief valve for alleviating pressure on the airlines,” Moody’s said.

Large retailers, in a frantic effort to conserve cash, have drawn down credit lines and are laying off or idling thousands of employees. Macy’s, which announced this week that it was furloughing the majority of its 125,000 employees, said in a statement, “We are also working both directly and through our retail associations to assess any government relief bill and advocate for Macy’s Inc. and the industry.”

Congress required fewer restrictions on the loan programs that will be set up with the $454 billion of Treasury backing. The legislation does not demand that companies taking out loans from these programs maintain hiring levels.

It is unclear how hard a line Mr. Mnuchin will take with chief executives. One approach might be to tell reluctant executives that their participation is needed for the whole effort to work. Henry M. Paulson Jr., who was Treasury secretary in 2008, told chief executives of large banks that they needed to take billions of dollars in taxpayer funds regardless of whether they agreed with the government’s terms, which many people across the political spectrum criticized. His goal, in part, was to avoid having investors consider banks that took the money as weak if stronger financial institutions did not accept the cash, too.

The executives, after some objections, quickly agreed. “This is the right thing to do for the country,” Mr. Paulson told them.

Michael Corkery contributed reporting.

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‘It’s More Than I Imagined’: Boeing’s New C.E.O. Confronts Its Challenges

FLORISSANT, Mo. — In his eight weeks on the job, Boeing’s chief executive, David L. Calhoun, has come to one overriding conclusion: things inside the aerospace giant were even worse than he thought.

In a wide-ranging interview this week, Mr. Calhoun criticized his predecessor in blunt terms and said he was focused on transforming the internal culture of a company mired in crisis following two crashes that killed 346 people.

To get Boeing back on track, Mr. Calhoun said he was working to mend relationships with angry airlines, win back the confidence of international regulators and appease an anxious President Trump — all while moving as quickly as possible to get the grounded 737 Max back in the air.

“It’s more than I imagined it would be, honestly,” Mr. Calhoun said, describing the problems he is confronting. “And it speaks to the weaknesses of our leadership.”

Boeing’s previous chief executive, Dennis A. Muilenburg, was fired in December after presiding over a series of embarrassing setbacks that culminated in the shutdown of the 737 factory this year.

Mr. Calhoun formally took over in January, but he has been involved in this mess from the beginning. A protégé of Jack Welch from his time at General Electric, Mr. Calhoun has been on Boeing’s board since 2009, and was elevated to chairman late last year.

Before becoming the chief executive, he had vigorously defended Mr. Muilenburg, saying in a CNBC appearance in November that Mr. Muilenburg “has done everything right” and should not resign. One month later, the board ousted Mr. Muilenburg and announced Mr. Calhoun as his replacement.

“Boards are invested in their C.E.O.s until they’re not,” said Mr. Calhoun, sitting in a dim conference room at the Boeing Leadership Center, a corporate campus outside St. Louis where Mr. Muilenburg’s photo is still displayed prominently.

“We had a backup plan,” he added. “I am the backup plan.”

ImageWestlake Legal Group merlin_163519638_8218926c-95ea-4e8d-9b71-4d201d31311a-articleLarge ‘It’s More Than I Imagined’: Boeing’s New C.E.O. Confronts Its Challenges Muilenburg, Dennis A Calhoun, David L Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters Airlines and Airplanes

Dennis Muilenberg, the former Boeing president and chief executive, at a hearing last year on Capitol Hill.Credit…Mandel Ngan/Agence France-Presse — Getty Images

Now that he’s in charge, Mr. Calhoun has become more willing to openly criticize Mr. Muilenburg. He said the former chief executive turbocharged Boeing’s production rates before the supply chain was ready, a move that sent Boeing shares to an all-time high but compromised quality.

“I’ll never be able to judge what motivated Dennis, whether it was a stock price that was going to continue to go up and up, or whether it was just beating the other guy to the next rate increase,” he said, adding later, “If anybody ran over the rainbow for the pot of gold on stock, it would have been him.”

Mr. Muilenburg declined to comment.

Mr. Calhoun and the rest of Boeing’s board never seriously questioned that strategy, in part because before the first Max crash off the coast of Indonesia in October 2018, the company was enjoying its best run in years. What’s more, the board believed that Mr. Muilenburg, an engineer who had been at Boeing for his entire career, was so deeply informed about the business that he was a good judge of the risks involved in ramping up production.

