The head of Boeing’s defense business is set to leave the company following years of financial losses from fixed-price contracts and issues with its space capsule that stranded two astronauts in space.
Kelly Ortberg, Boeing’s chief executive, announced in a memo to employees on Friday that Ted Colbert, who had been managing Boeing’s Defense, Space & Security division since 2022, would be departing from his role “effective immediately.” A Boeing spokesperson confirmed that Colbert chose to leave the company.
Colbert’s departure marks the first change in the executive team since Ortberg succeeded Dave Calhoun as CEO last month. Steve Parker, the current chief operating officer for the defense business, will temporarily head the division until a permanent successor is appointed.
Boeing’s defense segment has reported losses in 2022, 2023, and the second quarter of 2024. The division has been challenged by fixed-price contracts for several large programs, accounting for only 15 percent of revenues but resulting in nearly $14 billion in charges over the past decade. Jefferies analyst Sheila Kahyaoglu estimates that these fixed-price programs could consume $2.6 billion in cash this year and $1.8 billion in 2025.
These programs 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 another setback when NASA opted not to use its spacecraft to return astronauts Sunita Williams and Barry Wilmore to Earth. Due to technical issues, NASA now plans to bring the astronauts home in February using a SpaceX spacecraft.
The company’s challenges extend beyond its defense business. Boeing has been experiencing significant cash outflows due to slower commercial aircraft production as it aims to enhance manufacturing quality following a series of crises. The company has been under increased scrutiny since January when a door panel blew off a commercial jet mid-flight, leading to a nearly 40 percent drop in its share price this year.
Boeing’s ability to generate cash is crucial, hinging on the delivery of planes to airlines. This capability has been further compromised after 33,000 union workers went on strike 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 indicated that Boeing’s cash generation will be critical in determining whether they maintain the company’s investment-grade rating or downgrade it to junk status. The company is under pressure to raise additional funds by potentially selling shares worth up to $10 billion.
