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Boeing shareholder meeting turns tense amid 737 Max crisis

Posted: 6:10 AM, Apr 29, 2019
Updated: 2019-04-29 13:10:26-04
A deeply wounded Boeing faces shareholders ready for a fight

Boeing executives faced shareholders' tough questions about the 737 Max crisis at the company's annual meeting in Chicago on Monday.

Shareholders had a lot to gripe about. The company's stock has lost about 10% of its value since the March 10 crash of an Ethiopian Airlines jet, the second fatal crash of the company's bestselling plane. A Lion Air 737 Max crashed under similar circumstances in October. The second crash prompted a worldwide grounding of the 737 Max last month.

Boeing last week announced earnings fell 21% in the first quarter because of the crisis. Boeing suspended its share repurchase plans to conserve cash.

CEO Dennis Muilenburg started his remarks Monday with a moment of silence for the 346 people killed in the two crashes, according to his prepared remarks reviewed by CNN Business. He insisted that Boeing makes safety its top priority, and he said the company has been doing everything it can to find a solution. And he vowed the 737 Max will become the safest plane in the air once Boeing develops a fix to the automatic safety feature that is the focus of the two crash investigations.

"These enduring values are at the core of everything we do," Muilenburg said in his prepared remarks. "Yet, we know we can always be better. We have a responsibility to design, build and support the safest airplanes in the sky. The recent accidents have only intensified our dedication to it."

Shareholders voted on one proposal that would have separated the positions of chairman and CEO, both of which are now held by Muilenburg. A preliminary vote on that measure was supported by only 34% of the shares — better than the amount of support a similar measure received last year, but still far short of a majority.

The resolution predated the current 737 Max crisis. Two shareholder advisory firms recommended votes in favor of the resolution this time.

"Shareholders would benefit from the most robust form of independent oversight to ensure that the company's management is able to regain the confidence of regulators, customers and other key stakeholders," said one of those services, ISS, in a note urging support for the measure.

Muilenburg also said a preliminary vote showed that 92% of the shares supported the company's executive compensation package.

A small group of protestors braved pouring rain and cold outside the annual meeting. Most held large photos of some of the people killed on the two flights. One held signs reading "Boeing's arrogance kills," and "Prosecute Boeing & execs for manslaughter."

Questions remain as to whether Boeing did everything it could to ensure the planes were as safe as possible. For example, four Boeing employees called an Federal Aviation Administration whistleblower hotline to report damage to the wiring of sensors, CNN has reported. And Boeing made airlines pay extra if they wanted an alert that lets pilots know if two sensors are contradicting each other. After the crashes, the company said in congressional testimony it would make that feature standard on planes in the future.

Muilenburg defended that earlier decision to include the alert as an option in his prepared remarks.

"We don't make safety features optional," he said. "Every one of our airplanes includes all of the safety features necessary for safe flight."

Muilenburg said again that the company is getting close to a software fix. It has completed 146 flights of the 737 Max, totaling roughly 246 hours of air time with the updated software. He said he personally has flown on two of those test flights.

And in response to a shareholder's question, Muilenburg said Boeing executives would be on some of the early commercial flights once the planes return to service.

"It will include me and many others," he said. "This is a really important part in showing our confidence in our product. Our Boeing employees are very supportive of doing that."

Muilenburg faced several questions from shareholders about how the problem with the 737 Max was able to happen.

"You seem to have rushed the 737 [Max] into production and lost sight of some basic fail-safe things that go on," said one shareholder. "It never should have happened that you had one easily damaged sensor control a new, critically designed safety feature."

Muilenburg insisted that the 737 Max was not rushed. He said the plane took six years to develop and that the equipment had been deemed safe.

"I want to assure you safety is our top priority," Muilenburg said. "That said, we can always improve."

The safety feature forces down the plane's nose if a sensor detects it is climbing too fast and at risk of a stall. Apparently the sensor on the two flights gave a false reading. Two weeks after the Ethiopian crash, Boeing announced the software fix would add data from a second sensor that measures the horizontal tilt of the plane.