Boeing top brass stand down amid safety turbulence The door plug on Boeing's C-suite has flown off, taking the CEO, board chair, and head of its commercial airplane division with it. Boeing announced the departures in a press release this morning, saying that CEO Dave Calhoun will be stepping down from his role at the end of this year. Board chair Larry Kellner will decline to …
No, of course not.
"A" golden parachute, oh no there will be several as well as a quadrupedally stuffed pension scheme and a generous allowance because we all know how difficult it is adjusting after a long period of employment when you only have a few hundred million dollars to fall back on.
The stock price for Boeing is, fortunately, not just a matter of impressing the market by shuffling the same stack of cards to form a management structure.
Firstly, the FAA has threatened to withdraw Boeing's Production Certificate within 90 days if they're not somehow amazed by a transformation within Boeing. If that happens, Boeing cannot deliver aircraft. I don't care how much shuffling then ensues, even the most optimistic of investors must realise that a company that is barred by its government from selling product is not a good share to invest in.
Secondly, with the FAA having raised the possibility of withdrawing the Production Certificate for the company, the role of overseas regulators and how they interact with the FAA becomes important.
For example, suppose the FAA does withdraw the certificate and then reinstates it a couple of days later (maybe for political reasons - FAA is beholden to Congress after all - or they did it to get the attention of the management). From an overseas regulator's point of view, the temporary withdrawal of the Production Certificate looks odd. Either Boeing are fit to have a Production Certificate, or they're not. If they've been judged unfit, an overseas regulator may want some pretty solid answers as to why, miraculously, two days later they're re-judged fit.
The problem for Boeing in this scenario is that if the FAA itself is perceived to be "playing games" with Boeing's Production Certificate status, then that is not exactly encouraging an overseas regulator to take the FAA itself seriously or believe one word of what they say. It then doesn't matter what the FAA has told Boeing. If the CAA / EASA / CAAC or any of the other regulators doesn't like what's going on inside the FAA, Boeing could find itself shut out of overseas markets. Boeing is depending on a lot of overseas regulators believing in the FAA; these being the same regulators that, having realised that the FAA / Boeing were speaking bollocks about the safety of the MAX after the Ethiopian Airlines crash, stopped believing in it.
Thirdly, the FAA effectively announced that the situation is dire enough that they're considering removing Boeing's Production Certificate. This amounts to them saying "Boeing is a dead company soon to be buried. Change my mind". The question then is, "What is 'Good enough'?". Almost by definition, it's impossible to quantify what is good enough.
It's got to be something especially major, just shuffling the management deck a little won't do it. Worse, it's got to be good enough to convince the US flying public, the overseas flying public, overseas regulators and the FAA. The FAA will have to be the hardest of all to convince. Otherwise, it becomes a case of FAA saying "good, carry on manufacturing", and someone else (EASA?) saying, "er, not good enough for us" and Boeing has no overseas market it is able to sell to.
On top of all that, there's this dreadful business of John Barnet dying. Regardless of the true facts of the case, the rumours surrounding his death are a real factor that Boeing would have to overcome. If the US public thinks the company committed a foul deed, well, that's the kind of thing that can turn into a real force in the market place.
My view is that there isn't really anything the company can possibly do that's "good enough" in the timescale set by the FAA that's going to tick the box well enough to convince everyone. It could be really difficult for the FAA to not suspend the company's production line(s), for a good long time.
In the face of those three problems, I'm slightly amazed that their stock isn't already "junk" status. They've effectively gone over the precipice, the FAA has stamped on one hand, they're clinging on with their other, and no one has yet seen a reason to not stamp on that last hand too. It is the most dreadful position any company can possibly be in; I just don't see how they can realistically come back from that inside the 90 days the FAA has given them.
OK, so they press the eject button on those three exec roles, but having created a problem by putting bean counting ahead of safety, who do the put in as new CEO? Yep, the bean counter who was made up to COO.
