Boeing is leaving, and its defense boss is already gone

Boeing (BA 1.13%) is currently in poor condition. Between plane doors falling off, spacecraft stranded at space stations — and now a strike by 33,000 machinists at the company’s core commercial aircraft business — the last thing Boeing needed was drama in the company’s defense division, which (at least in theory) is supposed to be the company’s fault Provide ballast if something goes wrong on the commercial side.

But drama is exactly what Boeing gets.

See you then, CEO

Last month, Boeing reported a revenue shortfall, a loss of $2.33 per share and a quarterly cash burn of $4.3 billion in its second-quarter financial release. As soon as this news was known, Boeing dropped the next bombshell: the announcement that CEO Dave Calhoun would retire and be replaced by former Rockwell Collins manager Robert K. “Kelly” Ortberg.

However, this was just that First Management shoe to take off. Last week, the new CEO announced in a memo distributed to Boeing employees that Boeing is also losing its head of Boeing defense. Ted Colbert, who has worked at Boeing for 15 years, is stepping down as head of the department. He will be replaced by his chief operating officer, Steve Parker, who will lead BDS on an interim basis.

Oddly enough, Boeing appears to be trying to downplay the move. The company’s various press release pages contain the only news since September 20th – that day The Wall Street Journal reported Colbert’s departure – is an announcement of the first flight of a new British E-7 Wedgetail AWACS aircraft (coincidentally built by Boeing Defense).

Nevertheless, it is magazineThe reporting appears to be solid. At least on a website operated by the Securities and Exchange Commission, Boeing posted a one-line update confirming that Colbert “has ceased to serve as an elected official of the Boeing Company and as president and chief executive officer of Boeing Defense, Space.” & Security.”

What this means for Boeing investors

This is not good news for investors.

On the one hand, the man primarily responsible for the growth of Boeing’s defense and space business – but who has actually caused stagnation in the division over the past five years – is no longer in charge. Since 2019, the BDS unit’s revenue has been little changed (in fact, it’s down 4.5% from last year), while its operating profit plummeted from $2.6 billion benefit to $1.8 billion Loss (according to S&P Global Market Intelligence).

So, in theory, removing Colbert from leadership should be good news for Boeing investors. However, Boeing’s decision to take over Colbert’s No. 2 to take over defense and space – even if only temporarily – does not necessarily inspire confidence that things will now change for the better.

It will take more than just waving a magic wand or changing an office nameplate to reverse years of Boeing decisions to bid low to win unprofitable defense contracts. And Boeing’s space business could have even more serious problems. If you recall, it was just a few months ago that NASA’s Office of Inspector General criticized Boeing for trying to build reliable spacecraft despite the company suffering from “a shortage of adequately trained and experienced aerospace workers.” .

Pardon the bluntness, but it will take Boeing years to fix such problems.

What Boeing investors can expect next

There’s a quick fix that Boeing could implement: It could sell its defense and space businesses, so that all of this suddenly becomes someone else’s problem. But while some industry experts have suggested this, Boeing is spot on will do, I’m not so sure anymore.

For example, if Boeing had fired Colbert and then immediately replaced him with an executive with mergers and acquisitions experience—someone who could be relied upon to lead a division like BDS through a spinoff or sale—that would make sense . But firing Colbert without a permanent replacement hand-picked and ready to take over? That doesn’t sound to me like a sale is imminent.

At this point, investors probably just have to cross their fingers and hope that Boeing takes the time to find the right turnaround specialist – not an M&A specialist – to take the reins at BDS. Even Boeing once does To find the right leader, investors must be prepared to wait a while for the turnaround to occur.

Boeing didn’t get into its current dilemma in a day. It will take time – most likely years – to repair the damage done.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.