CNBC transcript: Boeing Chairman & CEO Dennis Muilenburg speaks with CNBC ’s Phil Lebeau today on CNBC’s “The Exchange”
WHEN: TODAY, MONDAY, JUNE 2
WHERE: CNBC’S “THE EXCHANGE”
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Following is the unofficial transcript of a CNBC interview with Boeing Chairman & CEO Dennis Muilenburg today on CNBC’s “The Exchange.” Following is a link to video of the interview on CNBC.com:
Watch CNBC's full interview with Boeing CEO Dennis Muilenburg
Kelly Evans: welcome back to "The exchange." Boeing shares are under pressure again today. This following news that some of the wing parts of the 737 max may be defective the stock is down 23% in the last three months as the company deals with the fallout from the 737 max crashes and subsequent grounding of the planes. Let’s talk about all of it with the chairman and CEO of Boeing Dennis Muilenburg. He’s live in Chicago with our Phil Lebeau. Phil
Phil Lebeau: thank you, Kelly. Dennis, thanks for being here today.
Dennis muilenburg: thank you.
Lebeau: let’s start first off with the latest issue with the 737 and the wing slats, if you will. These parts within these wings that you’re going to have to inspect. Is this due to your own internal investigation in terms of what happened here? And it brings up the question, are we going to hear more of this in the future not just with the max but 737 overall?
Muilenburg: well I think first of all, we start off everything with safety and quality. This is something we discovered as a supplier quality issue. As soon as we discovered that, we brought to it the surface we’re dealing with that expeditiously we’ve been coordinating with the FAA over the weekend this is a process that’s well defined and well understood in our engineering discipline and we’re all over it with our customers and we are out in the field with our airline customers as well to coordinate this.
Lebeau: you’ve got the 737 max already grounded so those wing slats they can inspect and repair when needed but with the ng those models are flying right now and that’s sort of this headline risk out there right now. Somebody will hear this, they’ll hear 737 and they’ll say, here we go again. Something else is wrong. Are you worried that it makes people uneasy about flying the 737?
Muilenburg: well, certainly it’s something that we regret the impact that it has had to our customers. Any time there’s news on the 737, it is something that goes to the top of the list we’re paying close attention to it this particular issue of the slat tracks is a well understood one and one that we will work our way through quickly. It’s something we’re going to stay very coordinated with customers. We know it is important and we want to minimize the disruption to our customers.
Lebeau: let’s shift to the 737 max. You’re in the process of preparing for certification flight and then filing your application for recertification. This is something that we’ve been told or conditioned by various people that, hey, it’s ready. It’s ready it’s ready you’ve already finished the software is there a delay in filing for this recertification?
Muilenburg: we are following a very disciplined process here everything again starts with safety and quality. We know that lives depend on the work that we are doing so safety is a paramount importance here. We’re working through this in a very disciplined fashion with the FAA. We have completed the software development work we’re now in the process of answering questions that the FAA has that include some sessions in our simulators this week. We hope to schedule the certification flight very soon. Then after that a decision from the FAA to return to flight.
Lebeau: is the FAA pushing back are they saying to you nope you’re not ready yet?
Muilenburg: the FAA is working closely with us but also being disciplined and deep in their analysis. I think it’s a good thing. I think it is good for all of us to be very disciplined in this approach to make sure that we’re doing everything we can to ensure safety and I’m very confident that when this process is completed and the max is back up in the air, that it’ll be one of the safest airplanes ever to fly
Lebeau: all of this brings up the question of whether or not Boeing and the FAA because of the certification process you work too closely together. And at the end of the day this is the problem. And that you have people that who are saying, wait a second. How do you know the information you’re getting from Boeing is correct and is accurate? And it has people saying, wait a second are these planes going to be safe when they’re recertified if they a;ready had these problems in the past
Muilenburg: we’re very confident in the overall process. Over the last 20 years, aviation has been the safest form of transportation around the world. And the accident rate has been reduced by 95% because of the processes that the FAA has put in place. The idea we work closely together to tap deep technical expertise while ensuring the independent review process I think the process is very effective. That said, we’re learning as we go through this current situation. Both the FAA and in my own board committee at Boeing are taking a look at our certification processes. And if there are any improvements we can make, we’ll make those
Lebeau: but you’ve seen the stories. It’s been a steady drum beat of stories that have come out where time and again it appears you were making changes in a plane too fast without enough people being notified. In many cases your own flight test engineers or flight test pilots were saying wait a second I didn’t know about the MCAS situation. When you hear those stories you have to understand that the public looks at this saying wait a second how do we know this isn’t going to happen again?
