Moody's threatens to downgrade Boeing debt rating; call to scrap bonus for new CEO

Recent developments suggest a more costly and protracted recovery for Boeing to restore confidence with its various market constituents, said Moody's.
Recent developments suggest a more costly and protracted recovery for Boeing to restore confidence with its various market constituents, said Moody's.PHOTO: AFP

NEW YORK (AFP, BLOOMBERG) - Ratings agency Moody's on Monday (Jan 13) placed Boeing's debt rating on review for downgrade, on the same day that new chief executive David Calhoun took charge of the crisis-hit company after two deadly jetliner crashes.

"Recent developments suggest a more costly and protracted recovery for Boeing to restore confidence with its various market constituents, and an ensuing period of heightened operational and financial risk," said Moody's Jonathan Root.

Three Democratic senators meanwhile have demanded the company scrap a US$7 million (S$9.4 million) potential bonus for the new CEO, saying it shows the plane manufacturer still prioritizes profit over safety. The payment is linked to returning the 737 Max aircraft to service, ending a global flight ban that's been in place since March in the wake of two deadly plane crashes.

"This payment represents a clear financial incentive for Mr Calhoun to pressure regulators into ungrounding the 737 Max, as well as rush the investigations and reforms needed to guarantee public safety," senators Edward Markey, Richard Blumenthal and Tammy Baldwin said on Monday in a letter to Boeing's board.

The lawmakers also said they're "deeply disturbed" by former CEO Dennis Muilenburg's exit package, which was disclosed on Friday only hours after a Boeing supplier said it plans to cut 2,800 employees because of lower levels of 737 Max production.

"These workers are suffering because of a situation created by Boeing's decision-making," making Muilenburg's exit package seem "all the more obscene," according to the letter.

Calhoun, who's 62 and has been a Boeing director for more than a decade, was tapped as CEO after the board in December voted to dismiss Muilenburg. In addition to the potential US$7 million bonus, he's eligible for US$10.9 million in annual compensation.

All Max jetliners have been under a global flight ban following crashes in Indonesia and Ethiopia that killed 346 people. Boeing's deteriorating relationship with the Federal Aviation Administration has prolonged the grounding.