Main Edition
US
FR
October 21, 2024 - 7:00am
In 1997, Boeing was the toast of Wall Street. The company had just overcome regulatory hurdles to merge with McDonnell Douglas, making it the largest jet airline manufacturer and the second-largest defence contractor in the world, a behemoth with over 200,000 employees and sprawling factories and plants dotted around the US. Boeing, as one financial journalist beamed at the time, is “also one of the nation’s biggest exporters, which makes it sort of like the State Department of American industry”.
These days, prospects for the aerospace giant are decidedly less sunny. Boeing’s star has tumbled, following a series of disasters involving faulty engineering and rushed designs that have proven deadly. The structural defects extend to its finances, and the company is haemorrhaging cash. In response, Boeing’s CEO has just decided to shrink the company and sell assets.
According to a turnaround plan announced last week, Boeing intends to raise about $15 billion in shares and convertible bonds. The news comes just ahead of plans to lay off 17,000 workers, or about 10% of the company’s workforce.
Its labour troubles are far from over, however. Last month, about 33,000 unionised Boeing employees went on strike, with labour representatives upset over stagnant wages and downsized benefits. Striking members of the International Association of Machinists and Aerospace Workers have turned down an initial offer from Boeing for a 25% raise over four years.
Workers have angrily demanded higher pay and better retirement benefits, noting that the company has long prioritised executive compensation and stock buybacks, while ignoring safety concerns to rush assembly lines. Those complaints are hardly new. The firm, which began as a Seattle-based aircraft maker, was once a bastion of creative engineering with a proud company culture. Boeing reportedly designed the B-52 bombers over a single weekend. The 737 airline, originally produced in 1966, was such a marvel of engineering that it remains in production today.
The 1997 merger jolted the company culture, as other reporters have observed. Accountants and business school-trained executives replaced the aerospace engineer leaders of the firm’s earlier iterations. The new Boeing board of directors, as one analyst noted, “would rather have spent money on a walk-in humidor for shareholders than on a new plane”.
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
SubscribeAnother case of a headline screaming while the article it headlines takes a more muted tone. There’s no sign that Boeing is on the verge of collapse. Quite the contrary. After this article went to press Boeing reached an agreement with its striking workers. Its belt has been tightened, and it will be tight for a while, but nothing on the horizon threatens more than that.
Indeed, everything suggests that Boeing will be around for a long time. Boeing has a big backlog of orders for its airplanes — the waitlist stretches well into the 2030s. A Boeing collapse would harm the global economy. Any sign of it and the federal government would step in. We seem as far from that as ever.
It is true that Boeing has lost some of its engineering luster. My father worked at Boeing in Seattle as an electrical engineer to start his career. Back then the company was admired as one of the country’s most innovative. Not so much any more, as this article details.
Not mentioned in this story was Boeing’s humiliation in stranding two astronauts at the International Space Station. NASA did not trust the Boeing spacecraft that had taken the astronauts there enough to let it take the astronauts home, so they will come back on a SpaceX spacecraft next year.
Now SpaceX is an innovative company, one that puts Boeing to shame. In a video from last week I saw a 23-story-high SpaceX Super Heavy rocket booster falling through the air at supersonic speed as it returned to the launch area it had left 7 minutes before. The booster had taken its payload 60 miles into space and 20 miles downrange, then after separating from it had reignited 13 of its 33 Raptor engines to retrace its flight path.
As the booster closed on its home base its engines started to fire again to keep it from slamming into its launchpad. The booster fell closer and closer, moving slower and slower. It approached its launch tower at an angle, now with only 3 of its engines firing, descending in a delicate dance as it righted itself, slowed to a hover, and stood in midair almost motionless, gravity and rocket thrust balancing, until two Mechazilla arms attached to the launch tower closed around it and held it fast.
The engines shut down, and the massive booster stood silent, like a skyscraper suspended 233 feet above the ground, ready for rapid repair, refuel and reuse. A stunning success, on its first try. I can’t remember seeing anything like it. Innovation at its best.
“Another case of a headline screaming while the article it headlines takes a more muted tone.”
As someone once said, when any newspaper article headline ends with a question, the answer is almost always “NO”
Maybe I’m too sanguine. The Walll Street Journal has not one but two articles today singing the same gloomy tune as Lee Fang about Boeing, and warning of a breakup or bankruptcy. I guess we’ll see what happens.
The problem is that there are only two manufacturers of large airliners in the world. It would be in nobody’s interest for that to shrink to one.
“The problem is that there are only two manufacturers of large airliners in the world. It would be in nobody’s interest for that to shrink to one.”
Not quite true, COMAC (Chinese manufacturer of commercial airlines) are coming up fast on the rails. They already have many small (100 seat) C909 aircraft in service, and the first of their C919 (737 / A320 size) are flying commercially; they have orders for nearly 1,000 of these. They are also working flat out to produce larger models too.
So I can imagine many people at COMAC whose interest it would be in.
Also many at Airbus.
There are competitors in China, Russia and Brazil waiting in the wings…
This author is doing what is called ‘cherry-picking’. Boeing has engaged with both Democrat and Republican administrations, doing things that made good sense and things that did not.He pulls one example (without needed context) from 50 years or more of government-corporation interaction, and slides in a subtle jab at the same time.
The trouble is, by observing a single example of cherry-picking in his writing method, it makes this reader observe that his “analysis” may be flawed in the same way.
He sees only what he wants to see.