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New Boeing CEO Already Has A Credibility Problem

Mar. 09, 2020 8:47 AM ETThe Boeing Company (BA) Stock151 Comments


  • In a recent interview CEO Calhoun heavily criticizes Muilenburg, but isn't as critical on his own role as a board member over the past decade.
  • Calhoun refuses to answer question on whether American pilots would be able to handle software malfunction, which doesn't add to the objective of transparency.
  • Calhoun could solve the Boeing 737 MAX crisis, a multi-year trajectory, but he's the prime example of what Boeing critics consider the move from engineering excellence to financial engineering.
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In October 2019, Boeing (NYSE:BA) decided to separate the role of CEO and chairman of the board of directors, electing David Calhoun as the chairman. It would be the first step toward a contingency plan in case Dennis Muilenburg would have to leave Boeing. That did indeed happen and since January 2020, Calhoun is the new CEO of The Boeing Company.

Boeing 737 MAX Calhoun Dhierin Seeking Alpha

Source: Boeing

Having followed Calhoun’s predecessors, Jim McNerney and Dennis Muilenburg, I can say that Calhoun makes a much better impression. Especially Muilenburg often made a rehearsed impression and sometimes even seemed to lack emotion. As said, Calhoun makes a better impression, a much better one. However, some of the things he says really make me question whether he's the right man for Boeing, and a recent interview with him from The New York Times strengthened that question. I would highly recommend readers of this report to read the interview as well, even if only for informational purposes.

In this report, I will lay out why I do have my questions about Mr. Calhoun.

View on Muilenburg evolves

Muilenburg Dhierin Bechai Seeking Alpha

Source: The New York Times

When Calhoun became chairman of the board in October 2019, he said the following:

The board has full confidence in Dennis as CEO and believes this division of labor will enable maximum focus on running the business with the board playing an active oversight role. The board also plans in the near term to name a new director with deep safety experience and expertise to serve on the board and its newly established Aerospace Safety Committee.

In November 2019, on CNBC, he said Muilenburg did everything correctly:

So, there are two instances in which Calhoun expressed confidence in Muilenburg. Contrary to what Calhoun states, Muilenburg did things far from correctly, as I discussed in a previous

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This article was written by

Dhierin Bechai profile picture

Dhierin-Perkash Bechai is an aerospace, defense and airline analyst.

Dhierin runs the investing group The Aerospace Forum, whose goal is to discover investment opportunities in the aerospace, defense and airline industry. With a background in aerospace engineering, he provides analysis of a complex industry with significant growth prospects, and offers context to developments as they occur, describing how they might affect investment theses. His investing ideas are driven by data informed analysis. The investing group also provides direct access to data analytics monitors. Learn more.

Analyst’s Disclosure: I am/we are long BA, EADSF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (151)

emcsqard profile picture
As previously noted, is the fact that aviation fuel is getting cheaper. How long, is anyone's guess. But for the time being, more efficient planes become less of a factor in the cost of a flight. Of course, for as long as they aren't flying, fuel is not a factor at all, nor is the need for new planes.

metalhead profile picture
We're getting close to a trade-able bottom with BA stock. $160 pre-market. That fulfills the massive head and shoulders pattern going back to 2016 with $440 as the "head" and $300 as the neckline. Theory would say once the neckline breaks, the pattern bottoms around the same distance from the neckline as the drop from the head to the neckline, in this case ($440-$300 = $140.)

In this case $160 is your magic number. Doesn't mean we don't go lower down the road, just that the odds favor some kind of bounce here, probably a multi-month one.

Also JPM threw in the towel in the stock. Analysts always screw the pooch and capitulate right near the bottom when they've missed a major bearish trend.
How low can you go? Must fire old top management.
metalhead profile picture
Well that comment I put in did not age well. BA looks ready to break below $100. I guess all bets are now officially off, short it to zero if you can find shares to borrow.
Dhierin Bechai profile picture
I have a piece coming up that puts a potential PT range, $160 is generous... ugly truth it, it is lower than my cost basis, @metalhead.
CEO is putting issues behind him and BA. That is good. Now Corona needs to be squashed. Cleveland Clinic has a good test that get results in 9 hours and that could be a breakthrough!
Still not a sell call in BA. finance.yahoo.com/...
Whats the latest with the BA Pension gap @Dhierin Bechai
When Boeing became more of a business company then an engineering company was the time to sell.
kan2905 profile picture
Wow, this company is riddled with scandals
Dhierin Bechai profile picture
The issues with the tanker are widely known, @kan2905. It is partially the result of US lawmakers trying to keep the domestic Defense industry competitive. It sometimes backfires... well it often backfires, if you want to make companies compete on price and then see what is in it for your home state.
kan2905 profile picture
I am new in following BA. What do you think of their aerospace side ? It seems that SpaceX will outcompete them
Dhierin Bechai profile picture
They are far behind with their launch vehicles. They had a good trajectory on sattelites but that is not a fast segment.
rando_on_the_internet profile picture
@Dhierin Bechai

