I have been wanting to write something about the current situation at Boeing, but I have been a little distracted. Previously I had written how Boeing needed to fire its CEO. They finally did it, but there is so much more they can do to correct this situation. The 737 Max has been grounded for nine months, which is the longest in the history of any US Airliner. This is a travesty for the airlines who want to fly the plane, the company and its reputation, and those of us who are stockholders. However, it is important the fix is done correctly. Everyone who works for and has worked for Boeing do not want people to lose their lives flying in our product.
Dennis Muilenburg, the previous CEO, has been replaced by David Calhoun. According to the Wall Street Journal, Calhoun is, “a long-time director with deep ties to the aviation and private-equity industries.” It appears the company may be uniting the CEO with the Chairman of the Board. Calhoun was named Boeing’s Chairman in October and will become CEO in January of 2020. He is considered a corporate fixer. At this point in time the company needs some fixing, however some criticize the choice saying he is too close to investors. On December 16, 2019 they shut down the 737 Max assembly line. With several hundred airplanes parked, the manufacturer is hemorrhaging cash as it tries to get the plane back into the air.
Everyone knows that Boeing has several challenges to face “winning back the confidence of government officials, suppliers, airlines, and the traveling public.” It will not be easy, and it will not be able to rely of hubris to get the job done. This time there will be no bullying to get its way. The customer, airlines, have lost hundreds of millions of dollars due to lost revenue from the grounded 737 Max fleet. 346 lives were lost, and it is important that the company not try to force a solution, but to trust the process set up by the regulators. One of Muilenburg’s biggest mistakes was to use press releases to pressure the FAA. Calhoun has “made it clear in public statements that they won’t get ahead of the regulators in predicting the return to service of the 737 Max.”
There does seem to be other problems with the management system of Boeing. The recent snafu with the Starliner Space Capsule was due to a misfunction of the capsule’s clock. There was a programming problem associated the clock resulting in “misinterpreting the stage of the mission.” It resulted in burning too much fuel, keeping it from docking with the space station. There were many wins associated with this event, at least according to those who monitor such things, but with this happening at the same time as the Max fiasco, it gives an indication of some management issues within the company.
Another player in this performance is Greg Smith. He is the finance chief. He has “spent most of his career at Boeing and is well respected by the investment community.” He will serve as interim CEO until Calhoun takes over. Monday of this week Smith pledged “to chart a new direction for Boeing.” I hope this will include a resetting of its internal culture. However, there are several steps required to repair this significant damage.
Their first responsibility is to the people killed on those two crashes. According to the Guardian, Boeing has set aside $100 million to be paid to families and the communities affected by these events. These payouts will be phased over several years. Boeing has also agreed to “form partnerships with local governments and non-profit organizations to address the needs.” The company must remember that no matter what level of culpability is found with the pilots, it is ultimately Boeing’s responsibility to meet the needs of those hurt by its product. It is not enough to do no harm; in this case it is Boeing’s ethical responsibility to do good.
Secondly, Boeing needs to repair its reputation with the FAA and all of the other regulators around the world. “The FAA is not expected to approve the Max software fixes, as well as related changes to pilot training, before February.” I have a friend who flies for Southwest, and they have been asked to be a part of flight tests for the Max. The American Airlines pilot union has stated they want to see certain actions from Boeing to help rebuild the trust between pilots and Boeing.
Thirdly, Boeing needs to work with the flying public to rebuild their trust in its products. Airbus has now become the number one aircraft manufacturer in the world. As the WSJ notes, “The crisis has disadvantaged Boeing in its competition with Airbus to supply carriers in a fast-growing air travel market.” Both manufacturers have a backlog of more than 13,000 airplanes, “which represents about several years of production.” In 2019 Boeing had planned on delivering 900, which is an amazing number, including 600 737 Max jets, but due to the grounding and production shutdown it will deliver less than 400 airplanes. This is a huge hit on the company’s profitability. One other note United Airlines just bought 50 A321X’s from Airbus.
There is one other stakeholder that Boeing needs to address. The employees of Boeing have been reporting issues associated with the production tempo of the large backlog of airplanes. Management has been putting large amounts of pressure on employees to meet the schedule. Having worked for an internal supplier of machine parts to Renton and Everett, I can attest to the pressure associated with producing flight critical parts. However, we in Portland would never short cut a process to get an assembly to the flight line. We made sure every product that left our plant was correct. The management team of Boeing will need to get its employees back on its side to meet the need of this crisis. If they don’t the problems could continue to mount. I hope the management team in Seattle wakes up and smells the coffee.
As I edit my post, rereading my comments above, I am not too sure Mr. Calhoun is the right person for the job. It says he knows how to be a corporate fixer, but he just may need more crisis management skills that what he currently has. We will see.
I am proud to say that at Boeing Portland we had a team that worked together well. Many of us grew up together in the company. Some of us went into management and some of us stayed in the union. But we all wanted to do the right thing. This is what Boeing needs to get back too. I hope it does, because there are a lot of people impacted by Boeing all around the world.
And that is my thought for the day!