Yesterday, the New York Times reported that President Donald Trump had called Boeing (BA) CEO Dennis Muilenberg a day before the company announced the production halt for its 737 MAX 8s. On Monday, Boeing announced that it would halt the production of the troubled 737 MAX 8 aircraft starting next month.
The production halt crushed Boeing’s hopes of a 2019 return for the 737 MAX 8. The company is currently producing 42 units of the aircraft every month. It cut this production rate from earlier 52 to 42 in April after it was grounded by worldwide regulators soon after Ethiopian Airlines Flight 610 crashed on March 10, killing 157 people on board. Just months earlier, Lion Air Flight 302 crashed in Indonesia due to similar issues.
Trump questions Boeing CEO on shutdown
The Times reported that President Trump had asked Muilenberg whether the company was permanently closing down 737 MAX 8 production. Muilenberg assured the president that the production halt was temporary and no jobs would be lost.
With the continued delay in getting the MAX back to the skies, the outrage against the company is growing. Passengers are wary of flying on the aircraft, which has already been responsible for the deaths of over 300 people. Pilots are suing Boeing for a breach of trust and loss of income. Even customers are looking at the company differently. Emirates President Tim Clark said at the Dubai Air Show, “I want one aircraft to go through hell on Earth, basically to make sure it all works,” while talking about the 777X.
With this background, it’s obvious that President Trump was concerned about a complete halt of 737 MAX 8 production. He’s up for reelection in 2020, and strong job numbers will support his bid. A million people work for Boeing and its suppliers. Any permeant halt in Boeing 737 MAX 8 production means thousands might lose their jobs.
Trump expresses concerns about Boeing’s health
During the call, President Trump expressed concerns about Boeing’s financial health—and rightfully so. Boeing has had a terrible 2019. In November, Boeing delivered 24 planes against 77 for rival Airbus. Boeing delivered 345 planes in the first 11 months of 2019 compared to Airbus’s 704. Boeing’s net orders in the first 11 months of 2019 stood at -84. Boeing is losing $1 billion every month due to the grounding.
Boeing’s other programs are also struggling. The 777X has been delayed, the 787 Dreamliner is also staring at production cuts, and there’s no official word on the 797. All of this combined has put the company’s health in question.
Yesterday, credit rating agency Moody’s cut Boeing’s rating due to its extension of the 737 MAX 8 grounding. Moody’s rating release said, “The downgrades follow the extension of the grounding of the 737 MAX into 2020, the announced plan to shut down this important program for some interim period, and the uncertainty and elevated risk — both financial and operational — for Boeing and its broader supply chain over the ensuing period.”
Muilenberg has been under fire
Muilenberg has been under fire since the Ethiopian Air Lines crash, and the pressure has intensified in recent months. In October, Muilenberg lost his board chairmanship. The board felt he needed to actively focus on getting the 737 MAX back in the skies. He conceded the post to Boeing board member David Calhoun.
Muilenberg visited Capitol Hill for testimony at the end of that month. In a prepared testimony released by Boeing, Muilenberg accepted the engineering mistakes, saying, “Both accidents involved the repeated activation of a flight control software function called MCAS, which responded to erroneous signals from a sensor that measures the airplane’s angle of attack.”
However, House representatives weren’t impressed with the delayed acceptance. During the hearing, committee members and some victims’ families told Muilenburg he should resign from his post.
Apparently, during the call, President Trump asked if Muilenberg was okay. Now that the president has been impeached, it might be time for Muilenberg to ask him the same.