Muilenburg: well, we certainly regret the impact this has had. Without question, we’re sorry for the lives that were lost in these two accidents. We know it’s impacted the trust and confidence of the flying public we take that very, very seriously. I can tell you we’ve taken a deep look at the max development. It was a six-year development program with more than 1600 flight tests we followed our certification processes but we always know that we can get better and that’s what we are committed to this is all about safety and the track record of safety in aviation is as strong as it is because we never stop improving. So we’re learning from these current situations but I want you to know we’re investing everything we can in the safety of these airplanes. We know that today 5 million passengers will fly on Boeing airplanes today. Their lives depend on it we take that very seriously
Lebeau: but that hasn’t changed with all due respect, that’s been that way for years. And we know that Boeing has a culture of saying we want to make sure we’re right. But how do you know this won’t happen again given the fact that it did happen?
Muilenburg: well, couple of things we’re doing. In this particular case with the improvements we’re making to the max software, we’ve taken a deep look at how we can build additional redundancies into that so-called MCAS software we’ve done more than 280 flight tests with that new software. The certification process around this is being done in depth in a very disciplined way as I mentioned earlier. We’re also working with our customers to make sure we understand the impact to them and working closely with them on return to service planning so that can be done in a safe and efficient way. And we’re looking at our certification processes hollistically so we can continue to improve for the future
Lebeau: dennis, I know kelly has a question or two for you.
Kelly evans: thank you one of the things the public and even your investors are saying they’re not hearing from you is contrition are you admitting to any wrong doing or fault
Muilenburg: well, first of all we are very, very sorry for both of these accidents. And as I’ve expressed and will continue to express our deepest sympathies to the loved ones and the families of those lost, that will never go away and that will weigh on us heavily forever. What that has done is it’s really reinvigorated our continuing emphasis on safety and quality and integrity. And I can assure you that we’re learning we’re going to be improving. We know that there are things we can do better. The MCAS software improvements are a clear area where we’re improving. We know we can make improvements on training and education. We’re making those investments we also know that our communication in some cases was not as effective or not as complete as it should have been. And there are areas where we can improve transparency and that’s part of how we’ll increase confidence of the flying public and the customers out there. So we know we have work to do.
Evans: sure. Does improving those systems mean that you did something wrong.
Muilenburg: well, I think one example that I’ve mentioned before is on the angle of attack disagree alert that was in the news recently we made a mistake on the implementation of that we are fixing that as we go forward. So we are in approach to how we do our business, where we’re always seeking to learn we’re always looking to improve. And we have fallen short in the past and I’ve admitted that and acknowledged it. And that only makes us more resolute in the commitment to safety going forward
Evans: and you’re clear about this now, but for months investors in the public have wanted this clarity. Were you hamstrung from speaking out by regulators did you personally want to be able to give people more information? Were you not allowed to give that information
Muilenburg: well, I think part of the challenge we’ve had is the investigation process around aviation accidents is controlled by something called ICAO Annex 13 it’s important to us that we protect the integrity of that investigation process. So we’ve been doing that at the same time we’ve been trying to share as much information as we could throughout the process and that has at times been a balancing act. But frankly we owe information to all of our stake holders in this process we’re doing everything we can to be transparent, provide that information. Again, I know we could do better and we are focused on that going forward.
Evans: are you the right person for this job
Muilenburg: yes, I think I am and certainly I’m committed to our objectives as a company around safety and integrity and quality. I think it’s important that I continue to lead and lead this company in a way that’s consistent with our values I’ve been at Boeing now for 34 years. I started at the company as an intern I have a great pride in our company. It’s frankly a privilege to do the kind of work we do around the world. We know that people’s lives depend on what we do whether it’s commercial airplane customers and passengers or servicemen and women around the world who use our defense products we are committed to excellence in the work we do. I’m proud and honored to work for this company I look forward to continue to lead consistent with our values.
