BOEING Co reported on Wednesday that its sales plunged 15% in the second quarter from a year earlier and that it burned through US$4.3bil of cash.

Even with those terrible financial results, its shares rose almost 5% because the beleaguered planemaker finally had some good news to share: Kelly Ortberg was named chief executive officer (CEO).

Outside of the aerospace world, Ortberg, 64, isn’t a household name. Inside the industry, he’s well known after spending most of his career climbing the corporate ladder at Rockwell Collins, a producer of cockpit controls and other aircraft equipment, where he became CEO in 2013.

In a flurry of industry consolidation, Rockwell Collins was sold to United Technologies Inc, which in turn merged with Raytheon to form what is now RTX Corp.

Kelly had remained in charge of the Collins business during those transactions until he stepped down in 2020 and stayed on as an RTX board member.

The market should be pleased with Ortberg’s extensive industry experience and the fact that he was trained as a mechanical engineer at the University of Iowa.

It’s a relief that Boeing decided to appoint an outsider to take on the huge tasks of changing the culture and returning this iconic company to making safe and reliable aircraft.

Some of the names that were bandied about - chief operating officer Stephanie Pope and Spirit Aerosystems Holdings Inc. CEO Pat Shanahan - are Boeing insiders and simply too close to the problems to be able to fix them properly.

“We believe this is a strong and safe pick,” Ken Herbert, an analyst with RBC Capital Markets, wrote in a note.

Ortberg knows Boeing from a supplier’s perspective, giving him insight into one of the thorniest issues.

The aerospace supply chain is still struggling from the whiplash of the pandemic and from the quality complications with the 787 Dreamliner and the 737 Max, which is still reeling from two fatal crashes in 2018 and 2019 and the most recent incident in which a door plug blew off during an Alaska Airlines flight in January.

Ortberg knows how decisions at the planemaker can impact suppliers.

In 2016, he famously called out Boeing - basically biting the hand that feeds suppliers - when the company stretched out payments for components to save money.

Ortberg will take over on Aug 8, which is also good news. Current Boeing CEO Dave Calhoun had promised to step down by the end of the year, but it’s crucial that Ortberg get started now.

This will allow him to put his imprint on the labour negotiations with 32,000 machinists before their contract expires on Sept 12.

Boeing will have to pay up to avoid a crippling strike, but Ortberg can leverage the negotiations to get workers on board with the changes needed to repair the manufacturing process.

A fresh face across the table from union negotiators may help to get both management and workers moving in the same direction, which is to save the 108-year-old company.

Ortberg is off to a good start with an announcement on Wednesday that he will be working from Seattle, which is the best way to show workers that he wants to return Boeing to its roots as a world-class manufacturer of aircraft.

The switch of the headquarters to Chicago in 2001 perhaps made sense on paper because the city is in the middle of the country, but it was a terrible idea in practice for the company’s culture.

Calhoun compounded the error by moving the headquarters to Arlington, Virginia, near Washington DC. Certainly, Boeing’s military and space businesses are large federal contractors, but commercial airliners should always be the focus.

The centre of gravity for Boeing’s commercial aircraft development and production is still in Seattle.

There are a lot of actions that are already in progress that Ortberg will have to manage. Boeing is well down the path of purchasing Spirit Aerospace, which makes key components, including aircraft fuselages.

Shift in strategy

This is a significant shift in strategy to bring more work in house rather than farm it out to suppliers to cut costs. Ortberg should continue and enhance this effort to reintegrate the manufacturing of important components.

Ortberg will also have to continue a safety and quality plan that Boeing submitted to the Federal Aviation Administration (FAA) in May as part of the agency’s active oversight following the blown-out door plug, which miraculously didn’t kill anybody.

The FAA’s involvement in Boeing’s operations may provide some cover for Ortberg to push through tough changes to improve the company’s manufacturing culture.

The new CEO will have to deal with the fallout of pleading guilty to fraud involving an agreement with the Justice Department after the two fatal crashes.

Ortberg will also be grilled by Congress, which has stepped up its verbal lashings since the January door-plug incident.

Boeing’s problems run deeper than just its airliner unit. Its military business is suffering under fixed contracts that are losing money, including replacement aircraft for Air Force One.

In space, Boeing’s reputation has taken a hit because of the Starliner capsule that’s had complications with thrusters and is docked at the International Space Station where two astronauts are waiting to ride it back to earth.

When Ortberg gets settled and puts out the immediate fires, he may want to take a hard look at the space unit and whether it makes sense for Boeing to keep it.

Boeing is bleeding cash, and its consolidated debt jumped to $57.9 billion at the end of June from $47.9 billion at the end of March.

Investors will be looking closely at whom Ortberg chooses for his management team, and they will question whether Ortberg, at age 64, has the stamina of the 80-hour or more workweeks that it will take to tackle all the problems.

Even with all the problems that Boeing faces, there are silver linings. The biggest is the robust demand for Boeing planes and the massive backlog of work that has climbed to more than 5,400 aircraft with a value of US$437bil.

For now, Boeing needs to increase the production rate of its aircraft and obtain certification for planes already in progress, including the 777X and 737 Max-10.

The next big step will be the introduction of a new, clean-sheet aircraft to replace the ageing 737 programme, which will give Boeing a chance to start fresh and prove that it can design and build a plane on time and under budget.

If Ortberg is able to pull that off, then Boeing will be back.

 - Bloomberg