WHEN: Today, Monday, March 25, 2024
WHERE: CNBC’s “Squawk Box”
Following is the unofficial transcript of a CNBC exclusive interview with Boeing CEO Dave Calhoun on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Monday, March 25. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2024/03/25/boeing-ceo-dave-calhoun-stepping-down-was-my-decision.html.
All references must be sourced to CNBC.
JOE KERNEN: Breaking news from Boeing. CEO Dave Calhoun will step down at the end of this year. Let’s get to Phil LeBeau. He’s standing by with Dave Calhoun. Hey, Phil.
PHIL LEBEAU: Thanks, Joe. Dave, thanks for joining us here. You heard what Joe said, stepping down at the end of this year. Why now? And was this completely your decision?
DAVE CALHOUN: Yes. First of all, 100 percent. Why now? I’ve entered my fifth year. At the end of this year, I’ll be close to 68-years-old. I’ve always said to the board, and the board has been very prepared, I would give them plenty of notice so that they could understand and plan succession in, in regular order. And that’s what this is about. It’s me giving them notice that at the end of this year I plan to retire. And then, and them, them taking the actions that they’ve taken. I’m actually very proud of the way the board has handled everything. Very deliberate. The move with Larry, in my view, very deliberate. The entry of Steve as our new chairman, very deliberate. All very qualified and great decisions.
LEBEAU: If you’re going to be leaving, some will say, why not just leave now? Why wait until end of the year?
CALHOUN: We have another mountain to climb. I, let’s not avoid what happened with Alaska Air. Let’s not avoid the call for action. Let’s not avoided the changes that we have to make in our factory. Let’s not avoid the need to slow down a bit and let the supply chain catch up. We’ve got to get it back. Just like we got at the rest. And we will get through that. We will get through that. And I’ve committed myself to the board to do exactly that.
LEBEAU: You’ve got two other big management changes. We’ll talk about the board changes in a bit. But you’ve got Stan Deal stepping down –
CALHOUN: Yes.
LEBEAU: Resigning as head of Boeing commercial airplanes. Stephanie Pope, the COO, moves into that position.
CALHOUN: Yes.
LEBEAU: What does she bring to the table that is different from Stan?
CALHOUN: Well, the big thing here is – first of all, Stan is retiring. This is all about the clear path to give our pest people internally an opportunity to shine in front of the board, demonstrate everything that they can do. Stephanie’s track record speaks for itself. She has been a leader in every position she’s had. She has seen every part of the economy. She has most recently led our global services business. It services both our military customers and our commercial customers every day, all day, taking calls, responding, doing the work. She has really differentiated herself. So, the move we made at the end of the year to put her into a chief operating officer position was a very deliberate move.
LEBEAU: As you know, just last week, airline CEOs went to your board, went to Larry Kellner, and they said, we want to meet. We want to talk with the directors directly.
CALHOUN: Yes.
LEBEAU: But we don’t want to hear from Dave Calhoun in this meeting. We don’t want Stan Deal in this meeting.
CALHOUN: Yes.
LEBEAU: When you first heard about that, what was your reaction?
CALHOUN: Well, I, first of all I would just take issue. I know all the people they call, and I know all of that and I talk to them every day all day. I don’t think it was anywhere near that kind of messaging. Our board and I talk to our customers every day, all day. We’ve had a CEO come in and talk about the accident, talk directly with the board, and I volunteered to leave that meeting because I want clarity. I want transparency. That’s what we all want. So, yes, I – I – I understand – look, you know, if you put this in context, they run an everyday, all day business. I run a long-cycled development business and a long-cycled production business that has to deliver them a perfect airplane. And so those two things, when they meet, and they collide, it creates this kind, this kind of environment. And that’s the environment we’re in. But I listen to our customers all day.
LEBEAU: Do you understand their frustration? Because I heard from – from airlines last week, they said, we want concrete action. We want concrete steps to make changes.
CALHOUN: I think, I think the news that Brian West had to delivered just, just earlier this week to the financial community about the slowdown in our factory, our determination to get ahead of that, I think that will demonstration and be a proof point on just our intent to get ahead of it. We will get ahead of it.
LEBEAU: Have you told FAA Administrator Mike Whitaker that you’re resigning or retiring at the end of the year?
CALHOUN: No. No. I, I would never preempt the board in communicating to anybody. But the FAA is with us all week this week. We will go through a 30-day plan with them. Then 30 days later we’ll go through 60 and 30 days later we’ll go through a 90 and we’re going to have to demonstrate progress in each one of those moments. And it’s a pretty constructive approach from – both from the FAA and from our team.
LEBEAU: Last week Mike Whitaker was interviewed by NBC. And he said that when he was out here, what he saw was a culture of, move the product, move the plane. It was not a focus on quality control and safety management.
CALHOUN: Yeah.
LEBEAU: What was your reaction when you heard those comments?
CALHOUN: Well, I recognized exactly what he was talking about because I heard it from all of our own people. Remember, we did a stand-down immediately after the – after the accident and we listened to all our own folks. And we have this bad habit in our company, and actually in many large companies that have to assemble big products. When you do work out of a position, the message you send to your people is – and maybe that work was moved because of a shortage. Maybe it was because you are trying to fix someone that was non-conforming. But when you move it down the line, it sends a message to your own people that, wow, I guess the movement of the airplane is more important than the first-time quality of the product. And we have got to get that in way more balance, without a doubt.
LEBEAU: But, Dave, you’ve been on the board since 2010, 2011. This is not a new criticism of Boeing. This has been out there for years, that you guys are about pump the product, pump the product, pump the product and not enough about quality control.
CALHOUN: Yes, I – I don’t –
LEBEAU: How do you change that?
