Flying Blind: The 737 MAX Tragedy and the Fall of Boeing — by Peter Robinson
A telling story about a “financialisation” of the manufacturing competence, that earned Boeing the status in the past, as well as delivery of near-legendary 747 and 777.
Some would wonder as to how, in the world full of compliance checks, licence provisions, string protocols and onerous fines for negligence — planes can still have their doors ripped from the fuselage and those grounded would show losened screws.
“The four bolts designed to keep the plug from moving off the stops were missing, [investigators at NTSB] said, adding that they would work to determine whether the bolts had ever even been installed.”
The author of this blog is an avid Boeing fan (and a general airplane geek), enjoying the spaciousness of 777 and the quietness of 787. The advancement of airplanes safety is captivating: better tech, materials, fuel efficiency and overall comfort, and most important — safety and decrease of fatal incidents.
At the same time, the allure of the global market capacity for airborne travel induced reckless behavious on the ground in terms of airplane’s manufacturing.
Competition between Airbus and Boeing — especially with the introduction of Airbus A320neo, stimulated the latter to adopt financial engineering techniques — to the detriment of sound assembly.
A great book dedicated to review the tragic loss of life in the crashes of two 737MAX planes traces potential failure points in the organisation — that could have contributed to the news of last week.
Boeing of the past did not shy away from putting the financial well-being of the organisation to create a sound engineering marvel: it did so with 747:
“… Boeing doubled down on the risk it had taken with the 707, betting even more money — ultimately the entire net worth of the company — on its massive 747. The gamble almost bankrupted Boeing before it was proven to be sound. The plane would become one of the most iconic in history. Three times bigger than anything in the sky, it required the coinage of a new term — “jumbo jet.”
Investment returns mattered less for engineers passionate to make a bold next step in engineering:
“When the [Boeing’s Board] director started probing the projected investment returns at the meeting, a senior manager replied that they’d run some studies but forgot the results. “My God, these guys don’t even know what the return on investment will be in this thing” [director muttered].
Airbus mounted a serious competition to Boeing in the 80ies, with the A320 family equiped with a “fly-by-wire” controls borrowed from Rafale fighter jets. That saved space and weight:
“The weight savings allowed the Airbus planes to be seven and a half inches wider than the 737, a difference that passengers would notice. Seats were up to an inch wider, and it was easier to squeeze past the flight attendants’ cart in the aisle.”
Boeing, benefiting from globalised world — borrowed heavily from the financialisation of most manufacturing industries born in the US: outsourcing and trimming cost, in parallel expanding into military space via a merger with McDonnel Douglas in 1997.
Seeing Airbus making big progress with airplane orders, Boeing, instead of a new narrow-body plane, went with the upgrade of the 737, trying to also placate investors w.r. to capital expenditure. Behind the yoke of the decision sat the new CEO of Boeing — Company’s first without airplane engineering experience — James McNerney, ex GE.
The organisation got under sway of GE mantra to trim costs and be lean:
“[James] McNerney’s phrase — “more for less” — became the company’s driving theme as it embarked on the MAX, a sharp contrast to “Working Together,” the motto Phil Condit had advanced in the early 1990s during the successful creation of the 777.
The implications were clear: More performance, lower cost. More range, less fuel burn. But also: more work, fewer people. And ultimately: more risk, catastrophic return.”
Outsourcing and relying on multitude of 3rd party manufacturers came back to bite: new programs got delayed due to compatibility and quality issues (notable with the Dreamliner development):
“At a meeting with top executives in 2008, a Boeing engineer complained about sending drawings back to a team in Russia eighteen times before they understood that the smoke detectors needed to be connected to the electrical system.”
Wall Street, meanwhile, continued to reward the company optimising cash-flow redirected towards stock buy-backs:
“Not long after Boeing reported record earnings, cash flow, and commercial deliveries for 2017, Boeing’s finance staff gathered at the JW Marriott on Adams Street in Chicago for their annual offsite meeting. CFO Greg Smith told staff the stock could hit $800 or $900 if Boeing continued pushing for efficiency and redirecting cash into dividends and buybacks.”
“Yet the people who made the most damaging decisions, and laid on the impossible demands, kept rising to the top. Like Jack Welch’s General Electric before it, Boeing became a collection of assets to be shuffled as managers saw fit to make the most beneficial combination for stockholders, not for customers or employees.”
