Boeing - at what point do the symptoms become the disease?
The current adverse media attention is one thing, but Boeing's problems have a much longer and deeper history, some of which reflect wider changes in the US economy.
If the British Royal family had a stock price, it would certainly be falling right now. It’s not at the all-time low - Charles I having his head chopped off in 1649 for declaring war on Parliament probably marked the low tick for the monarchy.
Charles III has the unenviable task of stepping into the shoes of the revered and dutiful Elizabeth II, and his job has sadly been made harder by illness. Prince Andrew is beyond the pale for obvious reasons, while Prince Harry’s periodic bleating from California is hardly helping the team.
Much of the image-making for the Royals has fallen to the Duchess of Cambridge, who in the last week has been embroiled in a scandal over photo-shopping a Mother’s day picture. While many rightly feel sorry for Kate, her current predicament, and the health issues that seem to have led to it, one can’t help but think the Palace has overplayed its hand in using her as the monarchy’s principal show-pony.
The job of the Palace PR machine is to make the Royals look good so people like them. The danger with this is optics become everything, and in the long run, the problems of style triumphing over substance means a dangerous game is played when the narrative starts to go wrong.
While the risks of an aeroplane crash are clearly a little more important than a badly-cropped hand in a mothering-Sunday photo, the problems currently facing Boeing, the American aeronautical giant (ticker BA), are in a sense similar to the Royals, especially if one’s critique is that of image trumping achievement.
The bad press started for Boeing following two of its 737 Max airliners crashing in 2018 and 2019 respectively, the latter event forcing the company to admit full liability for the engineering failures leading to the tragedy1.
As with the Duchess of Cambridge, the media is now all over every incident involving a Boeing plane, of which there have been a litany in 2024, including a door coming off mid-flight, a wheel falling off during take-off, a fuel leak and a number of failed audit issues2.
The roots of Boeing’s current woes are often traced back to its $14b merger with its commercial and military aviation rival McDonnel Douglas in 1997. Management at Seattle-based Boeing had always been known for its focus on safety and close relationships with the engineering brains within the company, and this seems to have started to change as the new company’s management came under the sway of the pro-outsourcing management at McDonnel Douglas3.
Rather than engineering excellence and safety being the paramount concern, cost efficiencies to help the share price seemed to have taken centre stage. In the age of the share buy-back, the new Boeing seems increasingly to have self-identified more closely with the financial economy than the real economy. Moving the company headquarters from its engineering hub in Seattle to America’s second financial city, Chicago, has been seen by many as symbolic of this.
The effect on Boeing’s commercial airliner production is clear to see. The last Boeing-only plane, the 777, has been one of the world’s most ordered and delivered models, while its successors, the 787 and 737 Max, have been characterised by production delays, cost overruns and serious safety concerns4.
Aside from a critique of the profit-maximising culture introduced by managers from McDonnel Douglas, there are also those who think Boeing management has forsaken a safety-first obsession (surely the only justifiable obsession for a commercial airliner company) with a pandering to political correctness.
The 2022 Proxy statement relating to executive compensation states that alongside product safety, employee safety and quality, two new focus areas were to be introduced - “climate and diversity, equity and inclusion (DE&I)”5. Laudable or not depending on one’s political stance, given the recent spate of accidents, common sense suggests that a company whose sole focus ought to be safety through engineering excellence has taken it's eye off the ball. Like Kate and her photo-shopped snap, it’s being punished through the very medium it was trying to promote - its share price.
Inferring from the particular to the general is always a risky business as nuance and idiosyncrasy can be lost, but if one is looking for metaphors for the hollowing out of US industry and America’s sense of being threatened in its primacy in engineering and technology, stories such as the Boeing one seem to resonate.
A similar tale can be told of General Electric (ticker GE), where its once world-beating reputation for technical innovation was sacrificed at the altar of financialisation. Initially led by the high priest of shareholder value, Jack Welch, the company’s share price soared then collapsed during the global financial crisis in 2008 as the full price of focusing on managing financial earnings at the expense of long-term growth from innovation was laid bare6.
American engineering can still be world-beating. During the rescue of 33 miners trapped in a Chilean gold and copper mine in 2010, it was American expertise and equipment, including drill bits, mining machinery and a NASA-designed rescue pod that led to the most unlikely triumph in the face of overwhelming odds7.
It’s not so much that America needs to be great again - it clearly already is, if one looks at its history of innovation in technology, engineering, agriculture and elsewhere. What seems however to be overwhelming it is the short-term obsessions of CEOs with share prices and quarterly earnings, phenomena linked to the compensation structure of management at most large US firms. Solve this problem of short-termism, and a lot of things will fall into place - optics not required.
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Gwyn Topham, Boeing admits full responsibility for 737 Max plane crash in Ethiopia, The Guardian, 11/11/2021.
Tim Wenger, Boeing’s Real Bad, Very Ugly 2024: Every Incident involving Boeing Planes This Year (So Far), Matador Network, 14/03/2024.
Jerry Useem, The Long-Forgotten Flight That Sent Boeing Off Course, The Atlantic, 20/11/2019.
Aram Gesar, Boeing’s Shift from Engineering Excellence to Profit-Driven Culture: Tracing the Impact of the McDonnell Douglas Merger on the 737 Max Crisis, Air Guide Info, 13/01/2024.
Proxy Statement of the 2022 annual meeting of shareholders, Boeing, pg51.
Steve Denning, Why Jack Welch Failed To Break Capitalism, Forbes Magazine, 12/06/2022.
The Chilean Miner Rescue: A Lesson in Global Teamwork, Knowledge at Wharton, 27/03/2012.