“If we were complacent in any way, maybe, maybe not, I don’t know,” Mr. Calhoun said. “We supported a C.E.O. who was willing and whose history would suggest that he might be really good at taking a few more risks.”

It was only after the Max was grounded last March following a crash in Ethiopia that Mr. Muilenburg’s optimistic approach became viewed as a liability. Airlines grew livid after he repeatedly voiced overly optimistic timetables about when the Max would return to service. The head of the Federal Aviation Administration, Stephen Dickson, was so frustrated that he reprimanded Mr. Muilenburg in a private meeting and publicly told F.A.A. employees to resist pressure from the company.

“They felt like they were being pushed into a timeline,” Mr. Calhoun said of the F.A.A., adding that the “regulator was never there alongside of us, but apparently our team didn’t quite come up to grips with that.”

One of Mr. Calhoun’s initial tasks as chief executive was to go on an apology tour, holding a series of what he called “greet-and-mend opportunities.” The first stop was the White House.

At a private meeting with Mr. Trump on Mr. Calhoun’s third day on the job, the president told him that he liked Mr. Muilenburg, but believed a leadership change was needed. The president said he hoped Boeing was investing all of its resources into getting the plane back in the air.

“He wants us to get back on our horse,” Mr. Calhoun said. “He wants us to get the Max flying again, safely.”

Mr. Calhoun said he recently asked Boeing employees to “lay out in gory detail what needed to be done” to get the plane certified. “And then when they told me exactly what that was, I added a day or two to it,” he said.

His conclusion was that the Max might be approved some time this summer, pushing back again the likely return of the plane by six months.

“Restoring credibility with the F.A.A. was not as hard as people think,” he said, “They just didn’t want to be boxed in anymore. They were sick of it.”

While he has been contrite about damaging internal messages released in January, Mr. Calhoun stopped short of saying that the company has systemic cultural problems. He called the messages, in which Boeing employees ridiculed the F.A.A. and denigrated their own colleagues, “totally unacceptable,” but said they were not representative of Boeing more broadly. “I see a couple of people who wrote horrible emails,” he said.

He also delicately maneuvered between accepting responsibility for the two crashes and pointing the finger elsewhere.

When designing the Max, the company made a “fatal mistake” by assuming pilots would immediately counteract a failure of new software on the plane that played a role in the Lion Air and Ethiopian Airlines accidents. But he implied that the pilots from Indonesia and Ethiopia, “where pilots don’t have anywhere near the experience that they have here in the U.S.,” were part of the problem, too.

Asked whether he believed American pilots would have been able to handle a malfunction of the software, Mr. Calhoun asked to speak off the record. The Times declined to do so.

“Forget it,” Mr. Calhoun then said. “You can guess the answer.”

He dismissed concerns about the board’s decision to give him a $7 million bonus based in part on whether the Max returned to service. “The objective is to get the Max up safely,” he said. “Period.”

When asked why he didn’t elect to forgo his salary altogether, he said, “Cause I’m not sure I would have done it.”

Pulling Boeing out of the hole it has dug will take years, Mr. Calhoun said. At a meeting with his senior leadership team on Tuesday, Mr. Calhoun introduced a new set of values intended to guide the company, which he hopes will inspire employees still working on getting the 737 Max back in service.

“You don’t just win this one,” he said. “You don’t just go out and fight and win and now you’re a hero. One airplane at a time.”

In the meantime, Mr. Calhoun is focused on the basics: producing jets at a pace the factory can handle, instilling discipline up and down the company, and hunting for bad news and acting on it.

“If I don’t accomplish all that,” he said, “then you can throw me out.”

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Boeing Expects 737 Max Costs Will Surpass $18 Billion

Westlake Legal Group 29boeing1-facebookJumbo Boeing Expects 737 Max Costs Will Surpass $18 Billion Company Reports Calhoun, David L Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters Airlines and Airplanes

Boeing on Wednesday said the costs associated with the grounding of the 737 Max were likely to surpass $18 billion, a significant increase over earlier forecasts.

The new estimate, announced during Boeing’s quarterly earnings report, is the company’s most recent approximation of just how expensive it will be to return the Max to service, compensate airline customers and restart the shuttered 737 factory.

