Boeing CEO David Calhoun Puts Credibility on the Line With Writedown

tech.hindustantimes.com:

The credibility of David Calhoun, the chief executive officer of Boeing Co., is on the line after the planemaker took $2.8 billion of charges for defense programs in the third quarter.

Boeing had been taking writedowns consistently on a variety of these programs, including a new Air Force One and a midair refueling tanker, at least every year since 2018, including a stretch of six consecutive quarters from the end of 2019 to the beginning of last year. That's why the size of the latest writedown shocked investors, who pushed the stock down nearly 9%, adding to the 27% drop this year through Tuesday.

The cause is well known. Boeing entered into fixed-price contracts for these aircraft — which also include a pilot-training plane and an aerial refueling drone — and hasn't been able to hold expenses in line. Lately, those costs have been amplified by the recent bout of inflation, supplier struggles, a labor shortage and poor performance. Calhoun decided to rip off the band-aid and pile all those charges into one lump sum, getting the sticker shock behind him ahead of a Nov. 2 investor meeting at which he will map out Boeing's huge cash-generation opportunity for its commercial aircraft.

This strategy works only if this is the last time that Boeing will slip in a charge on these four defense projects and one program for NASA, a new spacecraft capable of carrying astronauts to the International Space Station. Calhoun now has little room for error after he took over as CEO in January 2020 and promised a transformation after Boeing horribly stumbled on the 737 Max airliner, which resulted in two crashes that killed 346 people. Calhoun argues that a transformation takes time. But investors are losing patience.

The opportunity is