When a historian writes the inevitable tome, “How Unfettered Capitalism Destroyed America,” the chapter on Boeing’s decline will be among the most riveting. Boeing was once the company that deservedly made Americans most proud. The Japanese and the Germans bested America’s automakers but for decades no country had a company that even remotely rivaled Boeing’s engineering and manufacturing might.
“If it’s not Boeing, I’m not going,” was once a popular saying.
Reading the media coverage in wake of an Alaska Airlines 737 MAX 9 jet losing a giant chunk of its fuselage at 16,000 ft. one could reasonably conclude the accident was simply the result of some bolts that weren’t properly fastened, and that the FAA is hell bent on making sure a similar incident “cannot happen again.”
Hate to break this to you, but the FAA bears considerable culpability for the near catastrophic Alaska Airlines incident. It’s questionable whether the FAA, which until recently had been without a permanent leader for 18 months, has the resources or the resolve to ensure decades of damage inflicted by the Boeing bean counters who systematically destroyed the company to enrich themselves and their investors.
While one might expect the FAA would be aggressively recruiting experienced aviation professionals to make flying safer, the agency’s focus these days is expanding its “diversity and inclusion” hiring to attract individuals with “severe” intellectual, psychiatric, and other disabilities.
From the FAA’s website:
Spirit AeroSystems, the troubled subcontractor that manufactures the fuselages for the 737 MAX, also boasts of its DEI commitment.
Boeing was founded in 1916 by a Detroit-born entrepreneur named William Boeing, who moved to the Pacific Northwest to pursue investments in the timber industry. He subsequently became interested in aviation and his vision was to create a company that could build airplanes to better prepare America to defend itself. Boeing studied engineering for three years at Yale, although he never completed his studies.
Boeing’s 707, introduced in 1957, launched commercial airline travel. It was a four-engine plane with long range capabilities, and in the 60s all the major U.S. airlines used the aircraft for their domestic and international routes. The 737, one of the most successful aircrafts ever built, was introduced 10 years later. In 1970, Boeing launched the 747, a double decker aviation engineering wonder in its day.
Boeing’s decline began when the company merged with McDonnell Douglas in 1997, which received U.S. government approval despite making the combined companies the only U.S. manufacturer of commercial jets. Wall Street loved the deal.
“The merger creates this incredible powerhouse with massive technical, financial, manufacturing and marketing resources,” Wolfgang Demisch, then an analyst at BT Securities, told the New York Times. “They’ve got it all.”
Unfortunately, McDonnell Douglas’ management gained control of Boeing and some of the executives were certified nogoodniks. The company became embroiled in a litany of ethics scandals, including that of Michael Sears, Boeing’s former CFO, who pleaded guilty to charges he illegally helping Darleen Druyun, the Air Force’s former No. 2 procurement official, land a lucrative job with the company. Druyun admitted to favoring Boeing in at least four contract negotiations, including a lucrative tanker deal, because she felt indebted to the company for giving her daughter, her son-in-law and herself jobs. Druyun was sentenced to nine months in prison.
To burnish its reputation, Boeing’s board plucked from retirement Harry Stonecipher, the architect of the Boeing/McDonnell Douglas merger who ultimately became the CEO of the combined companies. Stonecipher was widely credited for transforming Boeing from a company run by engineers to an enterprise overseen by empty suits, a transformation he was mighty proud of.
“When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm,” Stonecipher told the Chicago Tribune in a 2004 interview. “It is a great engineering firm, but people invest in a company because they want to make money.”
Stonecipher was forced to resign in 2005 for having a consensual affair with another Boeing executive.
Boeing in 2005 sold its commercial aircraft manufacturing plants to Canadian private equity firm Onex Corp, which feigned altruistic concerns about job losses at the plants.
“There have been terrible job losses at these plants over the last several years,” moaned Seth Mersky, an Onex managing director. “We confidently believe that can be reversed.”
Boeing pocketed about $900 million in cash for the factory divestitures and cleared its balance sheet of some $300 million in liabilities. Of course, the company insisted that its motivation for the divestiture was to make even better airplanes.
“This agreement fully supports our strategy to focus Boeing on large-scale systems integration, which is where we are most competitive and can add the most value to our airplanes and services,” said then Boeing commercial airplanes chief Alan Mulally, who went on to become CEO of Ford Motor Co.
Despite having not an iota of aerospace experience, Onex pocketed nearly $1 billion from its Boeing acquisition over a nine-year period. In 2014, it spun off the operations of what it named Spirit AeroSystems Holdings into a public company and divested its holdings in the business.
Spirit’s business, which was almost entirely dependent on Boeing, in recent years was hit with a double whammy: The grounding of 737 MAX planes after two of them crashed because of engineering flaws and then the pandemic, which brought commercial air travel to a virtual halt. Spirit was forced to implement widespread layoffs and other cost cutting moves that impaired manufacturing quality.
For several years, Boeing essentially had Spirit on double secret probation because of pervasive manufacturing issues, with the threat that if Spirit didn’t clean up its act, it would lose its Boeing business. Never mind, that Boeing didn’t have an alterative supplier readily available to give its business to.
Details of Spirit’s manufacturing issues were outlined in a securities class action lawsuit filed last May and amended in recent weeks, which I’ve previously written about. The lawsuit alleges that Spirit laid off and voluntarily retired a disproportionate number of experienced engineers and mechanics. It also alleges that mechanics were required to work 70 hours weeks and that safety auditors were pressured to file false reports.
The lawsuit, filed before the Alaska Airlines accident, possibly explains how 737 MAX 9 aircraft were delivered to Alaska Airlines and United with loose bolts and other hardware. The lawsuit alleges that auditors repeatedly found “a significant number” of out-of-calibration torque wrenches, “a serious problem as a torque wrench that is out of calibration may not torque fasteners to correct levels, resulting in over-tightening or under-tightening that could threaten the structural integrity of the parts in question.”