Boeing continues to grapple with the fallout from the crashes of two Max jets in 2018 and 2019, which killed 346 people, leading to the worldwide grounding of the plane in March. In addition to the rising costs, the company is contending with a new chief executive, the temporary shutdown of the 737 factory and a range of challenges in other parts of the business.

Boeing on Wednesday said that the costs associated with shutting down and restarting the factory would amount to some $4 billion. The decision to temporarily halt production of the Max was only made last month, and Boeing had not previously given guidance on what the move would cost.

The company also said that the cost of compensating airlines that have suffered lost sales as a result of the grounding of the Max was now expected to reach $8.3 billion, up from a previous estimate of $5.6 billion. That figure represents a mixture of cash payments to airlines, as well as discounts on future sales.

And Boeing said that as a result of the grounding, which has lasted nearly a year now, it expected the overall cost to produce the 737 Max to rise to $6.3 billion in the years ahead, up from an earlier estimate of $3.6 billion.

In total, the anticipated costs now equal more than $18.6 billion, or nearly 20 percent of Boeing’s annual sales before the Max was grounded.

The Max crisis continued to weigh on the company’s financial results. Revenue for the quarter was $17.9 billion, down 37 percent from the same time a year earlier, before the jet was grounded.

Boeing also said it would incur a charge of $410 million as a result of its botched rocket launch late last year, when a space capsule it designed for NASA failed to reach the correct orbit.

This was the company’s first quarterly earnings report with David L. Calhoun at the helm, following the ouster of the previous chief executive, Dennis A. Muilenburg.

Since taking over this month, Mr. Calhoun has tried to set himself apart from Mr. Muilenburg, who was pushed out after alienating airline customers and the Federal Aviation Administration with overly optimistic projections about when the Max would return to service.

“We recognize we have a lot of work to do,” Mr. Calhoun said in a statement. “We are focused on returning the 737 Max to service safely and restoring the long-standing trust that the Boeing brand represents with the flying public. We are committed to transparency and excellence in everything we do.”

There is still no precise timeline for the return of the Max. Last week, Boeing said it did not expect regulators to approve the plane to fly until June or July, though that estimate was conservative. If regulators do not find any additional problems with the plane, the Max could return to service before then, though new issues cropped up earlier in the process.

The company has enjoyed rare bits of good news in recent weeks. It successfully completed the first flight test of the 777X, its new wide-body jet. And the trade deal that the White House struck with China included a commitment for the sale of new American aircraft to Chinese customers.

Yet Boeing still faces enormous challenges. The grounding of the Max is costing the company many billions of dollars, and costs are still rising. The fatal crashes and a cascade of damning revelations have badly damaged Boeing’s reputation, and the company’s own research shows 40 percent of regular travelers are unwilling to fly the Max. Other Boeing programs, including its work for NASA and the United States military, are behind schedule.

The Max is Boeing’s most important product, representing hundreds of billions of dollars in expected future sales. But just over a year after it was introduced in 2017, a Max crashed off the coast of Indonesia, after a new automated system triggered based on data from a faulty sensor. Less than five months later, a second Max crashed in Ethiopia under similar circumstances, leading to the worldwide grounding.

That has thrust Boeing into the biggest crisis in its history and led to the temporary shuttering of its 737 factory in Renton, Wash. Boeing has developed a software update and has been working with regulators to win approval to return the plane to service. But the grounding is now likely to last a year.

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Boeing Expects 737 Max Costs Will Surpass $18 Billion

Westlake Legal Group 29boeing1-facebookJumbo Boeing Expects 737 Max Costs Will Surpass $18 Billion Company Reports Calhoun, David L Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters Airlines and Airplanes

Boeing on Wednesday said the costs associated with the grounding of the 737 Max were likely to surpass $18 billion, a significant increase over earlier forecasts.

The new estimate, announced during Boeing’s quarterly earnings report, is the company’s most recent approximation of just how expensive it will be to return the Max to service, compensate airline customers and restart the shuttered 737 factory.

Boeing continues to grapple with the fallout from the crashes of two Max jets in 2018 and 2019, which killed 346 people, leading to the worldwide grounding of the plane in March. In addition to the rising costs, the company is contending with a new chief executive, the temporary shutdown of the 737 factory and a range of challenges in other parts of the business.