Why is it that McBoeing won't understand despite repeated embarrassments it's about engineering, you idiots. I agree any big business needs a C-suite that does have skilled, competent bean counters, but when your business is engineering, you need engineers to run it.
A modern corporation isn't about engineering or anything like that. Its primarily a merchant bank that does a bit of whatever on the side. This is why it likes outsourcing so much -- if it can get rid of this troublesome 'whatever' so it just retains an income stream from IP, trademark fees and the like then so much the better. The problem in this case is that its not easy to outsource the entire business so they're stuck with a rump that makes the actual aircraft which, unless managed and staffed appropriately, will be prone to spectacular slip-ups.
There's no easy solution because part of the financialization of the company involved selling -- 'spinning off' -- key assets like the manufacturing division that's now known as 'Spirit'. Everything about this corporation is now designed to suck value out of assets and cash flow; unwinding this without causing the stock price to crater (much less finding new sources of capital) is going to be difficult. Expect the taxpayer to eventually on the hook for a rescue. (It will be a bail out as well -- back in the Good Old Days the 1970s era Labour government hit on the idea of instead of just giving grants and tax holidays to companies in this state it would purchase equity. Obviously, like any other investment, it might bomb but some did really well.)(Too bad a change of government fixed that with a below book price sale to the usual insiders/suspects -- Rule #1 is that "Taxpayers can't win"!)
(This also explains why infrastructure projects cost so much money. The money has to go through layers and layers of consultancies, all creaming off what they can, so that by the time things are actually ready to be built it either costs an unreal amount of money or there's literally nothing left except a half-assed rump project.)
"who do the put in as new CEO? Yep, the bean counter who was made up to COO."
Came here to make a point on that very promotion, but from a different angle. Isn't the COO the one who actually does the work while the CEO pretty much just chairs the meetings? So in effect, no real change.
CEO and Chairman going simultaneously would suggest that it's time to get the kitchen sink out.
I think they would do best to look externally. Because they are absolutely desperate for credibility. Inertia can keep their customers for a bit longer. Airbus simply can't make planes fast enough to take any more of their customers. But if people keep asking, Airbus can expand still further with the promise of covering their next change of fleet. Ryanair, with an all Boeing fleet, already have their own QA inspectors embedded at Boeing factories. That's not a good look. I'm guessing they won't be the only ones. But also those guys will be reporting back to their HQs. There may come a point when they're saying things are still getting worse, not better - and airlines may feel they've no option but to start to change. They can run old fleets for longer, while they wait.
But a CEO and Chairman who stay for a year, can try to get all the troubles out into the public domain in one horrible mess of revelations now - their credibility being already destroyed. So-called "kitchen sinking". Rather than saddling their new hire with having to do all that slowly, over their first couple of years in office, thus making the bad credibility last longer. That's assuming the Boeing board recognise the gravity of the situation, even now.
The old Hemingway quote applies, a character is asked how he went bankrupt, "Two ways. Gradually and then suddenly." You can be "too big to fail" for quite a long time. Right up until the point when you're not.
Boeing are too big to fail, in terms of financially, employment, and defence. They know that there's no way the US government would allow the company to collapse.
I did originally think the misguided move of HQ to Arlington was to get nearer to the FAA and NTSB, but I was wrong, it was of course simply to get nice and near to the Capitol, and all the gladhandlers and influence pedlars who can be bought under America's version of democracy.
Too failed to beg might also happen.
Concerning the military parts, it might even be possible to cut away the civilian section and create a boeing paperplane inc. and a boeing military corporation.
After the many, many cash burn programs worldwide when it comes to failed military gadgets of all kinds and sizes, this would not really create something new. Just take a look on how successful former HP, now HPE and HP Inc. is shoveling money into managers and "investors" pockets.
Anyone remember "Jäger 90" from the mid 80ies ? Currently failing under the name of "Eurofighter" but at least its able to fly now and even the infamous taurus firecracker can now be fitted to the plane it was originally misdesigned for.
