Did Boeing "blow" it?


Apparently a "terse" writer
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Did Boeing \"blow\" it?

I know I'm breaking my own unset rule about 'overquoting' but this is a pretty thought-provoking, albeit apolitical article of interest to US aviators:

Reprinted without permission.

Jet Lag
How Boeing blew it.
By Douglas Gantenbein
Posted Friday, Dec. 5, 2003, at 10:34 AM PT

In 1997, near my home in Newcastle, Wash., I could look across a short stretch of water and see what I thought was an industrial miracle. Outside a giant hangar, scores of Boeing 737 aircraft were scattered like sea gulls, awaiting their final coat of airline paint before shipment to customers. The scene was similar 20 miles to the north, where a second Boeing plant could barely keep up with orders for huge 747s and was spooling up the assembly line for the then new 777.

Actually, what I was seeing was an economic debacle. Those airplanes shouldn't have been sitting around—they should have been in customers' hands. But because Boeing was trying to build too many aircraft too quickly, many of the jets were half-finished, awaiting extra parts or retrofits to correct factory mistakes. In the mid- to late 1990s, when Boeing should have been raking in money as airlines clamored for new aircraft, its screwed-up production lines instead lost millions of dollars on each aircraft.

That's just one reason why Boeing finds itself the current poster child of bad management. Not only has its CEO, Phil Condit, been shown the door by a disgruntled board but its much-admired CFO, Mike Sears, has been sacked for hiring a Pentagon employee who may have helped Boeing land a lucrative air-tanker contract. Meanwhile, employees stole documents in order to get a peek at a competitor's bid for military satellite launches. Boeing's stature as the world's leading manufacturer of commercial airliners—the Boeing 747 stands with Coca-Cola and the Golden Arches as the best-known American products around the globe—has collapsed in a mere half-decade.

What explains Boeing's fate? In a word: greed. Or rather, two words: greed and hubris. Boeing was in many ways a perfectly successful company in the mid-1990s, dominant in commercial aviation with a thriving sideline in military and space contracts. But the company had also become arrogant and lethargic, unwilling to update production-line techniques that had barely changed since B-29s were built on the same Lake Washington site where 737 and 757 aircraft are made today. And Boeing was not about to acknowledge that upstart Airbus, the European-based jetliner maker, posed any real threat.

Against this backdrop, the newly arrived CEO Condit decided what the company needed was freedom from the boom-and-bust cycle prevalent in commercial aviation. The solution: Go after more government dollars by enhancing its military side, and let taxpayers foot the bill for product development, something Boeing has to finance itself when building jetliners. In 1997, Condit embarked on a buying spree. Boeing snapped up military contractors such as the aerospace and defense units of Rockwell Collins and merged with McDonnell Douglas. With McDonnell Douglas, Boeing also absorbed a different culture, one in which it was de rigueur to pull every lever to win military contracts, and annual profits were enshrined as the ultimate prize.

Boeing's foray into the military world led to its current status as a premier pork-grabber, with Exhibit A its highly questionable contract to lease 767 jet tankers to the military at a huge cost to taxpayers. On the profit front, it opted for short-term cash, gussying up its aging line of commercial jets in an effort to boost their sagging sales and avoid investing in new aircraft that could compete for decades to come.

Meanwhile, as Boeing managers tried to fit McDonnell Douglas into the corporate mix, Airbus took off. One story has it that an Airbus executive boasted in 1997 that his company's sales would easily surpass Boeing's by 2003. Phil Condit, attending the same meeting, laughed. Now Airbus holds a huge lead over Boeing in orders; in 2002 and 2003, Airbus commanded nearly 60 percent of the global market—precisely the dominant share that Boeing enjoyed back when Condit was so amused.

Boeing's plummet matters in a big way, and not just for Boeing. The company has long been a major exporter: A single order of 747s (most of which sell for around $200 million) is capable of putting a sizable dent in the U.S. trade deficit, which likely will surpass $500 billion for 2003. Those fat orders now are essentially gone. Sales of 747s have screeched to a halt since Airbus announced plans to build the 550-passenger A380, due to fly in early 2005.

