Boeing's company culture challenges go beyond safety: Analyst

A Senate subcommittee is set to hold a hearing next week to examine Boeing's (BA) safety culture. This comes after airlines reported numerous safety incidents in relation to the company's Boeing 737 MAX jet line. Melius Research Managing Director of Aerospace, Defense & Space Robert Spingarn joins Market Domination to provide insight on the upcoming hearing,

Spingarn hones in on cultural issues within the company, noting the "distance" between the factory floor and executives. The divide was intensified by Boeing's decision to move its headquarters from Seattle to Chicago in the early 2000s, Spingarn says, calling the move a "disservice."

In light of Boeing's leadership shake-up, Spingarn believes "the changes are gonna be more significant than they were in the past," which may help the company see a turnaround. With the current CEO, Dave Calhoun, set to resign at the close of 2024, Spingarn is uncertain whether Calhoun will remain in the role if a successor is chosen sooner. He emphasizes the need for the next CEO to have an engineering background and production floor experience — recommending names like Pat Shanahan and Gwen Shotwell.

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This post was written by Angel Smith

Video transcript

- Boeing facing a Senate subcommittee next week on the growing safety concerns plaguing the company. And this comes as the embattled airplane manufacturer searches for its next chief executive officer. Joining us to discuss is Robert Spingarn. He's Melius Research managing director and research analyst for the aerospace defense and space sectors.

So, obviously, Rob, it doesn't feel like the pressure on Boeing is letting up. Let's talk briefly about that committee hearing next week. What do you think we can learn new, if anything, out of that hearing? And what is the sort of best-case scenario look like for Boeing?

ROBERT SPINGARN: Well, I think the best case scenario is going to rely on a lot more than just what happens next week. We may learn some new details from the whistleblower or those who testify next week. And it's clear-- you know, it's important that there's government oversight here, that they're asking questions and turning up the pressure, so to speak. And we've seen, I think, incremental response from Boeing, and it's going to continue.

- And, Rob, I'm just curious, you know the company backwards and forwards. What do you make of the job Calhoun has actually done sort of navigating the company through this crisis? What grade do you give him, Rob?

ROBERT SPINGARN: You know, it's-- it goes back to culture. We've talked about culture a lot with this company. And unfortunately, all of the executives, I think, have been disservice, if you will, by the movement of Boeing's headquarters out of Seattle in the early 2000s and to Chicago and now Northern Virginia.

And so there's a bit of a distance between the factory floor and the executives. And I think that Dave Calhoun, maybe he didn't have all the information he needed. The question is, how could he improve that?

I think the message is getting through. Unfortunately, it's taken a long time. We've had a lot of incremental movement and response in that message. You get the sense that we're at the point where the changes are going to be more significant than they have in the past, especially when you're changing the management team or you're changing the people at the top of the company.

- Rob, do you think Calhoun will make it to the end of the year?

ROBERT SPINGARN: I don't know that he necessarily will, but it's not-- I don't know that it's because of anything that happens at Boeing. I think there's a chance they may select the CEO before the end of the year. And then the timing would be sooner.

- Who should take the reins, Rob, in your opinion? Any candidates?

ROBERT SPINGARN: Well, I-- you know, we hear it Melius has actually downgraded the stock a couple-- about 10 days ago because we just felt the overhangs were too significant for the stock to work in the meantime while they're looking for management, you know, replacing Dave Calhoun while they're waiting to ramp up on their production.

One of the folks that I think would be a very good candidate is Pat Shanahan, former acting secretary of Defense and somebody with a 30-year career at Boeing prior to that. I also mentioned in one of my recent notes that an out of the box choice could be somebody like SpaceX COO Gwynne Shotwell. You need somebody with an engineering background with a production floor experience, program management.

So not-- you don't want a sales person. You don't want a finance person. And a bunch of the other suggestions have focused in those areas. I don't think that's the right answer.