The head of Boeing’s defense division is departing from the company after experiencing years of losses due to fixed-price contracts and a notable failure with its space capsule that left two astronauts stranded in space.
Chief Executive Kelly Ortberg informed employees through a memo on Friday that Ted Colbert, who has been leading Boeing’s Defense, Space & Security arm since 2022, would be leaving the company with immediate effect. According to a Boeing spokeswoman, Colbert chose to resign.
Colbert’s exit marks the first significant change in the company’s executive ranks since Ortberg assumed the CEO position last month, succeeding Dave Calhoun. In the interim, Steve Parker, the Chief Operating Officer for the defense business, will oversee the division until a permanent successor is appointed.
Boeing’s defense division has reported losses in 2022, 2023, and the second quarter of 2024. The division has struggled with fixed-price contracts for several large programs, which only constitute 15 percent of revenues but have incurred nearly $14 billion in charges over the past decade. Jefferies analyst Sheila Kahyaoglu has estimated that these fixed-price programs might 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 U.S. 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 against bringing astronauts Sunita Williams and Barry Wilmore back to Earth on Boeing’s spacecraft. Citing technical issues, the agency now plans to return the astronauts in February on a SpaceX spacecraft.
The challenges for Boeing are not confined to its defense business. The company has been experiencing substantial cash bleed this year due to slower commercial aircraft production, as it strives to enhance its manufacturing quality following a series of crises. Boeing has been under intense scrutiny since January after a door panel detached from a commercial jet mid-flight, resulting in a nearly 40 percent decline in its shares this year.
Boeing’s ability to generate cash relies heavily on the delivery of planes to airlines, a process which has been jeopardized after 33,000 union workers commenced a 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 is crucial in determining whether they will maintain the company’s investment-grade rating or downgrade it to junk status. Boeing is under pressure to raise additional funds, potentially through a $10 billion share sale.