Safety issues have also been a problem at Boeing’s Washington state plants. The Wall Street Journal in 2019 reported how senior Boeing managers allegedly ignored employee warnings about safety issues with the 737 MAX.
“For the first time in my life, I’m sorry to say that I’m hesitant about putting my family on a Boeing airplane,” a veteran production manager wrote in an email.
Americans would be aghast if they understood how the 737 MAX came into being. The aircraft is based on the half century-old design of the original 737, which had an impressive safety record. With commercial airlines clamoring for more fuel-efficient planes, Boeing’s management, with the blessings of the company’s board, opted to attach more efficient modern engines to the original design, rather than invest in the cost of a clean sheet new design.
Unfortunately, the newer engines were too big for the original design and altered the aircraft’s center of gravity, potentially causing it to stall. Boeing’s engineers wrote a “software fix” to address the problem, but the Band-Aid solution was responsible for two plane crashes that ultimately resulted in the grounding of all 737 MAX planes.
The plane crashes likely didn’t come as a surprise to many Boeing employees. Internal emails revealed they fully understood the issues with the 737 MAX.
“This (737 MAX) airplane is designed by clowns, who are in turn supervised by monkeys,” an employee wrote in an exchange from 2017. “Would you put your family on a MAX simulator trained aircraft? I wouldn’t,” one employee said to a colleague in another exchange from 2018, before the first crash. “No, the colleague responded.”
Americans would also be aghast to learn that approval inspections for the 737 MAX weren’t conducted by independent FAA safety auditors but by designated Boeing employees whose judgments the agency relied on. The Journal reported on an internal Boeing survey revealing that one in three employees who responded said they felt “potential undue pressure” from their bosses to bless the work they inspected.
“I still haven’t been forgiven by God for the covering up I did last year,” one of the employees said in messages from 2018, apparently in reference to interactions with the FAA.
There have been other reported issues with the 737 MAX, including a loose bolt in the rudder system and the aircraft’s de-icing system, which can melt the engines if activated for more than five minutes. While airline travelers imagine pilots relying on state-of-the-art software, Dennis Tajer, a pilot for American Airlines and spokesperson for the Allied Pilots Association, told the Washington Post that he sets a stopwatch and puts a yellow sticky note on the dashboard every time he engages the anti-icing system, as reminders to shut it off quickly.
Boeing has asked the FAA for a safety exemption that would give the company TWO YEARS! to fix the flaw.
Boeings CEO is Dave Calhoun, an accountant from the private equity world who joined Boeing’s board in 2009. According to press reports, he was an influential board member who drove much of Boeing’s cost cutting. After the two 737 MAX plane crashes, Boeing’s board named Calhoun CEO, and he’s since been paid more than $40 million. While many in the media were moved by Calhoun’s emotional interview where he nearly broke down after saying he was a father and grandfather, given Calhoun’s record, I’m confident he was shedding crocodile tears at the suggestion of a crisis consultant.
I’ve previously written about Calhoun, who I’ve dubbed, Lord Calhoun of Lake Sunapee, for damning reasons I explain in my blog.
China is one of Boeing’s most critical markets and for years was America’s largest exporter to that country. The Wall Street Journal reported that China’s aviation regulator, which strikes me as much tougher and more responsive than the FAA, has instructed the country’s airlines to conduct precautionary safety inspections on their Boeing 737 fleets. WSJ also reported that after the 737 MAX plane crashes within six months of each other beginning in 2018, Boeing’s commercial aircraft sales to China slowed to a trickle while Airbus, its European rival, received orders for hundreds of jets.
Calhoun is applying lots of PR lipstick to distract from his considerable culpability for Boeing’s safety issues and sadly it appears to be working.
Calhoun has named retired U.S. Naval Admiral Kirkland Donald to serve as his special advisor on safety issues, which hardly inspires confidence. In addition to lacking aviation experience, Donald’s record as a director of Huntington Ingalls these past seven years, including 16 months as chairman, is cause for alarm, not reassurance.
Navy inspectors found serious technical issues across all three U.S. Navy ship classes being built at Ingalls Shipbuilding in Pascagoula, Mississippi, in 2018 and 2019, according to an unclassified report sent to Congress three years ago.
As reported by Defense News the Navy’s Board of Inspection and Survey found that DDG-117, the Paul Ignatius, had the lowest overall score of any of the five previous destroyers built at Ingalls since the program restarted. And issues with the America-class amphibious assault ship Tripoli in 2018 set the service’s acceptance of the new ship back an entire year.
On the destroyer Ignatius, inspectors found four “starred deficiencies,” which the Navy defines as a deficiency that significantly degrades a ship’s ability to perform a primary or secondary mission or impacts the safety of the ship.
Notably, one of the starred deficiencies including shortcomings in aviation systems.
Don’t look to Republican presidential front runners Donald Trump and Nicki Haley, who previously served on Boeing’s board despite no aviation expertise, to demand a stronger FAA and more regulatory accountability. Boeing has contributed more than $19,000 to Trump’s 2024 campaign and $10,000 to Haley’s.
Boeing has greased both sides of the political aisle. In the 2020 election cycle, the company gave Joe Biden more than $700,000 and Trump more than $600,000. It gave Democratic socialist Bernie Sanders more than $200,000.
Except for this article in the Washington Post, and this one by Bloomberg, the media’s coverage of Boeing in recent weeks has been uninspiring. The best Boeing insight I’ve come across was this post published by another Canadian-born writer living in Sri Lanka.
Perhaps being born in Canada provides the benefit of being able to see things more clearly.