CALHOUN: Oh, you slow things down. You catch up. And just a reminder, in 2020 we didn’t produce any airplanes in the Max line. Zero. ’21, we started the line back up. So we were going from zero and slowly, steadily increasing – increasing our rates. At that very same time, with insatiable demand on the customer’s side, we had a very sporadic supply side. And so these forces that have been with our industry for a long time probably got even more pronounced, without a doubt. And so our job has to be to sort of say, no, raise our hand, everybody has to be able and capable of raising their hand and stopping a line if they – if they have to. And that is – that is the premise for going forward.
LEBEAU: Larry Kellner stepping down as chairman of the board. He’ll stay on the board until the annual meeting in May. Steve Mollenkopf steps in. He’ll lead the CEO search. There is a narrative that is out there in the investment community that the board of directors have not moved quick enough. Should they have moved faster with these changes?
CALHOUN: Yes, no, not in my opinion. I – this was our long – very long-cycle business. Nobody is more aware of the mountains that have been climbed and the remedies that have been put in place than the board. They want to go at the right pace and they want to do it the right way and they want to do it with real foresight and they want to see people demonstrate their capabilities in position. So that set of moves that we’ve just talked about, in my view, puts them in the very best position to make those decisions over the remainder of this year and be ready to go in the beginning of next year.
LEBEAU: Will you weigh in and share your thoughts on who might be the next CEO?
CALHOUN: Yes, of course. Of course.
LEBEAU: And – and what would you look for?
CALHOUN: And I will be nothing more than a board voice. And I will always, always defer to the chair and the governance committee to make those decisions.
LEBEAU: What would you look for?
CALHOUN: Well, I – I – I want somebody who knows how to handle a big, long, long cycled business like ours. It’s not just the production of the airplane, it’s the development of the next airplane. Our next leader is going to develop and call out the next airplane for the Boeing company. It will be a $50 billion investment. That will all happen on that next leader’s watch. So, I would like somebody who clearly has the experience inside our industry.
LEBEAU: A couple of weeks ago NTSB Chair Jennifer Homendy was asked about the investigation into the Alaska Airlines incident and what’s been happening here at Boeing. And she basically said you’re not being forthcoming. She didn’t use the word “stonewalling,” but the implication was there. What’s your reaction to that?
CALHOUN: Well, I think it was a reasonably harsh statement and probably not perfectly accurate. On the other hand, Chairperson Homendy and I have talked several times since that – that hearing. We have agreed with one another that the minute, the minute we thought we were being less than transparent or less than responsive we would call one another. And I haven’t heard from her since. I will say this, these –
LEBEAU: Was she over the top saying that you guys are not forthcoming?
CALHOUN: Yes, I’m not going to say that. I’m not going to say that. What I am going to say is, these professional teams on the ground, the pace with which they solved the issue of what happened, definitively, remarkable. It’s – in my view it’s one of the best – best investigative efforts I’ve seen in – in my history in aviation.
LEBEAU: Right now your 737 Max rate is capped at 38 per month by the FAA. Do you think you – you’re not there right now. You’re not producing anywhere close to that rate. Do you get to 38 per month by the end of the year?
CALHOUN: Definitely not going to answer that question. What the FAA wants and way more importantly what I want, is I want a production system that’s under control every step of the way. Whether it’s 38, or 52 or 16. It doesn’t matter. It will be under control. We will not travel work to anywhere near the level that it’s been traveled and we will let this supply chain catch up to the demand. And that’s – that’s the way we have to behave.
LEBEAU: Spirit AeroSystems. You guys are in the midst of negotiations. When might we see a deal?
CALHOUN: Well, I hope soon. Yes, I hope soon. We’re making progress. The teams have worked closely together. We have to get to real agreements. Yes, I hope it’s soon. And it’s very important. And it’s – it speaks directly to the subject of travel work, non-conformance management, all of those things. Some pretty dramatic actions have been taken. I think Pat is doing a fantastic job down there in responding to the aftermath of Alaska Air.
LEBEAU: You’ve got your own problems that you’re trying to sorting out and now you’re going to be potentially acquiring a company that has a whole slew of problems. That’s a big enchilada to swallow at a time when you’re trying to get your ship in order. Are you worried? That – that’s – that’s a lot to take on at one time.
CALHOUN: What you just said is why we do it, to get our ship in order. It’s a critical supply for us. Critical. It’s our fuselage. When you go out in the factory, the first thing you’re going to see is our fuselage. It’s a Boeing fuselage. Our job is to make sure mechanics and engineers freely travel between the shop floor and the design effort, and that they can help one another every step of the way. Vertical integration is the only way to accomplish that.
LEBEAU: Final question. You’ve been around the block a time or two. You’ve seen companies go through crises.
CALHOUN: Yes.
LEBEAU: Where are you in the process of coming out of this latest crisis when it comes to the Max and quality control?
CALHOUN: Well, let me start with companies going through crises. This company and our people have responded to the crises like – like no group of employees I’ve ever, ever seen or been around. They got over MCAS. They certified the airplane. They started up a factory from zero. They created a shadow factory to get airplanes back into the – back into the field. They created another shadow factory to basically rebuild all of our 787s, 100 of them. They’re up to the challenge. We will get ahead of this one. We are at the early stages of responding to, in my view, an overexercised supply chain and an overexercised Boeing factory. And we’re going to calm it down. We’re going to get ahead of all of the issues that either FAA and way more importantly our own people bring to our attention, and we’ll get ahead of it. That will happen.
LEBEAU: Dave Calhoun, CEO of Boeing –
CALHOUN: Yes.
LEBEAU: Announcing that he will be retiring at the end of the year. Guys, we’ll send it back to you.