Boeing on Wednesday said that the costs associated with shutting down and restarting the factory would amount to some $4 billion. The decision to temporarily halt production of the Max was only made last month, and Boeing had not previously given guidance on what the move would cost.

The company also said that the cost of compensating airlines that have suffered lost sales as a result of the grounding of the Max was now expected to reach $8.3 billion, up from a previous estimate of $5.6 billion. That figure represents a mixture of cash payments to airlines, as well as discounts on future sales.

And Boeing said that as a result of the grounding, which has lasted nearly a year now, it expected the overall cost to produce the 737 Max to rise to $6.3 billion in the years ahead, up from an earlier estimate of $3.6 billion.

In total, the anticipated costs now equal more than $18.6 billion, or nearly 20 percent of Boeing’s annual sales before the Max was grounded.

The Max crisis continued to weigh on the company’s financial results. Revenue for the quarter was $17.9 billion, down 37 percent from the same time a year earlier, before the jet was grounded.

Boeing also said it would incur a charge of $410 million as a result of its botched rocket launch late last year, when a space capsule it designed for NASA failed to reach the correct orbit.

This was the company’s first quarterly earnings report with David L. Calhoun at the helm, following the ouster of the previous chief executive, Dennis A. Muilenburg.

Since taking over this month, Mr. Calhoun has tried to set himself apart from Mr. Muilenburg, who was pushed out after alienating airline customers and the Federal Aviation Administration with overly optimistic projections about when the Max would return to service.

“We recognize we have a lot of work to do,” Mr. Calhoun said in a statement. “We are focused on returning the 737 Max to service safely and restoring the long-standing trust that the Boeing brand represents with the flying public. We are committed to transparency and excellence in everything we do.”

There is still no precise timeline for the return of the Max. Last week, Boeing said it did not expect regulators to approve the plane to fly until June or July, though that estimate was conservative. If regulators do not find any additional problems with the plane, the Max could return to service before then, though new issues cropped up earlier in the process.

The company has enjoyed rare bits of good news in recent weeks. It successfully completed the first flight test of the 777X, its new wide-body jet. And the trade deal that the White House struck with China included a commitment for the sale of new American aircraft to Chinese customers.

Yet Boeing still faces enormous challenges. The grounding of the Max is costing the company many billions of dollars, and costs are still rising. The fatal crashes and a cascade of damning revelations have badly damaged Boeing’s reputation, and the company’s own research shows 40 percent of regular travelers are unwilling to fly the Max. Other Boeing programs, including its work for NASA and the United States military, are behind schedule.

The Max is Boeing’s most important product, representing hundreds of billions of dollars in expected future sales. But just over a year after it was introduced in 2017, a Max crashed off the coast of Indonesia, after a new automated system triggered based on data from a faulty sensor. Less than five months later, a second Max crashed in Ethiopia under similar circumstances, leading to the worldwide grounding.

That has thrust Boeing into the biggest crisis in its history and led to the temporary shuttering of its 737 factory in Renton, Wash. Boeing has developed a software update and has been working with regulators to win approval to return the plane to service. But the grounding is now likely to last a year.

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Boeing Expects 737 Max Costs Will Surpass $18 Billion

Westlake Legal Group 29boeing1-facebookJumbo Boeing Expects 737 Max Costs Will Surpass $18 Billion Company Reports Calhoun, David L Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters Airlines and Airplanes

Boeing on Wednesday said the costs associated with the grounding of the 737 Max were likely to surpass $18 billion, a significant increase over earlier forecasts.

The new estimate, announced during Boeing’s quarterly earnings report, is the company’s most recent approximation of just how expensive it will be to return the Max to service, compensate airline customers and restart the shuttered 737 factory.

Boeing continues to grapple with the fallout from the crashes of two Max jets in 2018 and 2019, which killed 346 people, leading to the worldwide grounding of the plane in March. In addition to the rising costs, the company is contending with a new chief executive, the temporary shutdown of the 737 factory and a range of challenges in other parts of the business.

Boeing on Wednesday said that the costs associated with shutting down and restarting the factory would amount to some $4 billion. The decision to temporarily halt production of the Max was only made last month, and Boeing had not previously given guidance on what the move would cost.

