Boeing (BA) – Clean House – March 30, 2024

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Boeing (BA) – Clean House – March 30, 2024

Negative Boeing headlines have been frequent lately. One viral hardware issue after another has led to CEO Dave Calhoun stepping down in 2024 and a large board shake-up. For those of you who don’t know, Boeing used to be my largest position back in 2019 before I was doing this full time. I was drawn to the wildly compelling nature of its supply constrained global duopoly, massive backlogs and the U.S. government’s commitment to keeping them afloat and successful. I was enamored by how the odds were stacked in their favor. But you still need to execute. The plane issues are not solely Boeing’s fault. Regardless, when you spin off & outsource work to 3rd party suppliers, it’s on you to make sure those parts are perfect. When you rely on airlines to maintain planes, you are vulnerable to their employees making mistakes and you getting blamed for them. Fair? Maybe not. But there’s plenty of blame to go around.

One blunder after another pushed me out, with Calhoun’s hiring being the last straw. Why? Incredibly, Boeing’s idea of “clearing house” 5 years ago entailed hiring a new CEO from its existing board of directors. That’s not a fresh start… it’s a slap in the face to the public. It makes the current bout of issues somewhat unsurprising. They need to actually clean house this time. They need to pay up for top notch, EXTERNAL talent. They need to skew the focus further towards a quality obsession vs. a cost optimization obsession. And? They likely need to vertically integrate more of the maintenance responsibility to ensure everything is done perfectly. They’ll be blamed regardless, so might as well take that potential risk back into your own control. If that’s too expensive? Then sell/spin-off the defense or government service businesses to get it done.  Airbus doesn’t seem to have these issues and their planes are price competitive with Boeing.  

Boeing has shown it can’t optimize shareholder value while maintaining a robust, safe and consistent supply chain. Public safety is firmly in their hands and Boeing will need to make some costly decisions to appease regulators and take the large, large target off of their backs. That’s why I have no interest in re-entering.

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