Other interesting sources for sneers and satire include the first version of the G36, which wasnt able to shoot straight after around 40 shots in single fire until cooled down and had issues during NATOs unprovoked attack on former yugoslavia when certain plastic parts simply broke off in wintertimes. Well at least the modifications and corrections to the G36 did not take as long as with the british enfield rifle (around 8 years if i remember correctly ?). Then theres those pretty expensive modular frigates, where the modules did not really fit into the ship due to synchronization problems of the two different manufacturers involved and theres even something i suspect has inspired john campbells "lost fleet" novels, specifically the "Adroit" class ships which were built so cheaply that they had to rely on other ships sensor arrays to be halfway battleworthy. Theres a similarity to said frigates where the better RADAR system was cut due to cost issues, effectively preventing the use for one of the "modular" use cases, scouting.
Nothing on this list was named "MAX" but surely fits into boeings "QA culture" so there should not be too many adaptation issues if a military branch is indeed cut off.
But whatever happens, we can be sure that those in management wont be hit as hard as all the rest when anything goes down in flames (again).
Boeing are too big to fail, in terms of financially, employment, and defence. They know that there's no way the US government would allow the company to collapse.
Certainly Boeing aren't in immediate danger. There's literally no alternative. There are 2 manufacturers of large passenger jets. And both have full order-books.
But the US government don't totally control this process. They can keep giving money to Boeing for military aircraft. But at a certain point that cross-subsidisation no longer helps the civilian side of the company, if they get a reputation for being dangerous.
But worse, it won't take many more scandals for global safety regulation to start to break down. If other countries stop trusting the FAA's safety certification - because Boeing keep getting away with it, then they might refuse to certify new Boeing aircraft. At which point, we're in a whole new ballgame. It'll take a lot for that to happen, but it's not just Boeing's credibility on the line, it's the FAA's and the NTSB's. If they're sacrificed further, to save Boeing, then I think things become increasingly unpredictable. China might decide to refuse to certify new Boeing aircraft, just to create political and trade mischief. Or maybe there'll be a big accident in Europe, and political pressure forces the EASA to act in some way the US don't want them to. This could spark a new outbreak of the old Boeing / Airbus trade-war, which might prop up US sales of Boeing - except if US airlines are scared they can only use them on internal flights.
I don't think this'll happen. I think Beoing will at least improve things a bit, and airlines are going to be a lot more cautious inspecting their new Boeing planes. But I'd say it's a risk now.
If the death-spiral continues at this rate, states outside the Imperial orbit are more likely to buy Comac once they get their feet under them. I would love to know what kind of losses have been imposed thus far from grounded fleets... And I doubt Boeing is paying those airlines back for all that lost revenue
"I think they would do best to look externally. Because they are absolutely desperate for credibility. Inertia can keep their customers for a bit longer"
Indeed, and I think that they ought to start recruiting senior executives from the likes of Airbus and Embraer.
I get the feeling that, as far as Boeing's PR dept are concerned, the "watershed moment" is in a constant state of quantum superposition, with the wave-form re-collapsing every time they have to put out a statement.
Currently, the door plug incident is the watershed moment. Right up until the next incident happens, then that will be the watershed moment.
He's stepping down at the end of the year. He turns 67 next month, so this may have merely been an early announcement of what he was already planning on doing.
The new CEO needs to come from outside the industry to insure he/she doesn't come in with preconceived ideas about the "way things have always been done" at Boeing, and is more willing to shake up the culture and let it be known that managers that compromise on safety in the name of profit (which is always a short term gain that is lost once poor safety comes home to roost in the world press) will no longer be tolerated, and the company will fully cooperate with the FAA to improve the safety culture.
I'm not holding my breath that's what they do, but if they really want to fix things that's the necessary first step. It'd also be nice to see more turnover in the Board.