The company also said that the cost of compensating airlines that have suffered lost sales as a result of the grounding of the Max was now expected to reach $8.3 billion, up from a previous estimate of $5.6 billion. That figure represents a mixture of cash payments to airlines, as well as discounts on future sales.

And Boeing said that as a result of the grounding, which has lasted nearly a year now, it expected the overall cost to produce the 737 Max to rise to $6.3 billion in the years ahead, up from an earlier estimate of $3.6 billion.

In total, the anticipated costs now equal more than $18.6 billion, or nearly 20 percent of Boeing’s annual sales before the Max was grounded.

The Max crisis continued to weigh on the company’s financial results. Revenue for the quarter was $17.9 billion, down 37 percent from the same time a year earlier, before the jet was grounded.

Boeing also said it would incur a charge of $410 million as a result of its botched rocket launch late last year, when a space capsule it designed for NASA failed to reach the correct orbit.

This was the company’s first quarterly earnings report with David L. Calhoun at the helm, following the ouster of the previous chief executive, Dennis A. Muilenburg.

Since taking over this month, Mr. Calhoun has tried to set himself apart from Mr. Muilenburg, who was pushed out after alienating airline customers and the Federal Aviation Administration with overly optimistic projections about when the Max would return to service.

“We recognize we have a lot of work to do,” Mr. Calhoun said in a statement. “We are focused on returning the 737 Max to service safely and restoring the long-standing trust that the Boeing brand represents with the flying public. We are committed to transparency and excellence in everything we do.”

There is still no precise timeline for the return of the Max. Last week, Boeing said it did not expect regulators to approve the plane to fly until June or July, though that estimate was conservative. If regulators do not find any additional problems with the plane, the Max could return to service before then, though new issues cropped up earlier in the process.

The company has enjoyed rare bits of good news in recent weeks. It successfully completed the first flight test of the 777X, its new wide-body jet. And the trade deal that the White House struck with China included a commitment for the sale of new American aircraft to Chinese customers.

Yet Boeing still faces enormous challenges. The grounding of the Max is costing the company many billions of dollars, and costs are still rising. The fatal crashes and a cascade of damning revelations have badly damaged Boeing’s reputation, and the company’s own research shows 40 percent of regular travelers are unwilling to fly the Max. Other Boeing programs, including its work for NASA and the United States military, are behind schedule.

The Max is Boeing’s most important product, representing hundreds of billions of dollars in expected future sales. But just over a year after it was introduced in 2017, a Max crashed off the coast of Indonesia, after a new automated system triggered based on data from a faulty sensor. Less than five months later, a second Max crashed in Ethiopia under similar circumstances, leading to the worldwide grounding.

That has thrust Boeing into the biggest crisis in its history and led to the temporary shuttering of its 737 factory in Renton, Wash. Boeing has developed a software update and has been working with regulators to win approval to return the plane to service. But the grounding is now likely to last a year.

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Boeing Taps David Calhoun as C.E.O. to Stem 737 Max Crisis

Westlake Legal Group 24calhoun1-facebookJumbo Boeing Taps David Calhoun as C.E.O. to Stem 737 Max Crisis Muilenburg, Dennis A Careers and Professions Calhoun, David L Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters Airlines and Airplanes

As the new chief executive of Boeing, David L. Calhoun will take on one of the most challenging tasks in corporate America: steering the embattled airplane manufacturer out of a crisis that has consumed it for more than a year.

Boeing’s best-selling jet, the 737 Max, has been grounded for 10 months after two deadly crashes exposed serious flaws in the jet’s design and led to scrutiny of the company’s manufacturing process and its dealings with regulators, as well as to accusations that it overlooked safety concerns in its competitive zeal.

But while the magnitude of the task has little precedent, this is not the first time that Mr. Calhoun, who has longstanding ties to the aviation industry, has had to navigate a period of corporate turmoil. Over decades as an executive at companies like General Electric, Nielsen and Blackstone, he has been hailed as a “turnaround specialist” and described by colleagues as an experienced and decisive operator.

Mr. Calhoun, 62, started his career at G.E., rising to run the company’s airplane-engine business in the aftermath of the Sept. 11, 2001, attacks. Later, as chief executive of Nielsen, he was credited with rebuilding the data and information firm after a private-equity takeover. And in 2017, he was made chairman of the board of Caterpillar as the construction equipment company faced scrutiny from the federal government over its tax and export practices.

