Boeing CEO Calhoun testifies at Senate after new whistleblower claims

Boeing CEO Calhoun testifies at Senate after new whistleblower claims
US News

Boeing’s CEO Dave Calhoun and chief engineer Howard McKenzie turn to face those who lost loved ones in fatal crashes as they testify before a Senate Homeland Security and Governmental Affairs Committee Investigations Subcommittee hearing on the safety culture at Boeing, on Capitol Hill in Washington, U.S., June 18, 2024. 

Kevin Lamarque | Reuters

WASHINGTON — Boeing CEO Dave Calhoun was hammered by a Senate panel on Tuesday over the company’s safety and quality lapses, a host of whistleblower allegations about company corner-cutting and retaliation, and his own pay package.

Calhoun, who said in March that he will step down by year’s end, defended the plane-maker’s actions to try to improve manufacturing quality and to fix its tarnished safety reputation in the wake of a midair door-panel blowout on an Alaska Airlines flight in January.

The company has still not named a replacement for Calhoun, who took over after its previous leader was ousted for the handling of two fatal Boeing crashes.

“Much has been said about Boeing’s culture. We’ve heard those concerns loud and clear. Our culture is far from perfect, but we are taking action and making progress,” Calhoun told the subcommittee.

Hours before the hearing the Senate subcommittee released whistleblower claims on Tuesday from Sam Mohawk, a quality-assurance investigator at Boeing, alleging the company lost track of parts that were damaged or not up to specification and that “those parts are likely being installed on airplanes.” The parts Mohawk flagged were in Boeing’s Renton, Washington, plant, where the company makes its best-selling 737 Max.

Mohawk said he was retaliated against and that he was told by supervisors to hide evidence from the Federal Aviation Administration, according to a memo shared by the committee on Tuesday. Dozens of important parts were stored outside during an FAA inspection, including 42 rudders as well as winglets and stabilizers, Mohawk alleged in claims with the Occupational Safety and Health Administration, the memo said.

Boeing issued a written warning against Mohawk, saying he engaged in “unacceptable/disruptive behavior or communication,” according to Mohawk’s complaint, which the subcommittee also made public. It said he could be “discharged” if the behavior continued. Mohawk’s also alleged the company reduced staffing during his shift making it difficult to complete tasks.

A Boeing spokeswoman said the company received the claims Monday night and that staff are reviewing them.

“We continuously encourage employees to report all concerns as our priority is to ensure the safety of our airplanes and the flying public,” she said.

An attendee at a Senate hearing with Boeing’s CEO Dave Calhoun over the company’s safety record on June 18, 2024.

Leslie Josephs | CNBC

The FAA said it has seen an increase in the number of reports from Boeing staff since the door-plug blowout in January.

“We thoroughly investigate every report, including allegations uncovered in the Senate’s work,” the agency said Tuesday. The FAA declined to comment on the specifics of the latest allegations.

Mohawk is not testifying before the Senate subcommittee’s hearing.

Potential prosecution

The hearing and new whistleblower claims are further complicating matters for Boeing. The company already faces potential U.S. prosecution after the Justice Department said last month that the plane-maker violated a 2021 settlement tied to 737 Max crashes in 2018 and 2019 that claimed 346 lives. A flight-control system Boeing included on the Max, the latest generation of a jet that has flown since the late 1960s, was implicated in the crashes.

That agreement, which protected the company and its executives from facing criminal charges tied to the crashes, would have expired just days after the Alaska Airlines incident in January. The Department of Justice has until July 7 to decide whether to prosecute.

Several victims’ family members attended Tuesday’s hearing. Relatives of Max crash victims met with DOJ officials late last month to urge the U.S. to prosecute.

At the start of the hearing, Calhoun stood and apologized to the victims’ families, many of whom held photos of their lost loved ones.

“We’re here because we want Boeing to succeed,” Sen. Richard Blumenthal, D-Conn., the subcommittee’s chair, said at the start of the hearing on Tuesday, pointing to the jobs Boeing provides and the products it supplies to the U.S. military. “It’s not enough for Boeing to shrug its shoulders and say, ‘Mistakes happen.'”

Blumenthal railed against Boeing’s responses to the subcommittee’s request for more information, holding up a document and calling it “complete gobbledygook.”

“I would describe it precisely as you did,” Calhoun replied.

Why the Boeing 737 Max has been such a mess

The company is trying to stamp out quality flaws on jets and reduce so-called traveled work in which production steps are completed out of order, something it has done to address defects. Last month, Boeing pointed to a host of other changes to encourage workers to speak up about problems in its factories after several whistleblowers raised concerns about quality issues and retaliation.

Calhoun defended the company’s handling of whistleblowers and said that some employees have been fired for retaliation, though he declined to provide names, citing the individuals’ privacy.

Sen. Josh Hawley, R-Mo., accused Calhoun and Boeing of “strip mining” the company by cutting corners and criticized his compensation package of nearly $33 million, up 45% last year from 2022.

“And frankly, sir, I think it’s a travesty that you are still in your job,” Hawley said.

Production slowdown

The FAA has taken a hard line against Boeing, with Administrator Mike Whitaker saying the regulator will keep inspectors on the ground at the company’s facilities until the agency is satisfied with safety improvements.

The FAA had already halted Boeing’s ability to increase production of the Max, its bestselling plane. Whitaker last month said it would likely be several months before lifting that restriction.

Boeing’s aircraft output has suffered from the resulting crisis, forcing big customers such as Southwest Airlines and United Airlines to adjust their growth and hiring plans.

Boeing’s lower production and deliveries have hurt its cash flow, and it warned investors last month that it would burn, instead of generate, cash this year, using about $8 billion in the first half of the year.

The company’s shares are down nearly 33% this year through Tuesday’s close, compared with a roughly 15% gain in the S&P 500.

Separately, Boeing is facing supply chain issues. Spirit AeroSystems, a major supplier for both Boeing and Airbus, said last week that titanium entered the supply chain with falsified documents. The supplier said that despite the falsified documentation, more than 1,000 tests confirmed that the material is “airplane-grade titanium.”

Boeing has been trying to purchase fuselage supplier Spirit, a deal Calhoun said is “more than likely” to be finalized in the first half of the year. With less than two weeks to go in that period, Calhoun declined to comment on Tuesday whether he still expects a deal in that time frame.

— CNBC’s Ece Yildirim contributed to this report.

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