Lebeau: playing off what Kelly was asking you on whether you’re the right person to lead this company. One of the criticisms out there which I think is a valid one is there’s not an independent third party that has said -- that you’ve hired and you said you have free reign. You interview any engineer you want to, any test pilot we want to find out exactly what’s happened here. Why not bring in an independent third party and say find what you need to find and we will hold those accountable who did wrong here
Muilenburg: in fact, we are doing that in collaboration with our customers as well. As you know, the u.S. Government has initiated some independent reviews. We’re supporting that review process. I’ve also asked my board to independently set up a committee to – review our processes
Lebeau: will you release those results including names of those who have done wrong?
Muilenburg: we will release those results and I also want you to know that that committee is bringing in external experts. That is not only an internal view, they will bring in external experts to support the effort and whatever we learn from those committees, we are committed to implementing those improvements and we will make those improvements well known.
Lebeau: the president thinks you should rebrand the max we understand for certification reasons, you can’t just rebrand the plane and name it something else but you know the max name right now is toxic with travelers. They don’t want to fly it. They’re worried about the safety of it. Why not say we’re not going to call it the max anymore we are going to come up with something else? At a minimum to change the perception that is going to be out there when it comes back into service
Muilenburg: I think the most important thing here is to remain committed to safety and getting the airplane back up flying safely. I frankly don’t think this is a pr process or advertising process this is about safe travel. And we’re investing in making the max as safe as possible. I think the improvements were making on software, training and education, how we communicate, that’s what’s going to matter. As we get the airplane back up and flying and flying safely, that will rebuild customer confidence and we’re going to be working closely with the airline customers. They understand the flying public very well and we know that we’re going to have tailored work with them to rebuild that confidence over time this will take time. We know we’ve damaged trust. And we have to earn and reearn that trust of the flying public. We are committed
Lebeau: when are you telling airlines to probably expect to see this plane? August
Muilenburg: we’re working actively on that day-to-day. As I said this week we’re in the simulator with the faa and nasa we hope to schedule the certification flight shortly after that that will be followed by approvals from the regulators to get the airplane back up and flying I can’t give you a specific timeline on that, but that is all work we’re doing daily, hourly we also have our teams deployed with our customers helping them on return to service preparation. So these are all near term activities while I can’t give you a specific timeline, I can tell you it’s a very active day-to-day engagement we’re going to spend a lot of time with our customers to make sure they’re confident in the plane as it comes back up.
Lebeau: are you ever out and hear people talk about the max? Airport travelers. Do you know what they’re saying?
Muilenburg: yeah I’ve heard those comments.
Lebeau: and what’s your reaction when you hear people say, I’m not getting on it?
Muilenburg: well, first of all, we deeply regret the impact. We’re sorry for the lives that were lost. This will always be with us as a company. It weighs heavily on us every day. When I hear comments from the traveling public and you might guess I spend a lot of time in airports I’ve heard these comments. They’re tough. They wear on us deeply as a company. These are customers we care about we know their lives depend on what we do so our work here will never be done but I can tell you we’re only more resolute in our commitment to safety and quality and integrity as a result.
Lebeau: last question you’re at 42 a month in terms of 737 max production when do you get back up to 52 and can you get to 57 as previously expected by the end of the year?
Muilenburg: the long-term plans have not change this is all paced by the most important thing is getting the airplane back up and flying safely and then we will be helping our customers take the grounded fleet and returning that to service safely in the interim while we’re running at 42 a month we’re investing in our supply chain health so it’s ready to go when we are. Stepping back up to 47 and 52 a month is something we plan to do but only when we’re ready and in a very disciplined fashion. Long term
Lebeau: do you get back to 52 by the end of the year?
Muilenburg: I won’t put a time on it because it will be paced by a return to service. The most important thing is to focus on safety. When we are ready to ramp back up production wise, we will. The long-term market still says the world still needs 43,000 new airplanes over the next 20 years and the max is a big part of that.
Lebeau: have you had a single order for the max yet since the grounding?
Lebeau: okay. Dennis Muilenburg, chairman and CEO of the Boeing corporation joining us here today.
Evans: and before I let you guys totally go, Dennis, my last question on this is do you think that 737 max is going to be back up in the skies before the end of the year at this point?
Muilenburg: I do but again I can’t give you the specific timeline on it we are working very closely with the regulators this is day to day activities we are working with the right pace but all of this will be gaged by the investment we are making in safety. The most important thing here is safety and we will be back up and flying when we are ready and we will do that jointly with our customers and with the regulators