Any news on the wiring separation? From press reports it seems the FAA is obstinate that the wiring separation must be increased, but none of the timelines being published seem to account for any wiring changes.
Dhierin Bechai profile picture
@aqeelmahesri Likely will be mandated indeed, but nobody really knows how much rework is involved.
William Loh profile picture
Or if it will apply also to the 6,500 NG airplanes. And messing with it may also cause trouble down the road...can only find out the hard way.
Boeing just hit $199. News of Air Canada cancelling some of it's 737 Max order.
Dhierin Bechai profile picture
Full overview of MAX cancellations during the month:
• Air Canada: -11
• Air Lease Corporation: -9
• Business Jet VIP Customer: -1
• JIA: -10
• Oman Air: -10

The smart thing to do is clean out all the cockroaches from the chairman, the board of directors and a new CEO and start with a complete new transparency. That is a start I just feel sorry for the many employees that are hard working and come to work everyday and also have to bear all this mud that their leadership created for them. The American employee is a hard working dedicated and loyal employee and does not deserve this type of treatment that their leaders exposed them in this situation. Shame on you BA Leaders, you did a disservice to your tribe.
@reputation Great comment---except Boeing's leader did a great service to his tribe of vulture capitalists by looting Boeing. After all--Calhoun was head of private equity at Blackrock! The pension's and jobs will be next to go, then just the memory of an iconic American company striped by financial and social engineering.
BA 145b mcap vs EADSY 88b mcap am I seeing it right? BA is still expensive in that case
AutoTech profile picture
Latest run -- 40% chance it revisits the 150 layer.
189 today and headed down?
@AutoTech There is a good chance Boeing goes to zero, as Calhoun's buddies in private equity at Blackrock buy it from the bankruptcy court and take it private. Take a look at the bust out of GE. The only thing remaining is their jet engine manufacture. It will probably be bought by the same operators at Blackrock that feast on the carcass of American industrial might. They don't call them vulture capitalists for nothing. Did you know Calhoun was head of private equity at Blackrock? Bye Bye American Pie!
Can I expect BA upcoming earning call in April will be ugly? The CEO might sell the investors fake hope again on 737 Max.
Still long BA? Eventually BA will likely recover, however it wouldn't surprise me if the stock gets under $100 first. I'm not advising people to short it, but just to avoid it for now.
Aviation Systems International profile picture
@Dhierin Bechai

Thank you for yet another unbiased documentation of factual information.

Seth Glucksman profile picture
Information is filtered on its way to the top. I'm sure Calhoun saw some gorgeous powerpoint slides in his years on the board. If you can't trust a powerpoint slide, what can you trust?
Aviation Systems International profile picture
@Seth G No...this is a critical function. Every step to the top should be evident, as well as the intermediate steps and decisions to get there.
FINAL approval within a critical function is not at the base level.
If what you are saying is correct, Boeing has failing in its primary mission.

What you are saying it that the people signing off on the aircraft, have no idea if it is safe to fly?

While evidence shows this, that is NOT the way it is supposed to be.
@Seth G You don't understand---Calhoun was head of private equity at Blackrock. He's in place to bust out Boeing. They don't call these guys vulture capitalists for nothing.
Seth Glucksman profile picture
Interesting take.
Please, please provide your take on this Coney Island Nick...($220)

I just cant wait.....
$205 now
Wondering if we will be seeing $180 by this week.
metalhead profile picture
Very bad sign IMO that BA cannot rally with the Dow now up 600. It probably means institutional investors are finally throwing in the towel. I see $160 as the next support level after $200. Short any bounces and use 240 as a backstop.
Aspiring Penguin profile picture
it looks like finally $hit is hitting the fan with BA. glad I stayed far, far away from this stock since last year. didn't have guts to short it, but in retrospect, should've shorted all the way from $400 a share
As of now, Boeing is down to $223. I gotta admit that was sceptical when others (notably you, Dhierin) said it was headed to somewhere around $140, I think it was. Boeing has lost almost half it's value ($440 on Mar 1, 2019) and imagine where it would be if they hadn't spent some $43 billion on buybacks since 2013. Mind you, imagine what they could have done with that $43 billion, if invested back into the company and new aircraft.
Well done, sir.
Isn’t he long BA? 140?
Dhierin Bechai profile picture
@crankypants007 The price held so well that I wondered whether it would ever come. @Flamebeknave, Yes I am long Boeing. Doesn't mean I can't put analysis driven price targets that go against my position. If my position prevents me from writing something I either shouldn't write or dispose my shares.
Cool thanks
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