“He’s somebody people trust,” said Kevin Sharer, a former chief executive of the drugmaker Amgen and a close friend of Mr. Calhoun’s who overlapped with him at G.E. “He doesn’t bring emotion. He brings logic and conviction.”

Mr. Calhoun will replace Dennis A. Muilenburg as Boeing’s chief executive on Jan. 13, the company said on Monday. A member of the company’s board of directors since 2009, he became chairman in October when Mr. Muilenburg was stripped of that title as the company continued to struggle in the aftermath of the crashes — one in Indonesia and the other in Ethiopia — that left 346 people dead.

Since he joined G.E. after graduating from Virginia Tech in 1979, Mr. Calhoun has built a career on firm decision-making and an ability to execute ambitious strategies step by step, according to interviews with former colleagues.

He thrived under the mentorship of G.E.’s longtime chief executive, Jack Welch, and became known as a blunt and forceful leader. When he settled on a decision, he pursued it relentlessly, former colleagues say.

“He was very, very clear in his communication,” said Paul Mirabella, who ran G.E.’s global diagnostic imaging unit from 2003 to 2006. “If you worked for David, you were never confused about what the mission was.”

Toward the end of his tenure at G.E., Mr. Calhoun was courted by a number of major companies. In 2006, The New York Times reported that it was “common knowledge among analysts” that Boeing had offered him the chief executive job a year earlier. But Mr. Calhoun decided to take over Nielsen, which a group of private equity firms had acquired.

There, he streamlined the business by selling several magazines, including The Hollywood Reporter and Billboard Magazine. He also recorded a major victory in 2011 when Walmart agreed to share consumer sales information with Nielsen after keeping the data private for many years.

In 2017, Mr. Calhoun took over as chairman of Caterpillar shortly after federal agents raided the company’s headquarters. And he has led the portfolio-operations group at Blackstone since 2013.

“Dave is an incredibly capable, super talented executive,” said Jonathan Gray, the president and chief operating officer at Blackstone. “I’m sure Boeing saw in the boardroom how capable he was.”

At Blackstone, Mr. Calhoun was involved in discussions with senior executives about the firm’s new life sciences initiatives, which were unveiled in 2018. At a meeting three years ago, most of the officials in the room spoke in broad strokes about the future of health care, recalled Mr. Sharer, who was at the meeting. But not Mr. Calhoun. He focused on the nuts and bolts: Where do we invest? Whom do we hire?

“We’re all dreaming about how beautiful the cathedral is going to look,” Mr. Sharer said. “And he kept saying, ‘How are we going to build it?’”

Throughout Boeing’s crisis, Mr. Calhoun has been the face of the board, often reaffirming its support for Mr. Muilenburg in media appearances. But it was never entirely clear whether he had his eyes on the top job.

In an interview with Virginia Tech Daily in 2018, Mr. Calhoun emphasized his desire to maintain an even work-life balance, noting that he learned the importance of setting aside time for his family from one of his mentors at G.E.

“He had found this wonderful balance. He clearly told me how imbalanced I was,” said Mr. Calhoun, who is married and has four children. “I can probably work around the clock, but that’s not a healthy thing, and you miss out on a lot.”

Still, over the course of his career, he has repeatedly shown an appetite for new challenges. In 2010, he told an interviewer that he had left G.E. partly because he had wanted a “a little anxiety” in his professional life.

He will get plenty of that as chief executive of Boeing. Over the last year, the company has faced intense criticism from regulators, Congress and the families of the people who died in the two crashes.

Last week, Boeing temporarily suspended production of the Max, disrupting a vast international supply chain that stretches across thousands of companies. Mr. Calhoun spent much of Monday speaking with Boeing’s customers and government regulators, as well as other public officials, a Boeing spokesman said.

In an interview with The Times in May, Mr. Calhoun made clear what he viewed as Boeing’s main priority. “There’s really only one thing to do, and that’s to get a safe airplane back up in the sky and let it fly,” he said. “I mean, that’s really all we can do.”

“Oh, by the way,” he added. “That will all happen. That is what we do.”

Natalie Kitroeff and Kate Kelly contributed reporting.

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