What's more, building a modern jetliner is an ambitious technical undertaking, which requires engineering skills that benefit the entire economy. Earlier this year, for instance, two University of Buffalo researchers declared that commercial aviation is "the single most important sector in the U.S. economy in terms of skilled production jobs, value-added [to products] and exports." And the sheer visibility of Boeing's products has a kind of halo effect, enhancing America's status in a way that hamburgers and soft drinks do not. The sight of a European or Asian airport packed with 747s and 777s says one thing about the United States. Those same airports crammed with Airbus A340s—and, before long, with mammoth A380 superjumbo jets—say another. Boeing's diminished clout in commercial aviation is also bad news for the U.S. airline industry, which may soon find itself with only one viable source of aircraft: Airbus. Goodbye to all the sweet deals the airlines extracted from Boeing or Airbus when the two were fiercely competing.

Can Boeing fix itself? Certainly, jettisoning Condit—who presided over a host of misjudgments, including moving the corporate headquarters from the Seattle area to Chicago for no apparent good reason—is a step. The trouble is that his successor, Harry Stonecipher, is very much of the short-term-profits school. The company he headed in the 1990s, McDonnell Douglas, also had largely abandoned commercial aviation in favor of military loot, which was one reason it had to find succor in Boeing's arms. Still, McDonnell Douglas' military strengths at first seemed a good fit for Boeing, and Stonecipher brought some needed fiscal discipline to Boeing when he arrived in 1997. But he also has created more fear than respect within company ranks. As one aircraft worker told a Seattle newspaper reporter after hearing the news of Stonecipher's accession: "We are doomed."

To save itself, Boeing needs to accomplish two feats. One is to mend fences with the Pentagon and save the deal under which it will build 100 767 jets to serve as midair tankers (the only hope for the aircraft, which no commercial customer now wants). That may not be terribly hard; the Air Force really, truly wants those tankers, and even John McCain's blustering over the deal isn't likely to impede it.

But the other more important challenge for Boeing is to get back to basics in commercial aviation, which after all is what built the company during the 1960s and 1970s. Whether Boeing is up to the task is far from clear. After fiddling in recent years with notions for a supersized 747 and a fast jet called the "sonic cruiser," Boeing has decided its savior will be a jet called the 7E7 "Dreamliner." This twin-engine, 220-seat jet is supposed to give airlines a comfortable, superefficient plane that dovetails nicely with the move away from hub-and-spoke airline flight patterns and toward the point-to-point flights preferred by customers.

Yet it's basically a variation on the tube-and-wing model used by every commercial aircraft manufacturer since Donald Douglas created the DC-3 in 1936. It bears scant resemblance to the inspired engineering moxie that led Boeing to work up a balsa mock-up of the B-52 bomber in a hotel room in 1948. Or that in a mere 16 months took the 747 from a design concept for a failed military transport plane to a flyable commercial aircraft that literally changed the world by making possible cheap mass global travel.

What really is needed is a shot of that old-time engineering nerve. Ironically, says Paul Czysz, a professor emeritus of aeronautics at St. Louis University, that might have been found in the McDonnell Douglas archives. During the 1980s and 1990s, engineers there developed what is called the "blended wing"—a variation on the flying-wing model used in the B-2 bomber. Basically, a blended wing is simply a fat wing with the engines and tail fins attached to it—no long skinny tube with the wings stuck on the side. It's an ideal design for commercial aircraft—even more fuel efficient than the proposed 7E7, capable of carrying huge loads, easily switched between passengers and cargo and back. Should any U.S. aviation company actually build a commercial version, says Czysz (full disclosure: He's a former McDonnell Douglas guy), no other airliner could compete. Boeing toyed with something a little like the blended wing with its proposed sonic cruiser, but scrapped that in the wake of Sept. 11 and the collapse of commercial aviation.

The 7E7, offered in its place, is certainly a safer bet. But if the Dreamliner isn't a winner—and there is no clear evidence that it will offer airlines something that Airbus can't—the odds are good that Boeing will be out of the commercial aircraft business in 10 years. To leapfrog Airbus, Boeing needed to roll the dice. Instead, its new culture of soaking the taxpayers for military goodies while playing it safe on the commercial-aircraft front may have cost Boeing its future and blown a hole in the U.S. economy that never will close.

Douglas Gantenbein is the Seattle correspondent for the Economist and the author of A Season of Fire: Four Months on the Firelines in America's West.

Article URL: http://slate.msn.com/id/2092031/
Re: Did Boeing \"blow\" it?

