Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The head of Boeing’s defence business is leaving the company after years of losses from fixed-price contracts and a high-profile debacle with its space capsule that left two astronauts in space.
Chief executive Kelly Ortberg said in a memo to employees on Friday that Ted Colbert, who has run Boeing’s Defense, Space & Security arm since 2022, would depart the company “effective immediately”. A Boeing spokeswoman said Colbert was opting to leave.
Colbert’s exit is the first change in the company’s executive ranks since Ortberg took over the top job last month from Dave Calhoun. Steve Parker, the chief operating officer for the defence business, will lead it temporarily until the company names a permanent successor to Colbert.
Boeing’s defence business reported losses in 2022, 2023 and the second quarter of 2024. The division has laboured under fixed-price contracts for several large programmes, which represent just 15 per cent of revenues but have racked up nearly $14bn in charges over the past decade. Jefferies analyst Sheila Kahyaoglu estimated the fixed-price programmes could consume $2.6bn in cash this year, and $1.8bn in 2025.
The programmes include the KC-46 refuelling tanker, the T-7A Air Force training aircraft and the MQ-25 refuelling drone, as well as the US president’s Air Force One jet and the CST-100 Starliner spacecraft that was built to ferry astronauts to the International Space Station.
Boeing suffered a black eye last month when Nasa decided to forgo bringing astronauts Sunita Williams and Barry Wilmore back to Earth on Boeing’s spacecraft. Due to technical problems, the agency now plans to bring the pair home in February on a SpaceX spacecraft.
The group’s problems are not limited to its defence business. Boeing has been bleeding cash this year, the result of slower commercial aircraft production as it tries to improve the quality of its manufacturing after a series of crises. The company has been scrutinised from all sides since January after a door panel blew off a commercial jet mid-flight and its shares are down almost 40 per cent this year.
Recommended
The company’s ability to generate cash is tied to delivering planes to airlines, but that is again in question after 33,000 union workers walked off the job last week, seeking better pay and retirement benefits. Boeing is imposing furloughs and a hiring freeze to conserve cash.
Credit rating agencies have said Boeing’s cash generation is a critical factor in whether they continue to rate the company as investment grade or cut it to junk. The company is under pressure to raise more cash by selling shares, possibly worth as much as $10bn.
GIPHY App Key not set. Please check settings