Boeing defense chief exits as new CEO shakes up top ranks

(Bloomberg) — Boeing Co. ousted the top executive for its defense and space division, in the first major shakeup by Kelly Ortberg since he took over as chief executive officer last month.

Ted Colbert, a 15-year veteran at Boeing, will leave the company with immediate effect and be succeeded on an interim basis by Steve Parker, the defense unit’s chief operating officer, Ortberg said in a message to employees on Friday. 

The new CEO is expected to make sweeping management changes as he works to turn around operations at the embattled aerospace and defense company. Ortberg said it’s Boeing’s priority “to restore the trust of our customers and meet the high standards they expect of us.”

Once a steady financial performer, the defense division has amassed billions of dollars in cost overruns on fixed price contracts such as the KC-46 aerial tanker and replacements for the Air Force One jets that ferry the US president. Boeing was buffeted by negative headlines for the Starliner space capsule after NASA decided it was too risky to use it to bring two astronauts back from the International Space Station, leaving the pair in space until early next year, much longer than originally planned.

The shake-up comes a week after Brian West, Boeing’s chief financial officer, told an investor conference that the defense business would again drag on earnings in the third quarter, with results set to approach the $1 billion operating loss it recorded the previous quarter. 

Pentagon leaders have vented their frustration over the company’s delays and performance shortfalls, Ortberg told employees last month, stressing that the company needs to start meeting its commitments. He reiterated in a separate message on Friday that he will be keeping a close track on the commercial and defense businesses in regular operating reviews.

Ortberg assumed the top job in early August, taking the helm at a time when Boeing is struggling to overcome a severe crisis of confidence. The company has been struggling to regain its footing after a near-catastrophic accident in January, which exposed quality lapses at its factories making commercial aircraft. 

On top of that, Boeing now has to contend with a strike by workers at its main factories in the Seattle region, with no breakthrough on a new contract in sight one week after employees voted down a first company proposal.

While he’s a company outsider tackling one of the toughest assignments in corporate America, Ortberg knows the defense industry well. He gained a reputation for being a decisive leader at Rockwell Collins, which was a longtime Boeing supplier until it was acquired by RTX Corp., last decade.

“He’s got to bring in the right collaborators, the right wingmen,” said Kevin Michaels, an aerospace consultant who worked with Ortberg earlier in his career.  “He’s going to be making some hard decisions.”

Boeing shares pared losses and rose less than 1% after the close of trading in New York.

(Updates with consultant’s quote, details of defense woes)

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