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The head of Boeing’s defense business is departing the company following years of losses from fixed-price contracts and issues with its space capsule, which left two astronauts stranded in space.
Chief Executive Kelly Ortberg informed employees in a memo on Friday that Ted Colbert, who has been leading Boeing’s Defense, Space & Security arm since 2022, will be leaving the company “effective immediately.” A spokeswoman for Boeing stated that Colbert opted to leave the position.
Colbert’s exit marks the first change in the executive ranks since Ortberg succeeded Dave Calhoun as CEO last month. Steve Parker, the current Chief Operating Officer for the defense business, will temporarily lead the division until a permanent successor is appointed.
Boeing’s defense business has reported losses in the years 2022, 2023, and the second quarter of 2024. The division’s fixed-price contracts for several large programs have significantly contributed to the financial strain, amounting to nearly $14 billion in charges over the past decade, despite these contracts only representing 15% of revenues. Jefferies analyst Sheila Kahyaoglu has projected that these fixed-price programs could consume $2.6 billion in cash this year and $1.8 billion in 2025.
The programs affected include the KC-46 refueling tanker, the T-7A Air Force training aircraft, the MQ-25 refueling drone, the US President’s Air Force One jet, and the CST-100 Starliner spacecraft designed to transport astronauts to the International Space Station.
Boeing faced a significant setback last month when NASA decided not to use Boeing’s spacecraft to bring back astronauts Sunita Williams and Barry Wilmore from space. Due to technical issues, NASA now plans to return the astronauts in February on a SpaceX spacecraft.
Beyond its defense segment, Boeing is encountering broader financial difficulties. The company has been experiencing cash flow issues this year, primarily due to slower commercial aircraft production as it aims to improve manufacturing quality following a series of crises. Since January, Boeing has been under intense scrutiny after an incident where a door panel detached mid-flight, leading to a near 40% drop in its shares this year.
The company’s financial stability is closely tied to its ability to deliver aircraft to airlines, which is currently jeopardized as 33,000 union workers staged a walkout last week, demanding better pay and retirement benefits. In response, Boeing is implementing furloughs and a hiring freeze to conserve cash.
Credit rating agencies have emphasized that Boeing’s cash generation capabilities are a vital determinant in maintaining its investment-grade rating. The company faces mounting pressure to raise additional funds, potentially through the sale of shares worth up to $10 billion.
