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Ortberg's priorities include mending relationships with

airlines

and employees

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Boeing ( BA ) faces production and delivery challenges

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Threat of labor disruptions looms

By Allison Lampert

Aug 1 (Reuters) - Boeing's ( BA ) incoming boss, Kelly

Ortberg, faces a herculean task when he starts next week -

restoring the might of a U.S. corporate powerhouse rocked by

multiple crises.

The former Rockwell Collins boss is returning from retirement to

head the 108-year-old U.S. planemaker, which is bleeding cash

and beset by companywide problems expected to take years to fix.

His extensive to-do list includes mending relationships with

airlines and employees, boosting output, repairing company

finances and securing a labor deal to avoid a possible worker

strike later this year.

Current and former airline executives told Reuters they are

optimistic about Ortberg's aerospace and engineering expertise

and his status as an outsider untethered to Boeing's ( BA ) past. But

the 64-year-old has a hefty task.

"This is not a five-year fix-it," said Bill George, former

Medtronic CEO and executive fellow at Harvard Business School.

"Is he prepared to spend the 10 years it's going to take to

restore Boeing ( BA )?"

Boeing ( BA ) did not make Ortberg available for an interview. The

company has previously said it is taking comprehensive steps to

strengthen quality and build confidence, including reducing the

amount of so-called traveled or pending work.

"There is much work to be done, and I'm looking forward to

getting started," Ortberg said on Wednesday in a statement.

The company's most pressing issue is its falloff in jet

production and deliveries following a Jan. 5 mid-air panel

blowout on a near-new 737 MAX. Boeing ( BA ) is currently producing

about 25 MAX jets a month, with a target of 38 per month by

year-end.

This has left customers scrambling for planes as travel

demand has boomed, costing them revenue and leaving them

overstaffed. Southwest Airlines ( LUV ), which operates an

all-Boeing ( BA ) fleet, had been hiring on the assumption it would

receive 85 jets this year, but it now expects only 20 planes.

Former United Airlines CEO Oscar Munoz said Ortberg will

need to be realistic with executives. Reaching out to key

customers and Boeing ( BA ) employees "and letting them know that they

have a leader that they can trust and work with" will be key,

Munoz told Reuters.

Boeing ( BA ) is still facing industry supply-chain snags and the

threat of labor disruptions this September from the more-than

30,000 Seattle-area factory workers currently in contract talks.

Spokespeople for both Boeing ( BA ) and the International

Association of Machinists and Aerospace Workers say the two

sides have made progress on non-economic issues, with talks on

critical economic issues to start in coming weeks.

BURNING CASH

The company also needs to boost output to slow a cash burn

expected to continue at least through the third quarter. Rating

agency S&P said it could downgrade the company's credit rating

to junk status if Boeing ( BA ) does not make progress toward more

normalized production levels. That would raise its borrowing

costs. Boeing ( BA ) has been paying for parts and components that are

currently not being used to build planes.

"There's a lot of operating leverage in this business, and

with production rates currently below optimal capacity, it's

just going to burn cash," said Tony Bancroft, portfolio manager

at Gabelli Funds, which holds Boeing ( BA ) shares.

The road to fixing Boeing's ( BA ) finances goes through its

factories. Ortberg's plan to be based in Seattle where Boeing ( BA )

does most of its commercial jet manufacturing, even though the

company is headquartered in Washington, D.C., has won early

praise from the machinists' union and others.

Ortberg will also need to meet with families of the 346

people who perished in two 737 MAX crashes in 2018 and 2019.

The U.S. Department of Justice and Boeing ( BA ) agreed that the

planemaker would plead guilty to a criminal fraud conspiracy

charge and pay up to $487 million after breaching a 2021

deferred prosecution agreement. A U.S. judge must decide whether

to accept the deal, which would require board members to meet

with family members.

Once it gets the company on solid footing, Boeing ( BA ) leadership

will need to focus on launching a new commercial jet to add to

its aging product line, analysts said. The MAX is the latest

variant of the 737 jet which first entered service in 1968.

"Given Mr. Ortberg's age - he is 64 - his priorities may be

to stabilize Boeing's ( BA ) operations, finances, and fix the

culture," said Robert Spingarn, analyst at Melius Research, who

added that while he is an advocate for a new plane, "we must

admit that Boeing ( BA ) has more immediate needs."