After the 2 Max crashes the DOJ entered into a deferred prosecution agreement with Boeing stating that if they improved safety and didn't break any safety rules for 3 years then the charges would get dropped.
The Alaska blowout happened 3 days before this agreement was meant to expire, so it look like Boeing is now going to get charged with 346 counts of corporate manslaughter.
Nooooo, the cornerstone of Neoliberalism is that you never ever hold someone accountable (if they're a corpo figure).
Not a snowballs chance in hell anyone actually gets charged.
Boeing will have to pay increased insurance premiums (and likely get those as a tax writeoff! Goody), run a PR campaign about "how important safety is" and then proceed with business as usual.
Maybe they'll throw a few of their temp agencies under the bus, but no results from this all.
John Oliver's show on 3/3/24 was all about this and was very interesting, despite Boeing essentially taking over McDonnell-Douglas (who were in dire straits because of their own similar issues with failures, even though it was called a merger) the McDonnell-Douglas culture has apparently taken over Boeing and the bean counters have won out over the engineers.
The (reverse) takeover of Boeing by McDonnell Douglas (in 1997) is well known (especially to the denizens of these parts) to have been the true watershed moment.
The writing was already on the wall, and then when the company relocated HQ to Chicago and effectively put the bean counters in charge, it was clear Boeing was no longer a proper engineering company,
The 737MAX problems were a symptom of this rot that has been in place for a long time, and I am not sure how quickly it can be removed (and it needs to be removed, fast). There have been a lot of comments on the issues at Boeing over various articles and I am not going to rehash them.
It is not just a matter of recruiting new C-Suite execs; the entire corporate attitude must change to regain their reputation.
An old saying, but true: It takes years to build a reputation and seconds to lose it.
Star Trek School of Engineering Management strikes again.
Too many company execs think they're Captian James T. Kirk... when the nerds in red shirts complain that you're asking them to break the laws of physics, you just need to yell at them to motivate them to find a solution.
That can work out if the captian is technically competent, and knows that his request is viable (or at least a reasonably calculated risk).
That does not work out if the captain is a finance bro trying to squeeze a few more drops of profit out of an already precariously lean system.
Blanket "is it Boeing" is too coarse a measure. If it's a pre-max 737, early production 777, or any other model and variant older than the 777, it was effectively built and designed by a different, much more competent company. The 787, later-model 777, and anything with a -max suffix is to be avoided like the plague.
especially if they still recruit the C-level execs from the same limited bunch of MBAs/ beancounters they've been recruiting C-level execs from for the past 20 years.
But then this boeing saga is starting to sound a lot like the titanic...... and they're just rearranging the deck chairs ....
>and they're just rearranging the deck chairs
That's a bit unfair to Boeing management. They are not re-arranging deck chairs.
They have actually sold the division in charge of deck chairs who gave replaced the deck chair arrangers with gig workers. And by making it merely a re-arranging there is no need to include it in any safety plan.
Leave three envelopes on the desk for the next CEO with instructions.
First envelope reads "Open when times get tough"
Second envelopes reads "Open when things go bad"
Third envelope reads "Open when times are tough and everything is going bad"
New CEO comes in. Sure enough about 9 months in, things get tough. So the first envelope is opened. One line of instructions, "Blame me". So the CEO does that and things smooth out.
A couple months later things are going badly, so the second envelope is opened. It reads... "Re-org!" That solves the problems for a while.
Then things get tough again and everything going really bad, all at once. So the CEO opens the third envelope.... "Prepare three envelopes."
The problems at Boeing have been ongoing for years and years.
The fact is there are Boeing aircraft flying everyday that have faults over and above the normal routine faults all aircraft have.
If there is another fatal accident then Boeing passenger aircraft as we know them are effectively done as is the FAA, NTSB & other US safety organisations.
Whomever takes over the reins at Boeing will inherit the revolver with a loaded chamber & will pray every day it doesn’t go off on their watch.
I’m not flying Boeing especially post 2019 737/787.
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