By Joe Brock, David Shepardson and Tim Hepher
(Reuters) – Boeing said on Friday the head of its troubled space and defense unit is leaving the company immediately, in the first management change under new CEO Kelly Ortberg.
Ortberg who took over in August said Ted Colbert would be leaving and Steve Parker, the unit’s chief operating officer, would assume Colbert’s responsibilities until a replacement is named at a later date.
“At this critical juncture, our priority is to restore the trust of our customers and meet the high standards they expect of us to enable their critical missions around the world,” Ortberg wrote in an email to employees. “Working together we can and will improve our performance and ensure we deliver on our commitments.”
Boeing’s space business has suffered significant setbacks, notably NASA’s recent decision to send Boeing’s Starliner capsule home without astronauts that followed years of missteps. Starliner has cost Boeing $1.6 billion in overruns since 2016, according to a Reuters analysis of securities filings.
Colbert’s departure comes at a time when Boeing has been trying to save cash by announcing furloughs of thousands of white-collar workers amid a strike by more than 32,000 of its workers.
Boeing has also faced significant woes after a new Alaska Airlines 737 MAX 9 in January suffered a mid-air emergency after it was missing four key bolts.
Boeing in July agreed to plead guilty to a criminal fraud conspiracy charge and pay at least $243.6 million after breaching a 2021 deferred prosecution agreement. The government said Boeing knowingly made false representations to the Federal Aviation Administration about key software for the 737 MAX.
The FAA has tightened oversight of Boeing and barred it from expanding production of the MAX beyond 38 planes per month until it makes significant quality and safety improvements.
Parker was brought in to shore up industrial leadership and help fix loss-making programs with a new operating management role just under two years ago. He had previously headed Boeing’s bomber and fighter programs as well as its St Louis defense plants.
“Historically, Boeing held a superior reputation for our ability to manage programs, and we need to ensure it remains a key differentiator for us in the future,” Ortberg wrote in separate email to employees on Friday.
Ortberg added he had learned “more about the future investments we need to make to be competitive and define our future, as well as about some of the more near-term hurdles engineering faces with first-time quality and execution.”
Colbert, who joined Boeing in 2009 after working at Citigroup and Ford Motor, took the reins at Boeing Defense and Space in April 2022 after the prior head of defense was ousted.
Boeing’s defense, space and security unit, one of its three main businesses, has lost billions of dollars in 2023 and 2022, which executives attributed in large part to cost overruns on fixed-price contracts.
Such contracts have high margins but leave defense contractors vulnerable to inflationary pressures that have dented U.S. corporate earnings in the last few years.
Boeing has lost more than $2 billion on its delayed program to deliver two heavily retrofitted Boeing 747-8s for use as U.S. presidential aircraft known as Air Force One. The 747-8s are designed to be an airborne White House able to fly in worst-case security scenarios, such as nuclear war.
Boeing’s shares closed down about 1% on Friday and have lost about 41% so far this year.
(Reporting by Utkarsh Shetti in Bengaluru, David Shepardson in Washington and Joe Brock in Los Angeles; Editing by Shounak Dasgupta, Marguerita Choy and Shri Navaratnam)
