Washington: Ted Colbert, chief executive of Boeing’s defence unit, exited the company September 20 effective immediately amid the unit’s continued poor performance and crippling financial losses.
Steve Parker, Boeing defence’s chief operating officer, will take on leadership at the unit while the company seeks out a permanent replacement, Boeing CEO Kelly Ortberg said in a memo to employees.
“I want to thank Ted for his 15 years of service at The Boeing Company, supporting our customers, our people and our communities,” Ortberg said in the memo.
“At this critical juncture, our priority is to restore the trust of our customers and meet the high standards they expect of us to enable their critical missions around the world. Working together we can and will improve our performance and ensure we deliver on our commitments,” Ortberg said.
Colbert’s ouster comes just a week after Boeing Chief Financial Officer Brian West, speaking to investors at a financial conference, disclosed that margins at the defence unit would be negative during the third quarter amid continued difficulties reversing cost overruns from fixed-priced defence contracts, as well as newly discovered production challenges on the F-15EX and F/A-18 Super Hornet.
Colbert, previously the top executive at Boeing’s services division, took the reins of Boeing Defence, Space and Security (BDS) in 2022, a period when the defence company was ailing from pandemic-induced supply chain and labour woes as well as billions in reach-forward losses on programs like the KC-46 tanker, MQ-25 tanker drone and Air Force One replacement.
During the company’s commercial heyday, Boeing aggressively bid for those programs under fixed-price contract deals that force the company to pay for any overruns above a certain threshold, knowing that financial losses could materialise during the early phases of development, but gambling future production returns would offset those losses. But when the pandemic and 737 MAX crisis in the 2019-2022 timeframe crippled Boeing’s usually lucrative commercial airplanes business, losses on the defence side could not be hidden amid the company’s jetliner sales.
Colbert — though not responsible for helming those defence deals—was charged with cleaning up the financial mess at BDS, tapping Parker as his No. 2 to help stabilise the division. Colbert publicly vowed that BDS would no longer bid on fixed price development programs or to take potentially-harmful contract terms. The company pulled out of a competition to build a replacement for the E-4B Doomsday Plane last year for those reasons.
Despite BDS absorbing $4.4 billion in losses in 2022 — a move meant to reset fixed-price programs to be healthier going forward — the defence division took about $1.6 billion in losses on its fixed-price portfolio in 2023 and has logged more than $1 billion in charges over the first half of 2024.
“We just have to slog through,” Colbert told reporters in July.
Colbert’s departure follows that of much of the company’s top leadership this year — including former Boeing CEO Dave Calhoun and the head of its commercial planes unit Stan Deal — due to a safety and production crisis on the commercial side of the company. It also comes as the firm is in the early days of a labour strike at its Seattle facilities, which is expected to impact deliveries of KC-46 and P-8 military aircraft.
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