If only the corporate boards of America valued engineers the way they value MBAs, this wouldn't be a problem. The way things are, everybody wants to be in management--which can't seem to innovate its way out of a wet paper bag, irrespective of the industry--and nobody wants to create. The reality is that globalization is in the midst of knocking America from her perch of industrial and economic superiority, and through their never-ending search for the quick buck (via the quick spike in stock prices), Corporate America is helping push.
Re: Did Boeing \"blow\" it?

I shocked the crap out of my captain last week when I said that Delta should purchase the Airbus.

I'm not really a big Airbus fan, but hands down the A320 is probably a better product than the 737NG. If Boeing is going to build a majority of the 7E7 overseas, I can't see the point in supporting the home team where in fact, they're not supporting the ball park.

Besides, I'm one of the weidoes that thought that the sonic cruiser was going to springboard Boeing back up to commercial aviation relevance instead of once again rehashing the 737 or putting a cutsey tail on the 757/767, some groovy neon lighting and calling it a 7E7.
Re: Did Boeing \"blow\" it?

But if the neon is timed to the bass it'll be all that!

Re: Did Boeing \"blow\" it?

I'm a free-market guy and believe stongly in the principle of survival of the fittest when it comes to markets. But the playing field between Boeing and Airbus is not level. Their subsidies work effectively as tariffs against every plane Boeing sells and hamstrings their R&D.

Unfettered by Eurocrats Boeing would beat Airbus like a rented mule. Boeing, despite its problems, is incredibly efficient at what it does.

The crux of the problem is what to do about it. Retaliatory tariffs only exacerbate the problem. I'm conflicted about the best response to this problem. Despite what some say the US puts up with a lot of this treatment (like last week's steel development). You really can't blame Boeing for trying to bilk the government -they're fighting for their survival.

We have tremendous market power in this biz. Although I never thought I would say this, I think we should play hardball with Airbus Industries until they either play fair or go bankrupt.
Re: Did Boeing \"blow\" it?

Nice to see the thawing of a Republican heart. Welcome.
Re: Did Boeing \"blow\" it?

It does not matter how they do it, in this global economy if people can undercut the US then that's how things happen. It's been corporate America that's been pushing for globilization of business, and this is what happens.

You want to play hardball or not?
Re: Did Boeing \"blow\" it?

Funny that the 747 they use to point out boeings once held glory almost bankrupted the company. Always was and always be one of the coolest planes ever built!
Re: Did Boeing \"blow\" it?

Just a correction. The term globalization is all but synonymous with free trade it means the same thing. And yes most of coporate America is behind globalization because for better or worse we would dominate in scores of industries.

The problem with Airbus is that they are not globalizing. The Euros are engaging in protectionist policies so they can keep the masses off the streets. These activities include enormous subsidies and tax breaks.

John, let's say for the sake of the discussion you liked to box. Let's also say that you and one other person were the only pro boxers in the world. You are the better boxer, but because of this your opponent is given brass knuckles and 2 min. before each bout to kick you in the junk as many times as he wants. When the bell rings you fight a good fight, but because of the advantage of the other boxer you loose by a narrow margin. Furthermore, everyone thinks your opponent is really good boxer because he wins more of his fights.

WhatI meant by hardball, is that if its going to be an unfair fight, maybe we should bring a louisvile slugger and and a slapper to our next fight. IOW we should figure out the quantity of help that Airbus receives and levy a tariff that equals or exceeds that amount on all Airbus aircraft. We could also give government subsidies to airlines for choosing Boeing. (I can't believe i just said that) Either way, we shouldn't conceed this one.

Aloft, that was funny, but don't get your hopes up. I'd still sell my soul to the devil if he'd give me par value, and I'd be happy to break lil'Timmy's crutch over his head if the price was right.
Re: Did Boeing \"blow\" it?

WhatI meant by hardball, is that if its going to be an unfair fight, maybe we should bring a louisvile slugger and and a slapper to our next fight. IOW we should figure out the quantity of help that Airbus receives and levy a tariff that equals or exceeds that amount on all Airbus aircraft. We could also give government subsidies to airlines for choosing Boeing. (I can't believe i just said that) Either way, we shouldn't conceed this one.

[/ QUOTE ]Hear that? It's the sound of someone's paradigm shifting. You're thinking like a liberal, my friend, whether you'll admit it to yourself or not.
Re: Did Boeing \"blow\" it?

I dunno. It's going to take a change in leadership (and morale) at Boeing.

