Boeing’s Dennis Muilenburg becomes chief executive officer next week with a to-do list of decisions that could reshape the world’s largest planemaker.
On his watch, Boeing will face choices including whether to pursue a $10 billion takeover of Sikorsky Aircraft, move forward on an all-new jetliner and keep — or cancel — the venerated 747 jumbo, the model nicknamed the “Queen of the Skies.”
As Jim McNerney retires after a decade as CEO, the 51-year- old Muilenburg moves up from chief operating officer to lead a company bent on disciplined aircraft development after the 787 Dreamliner’s tardy and costly debut, and bolstered by labor peace with the Machinists union following crippling strikes.
“McNerney did the really hard job. He changed Boeing to the core,” said Michel Merluzeau, vice president for global aerospace development at consultant Frost & Sullivan Inc. “With Muilenburg, I’d say, ‘OK, the storm has passed. Where do we go from here?’ “
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Setting a course for the $60 billion commercial plane business and navigating complicated global marketplaces will be among his greatest challenges as CEO, Muilenburg said in a phone interview Tuesday after his promotion was announced.
“The greatest opportunity that we have ahead of us is the strong commercial market,” Muilenburg said, nodding to plans to boost the monthly output of the 737 and 787 jets to new highs.
Muilenburg will inherit challenges such as whether to pare output for the 777, one of Boeing’s most-profitable models, ahead of the successor 777X next decade, according to Rob Stallard, an RBC Capital Markets analyst. He also will have to choose whether to invest billions in offering a replacement for Boeing’s mid-sized, out-of-production 757, Stallard said.
“These may be viewed as ‘negative’ in the short term, as they would likely dent the uber-bullish tale on cash generation and deployment,” Stallard said in a note to clients. “But longer term they are arguably the calls that need to be made, and in our view could be healthier for Boeing’s longer-term growth and success.”
While Boeing has cited positive momentum in airfreight markets, slow orders may force the company to cut output of the four-engine 747-8 even deeper, or altogether.
The “risk remains that the line will need to close by the end of the decade,” Jason Gursky, a Citigroup Inc. analyst, said in a June 16 report.
One of the new CEO’s most-difficult calls could come this year. It involves how to reshape Boeing Defense Systems, the $30.9 billion division that Muilenburg used to run, as the clock runs out on the fighter jets made in its St. Louis factories.
That operation may be in sharper focus if a joint Boeing- Lockheed Martin bid for the U.S. Air Force’s new long- range bomber loses to a Northrop Grumman Corp. proposal.
“The tough decision that Dennis is going to have to face is what is the transformation of the defense unit?” Merluzeau said. “What is the future of St. Louis?”
The fate of the U.S. Export-Import Bank, a crucial source of financing for Boeing jets sold abroad, also is in the hands of Washington politicians. McNerney has been a vocal champion for the bank, which is nearing the June 30 expiration of Congress’s short-term reauthorization.
Boeing isn’t discussing prospects for Sikorsky, the helicopter maker being unloaded by United Technologies Corp.; a 757 successor – too early, the company says; or the idea that the 747’s days are numbered. It’s also staying mum on the work on the bomber, whose technology is highly classified.