Because personally, if we started giving subsidies to Boeing with their current way of doing business, they'd suspend R&D and use the subsidy to make their balance sheet look spanky and drive up the stock price so the CEO could enjoy more lucrative stock options.

Call me a pessimist when it comes to corporate welfare because it rarely 'trickles down' to the average Joe.

They're going to have to get off their duff, take some risks and compete. And the only way they're going to do that is with an engaged, charged-up and ready to fight American work force.
Re: Did Boeing \"blow\" it?

Well, I also feel that the A-320 is a better product. But the really problem i think is economics, if the French and company are going to suport Airbus so they can undercut Boeing, then what can boeing do, not much but try to make a better product or try to survive on military contracts.
Re: Did Boeing \"blow\" it?

Right you are, Doug--but here's another angle to consider: Bombardier and Embraer would be subject to the same tariffs, perhaps making the B717--and its mainline crew rates--more attractive to airlines, and/or motivating Boeing to enter the small jet market.

At first blush, both are positives.
Re: Did Boeing \"blow\" it?

I too thought the "Sonic Cruiser" would blast (no pun intended) Boeing back to number one. How sad they have chosen to fall back on tired older designs instead of leap forward.

They should have taken a lesson from the "Cortez" play book and burned the boats on the beach to show the world there is no going back. Dump the old and return to the glory days of American know how! Let's show the eurocrats that the reason our ancestors came here was to exceed europe, not to bow to her.

Airbus, like most of the Euro welfare state, couldn't exist in a fair and free market. I vote with my feet every time I travel. I ask what kind of aircraft, and if it's an Airbus, I simply refuse to book my flight, and make sure that management knows why I will not fly with that airline.

I support american workers, regardless of what product I'm purchasing.
Re: Did Boeing \"blow\" it?

Hum, maybe it's changed but when I checked a few months ago there were more standing orders for 747s than there are flying today. Plus I not sure how the market for each plane differs but I know Qantas had the first orders for the A380 AND the 747-400ER so they must see differing uses for them. *shrugs*
Re: Did Boeing \"blow\" it?

I support american workers, regardless of what product I'm purchasing.

[/ QUOTE ]
And what kind of clothes do you buy? Furniture? TV? Stereo?

Automobile? And was it made in the U.S. or Mexico? Where did the majority of the sub-components come from?

Really, I'm not trying to pick on you. It's just that I believe that the idea of "American Made" almost doesn't exist anymore. It's becoming a global economy, whether we like it or not. The interconnection of where things are made, who owns the companies that make them, and who ultimately benefits is no longer nearly as clear as it used to be.
Re: Did Boeing \"blow\" it?

Steve, You're right, it's very hard to find anything "Made in America", but, where I can, I choose the American made product. Shoes, clothes, major appliances. The products are out there, sometimes, you just have to look beyond your own wallet to find them.

I drive a Ford, wear Levi's and otherwise try damn hard to support my countrymen (and women for the PC crowd).

PS. I make my daughter park her Volkswagon on the street.
Re: Did Boeing \"blow\" it?

I applaud your efforts and am glad that you "vote" with your pocketbook. You've got the right idea.

Might want to take a look, though, and see which factory that Ford was built in (Chihuahua, Mexico?). Or which country your Levis come from (China or Indonesia or Phillipines or ?). Would you rather buy a Ford that was built in Mexico or a Nissan that was built in Tennessee by Americans?

Sorry. Probably beating on this horse one too many times...
Re: Did Boeing \"blow\" it?

Sreve, your point is well taken. The ford was built in Detroit (Or a suburb thereof). But, I do the research and read the lables.

I don't want to Hijack (did I say that out loud?) this thread becase I think Doug's point needs to be discussed.

If America becomes a bit player in the global aviation manufacturing scheme (and don't think the Chinese aren't watching, and the Russians would love a piece of this pie if they could build a plane that someone but they would actually buy), we'll be very near the end of being a nation of inovators and becom a nation of has beens. I fear for the Repuiblic when that comes.
Re: Did Boeing \"blow\" it?

Automobile? And was it made in the U.S. or Mexico? Where did the majority of the sub-components come from?

[/ QUOTE ]

Funny story about that. Some people gave me crap for not buying American when my wife an I purchased an SUV earlier this summer.

The ironic thing is, is that my wife's sh*t hot, built like a tank and drives like a dream Bavarian BMW was manufactured in South Carolina, whereas my American (and a piece of crap) Pontiac was manufactured in Mexico with parts from Canada.