New Boeing CEO Insists On Moving The Company Towards Irrelevance
By Moon of Alabama
Jan 24, 2020 - 7:01:04 PM
Shortly after we published our latest Boeing piece, asking if the company can survive, the new Boeing CEO and former board member David Calhoun held a call with the media. It confirmed our pessimistic take.
Calhoun said that nothing was wrong at Boeing. It is just that foreign pilots are incompetent, that Boeing workers lack practice and that its customers have no idea what they are talking about. Safety, he says, is just a prerequisite for shareholder value, not an inherent value in itself. Dividends must continue to flow, even when that requires the company to take on more debt. Boeing should not develop new airplanes as its derivatives of very ones can beat the competition. Calhoun also wants to stay in his new positions as long as possible even though he lacks the competence to fill it.
In short - Calhoun said all the wrong things he possibly could have said:
Speaking from Boeing Commercial Airplanes headquarters at Longacres in Renton on a two-day visit to the area ahead of Friday's expected first flight of the 777X, Calhoun acknowledged the design of the MAX's new flight control system was flawed, but insisted that was not a product of any deliberate decision to put cost factors ahead of safety.
Instead, he said, the flaws came from long-standing assumptions about how pilots would react to a failure -assumptions that proved fatally wrong.
We do have documentation from several Boeing employees who say the exact opposite:
"We put ourselves in this position by picking the lowest cost supplier [...] and signing up to impossible schedules," wrote a Boeing employee. "We have a senior leadership team that understand very little about the business and yet are driving us to certain objectives."
"Time and time again, we are inundated with Boeing material specifying quality is key - this clearly is not the case in any of the decisions that are made," wrote another. "Until an open and frank discussion takes place, the same errors, wasted opportunities, and financial losses will continually be absorbed."
The above exchange of Boeing engineers was not just part of a "micro-culture not representative for Boeing", as Calhoun claimed. It was and is a widespread sentiment throughout the company:
Investigators for the House Transportation and Infrastructure Committee looking into the design and certification of the 737 Max have received details of a three-year-old internal Boeing BA, survey showing roughly one in three employees who responded felt "potential undue pressure" from managers regarding safety-related approvals by federal regulators across an array of commercial planes. Workload and schedule were cited as important causes.
With Calhoun in the lead Boeing will never have the "open and frank discussion" it urgently needs. Instead it is back at "blame the pilots" who got overwhelmed with inconclusive alarms that had little to do with real fault on their planes.
Calhoun announced that he had stopped the development of new airplanes at Boeing:
Calhoun also disclosed he has instructed engineers to go back to the drawing board for Boeing's next new airplane. That reset could have a significant strategic impact on the competitive balance with rival Airbus, a sign of how deeply the MAX crisis has damaged Boeing.
The new jet that Boeing was once expected to launch last year at the Paris Air Show now seems years away.
It takes at least 7 years and some $10 to $15 billions to create and certify an all new airplane. Airbus already has some 60% of the large jet market share with Boeing having some 40%. Pushing back the launch of the New Midsize Airplane (NMA) means that Boeing will have nothing new to offer throughout the next ten years. Without a new plane Boeing's market share will slip to 30% which is less than the minimum one third it needs to survive in the duopoly.
The MAX, though, is here to stay. Calhoun said he expects it to eventually reach parity with the Airbus A320neo. He dismissed a suggestion that the MAX may never fly again, or will be renamed to disguise its history, and said passengers' confidence in the airplane will be restored.
"I believe in this airplane," he said. "I'm all in on it and the company's all in on it."
Boeing's 737 MAX will not reach parity with the much newer A220 and A320neo series unless it sells its planes for less than it costs to produce them. The A320neo and its variants are already the better planes and they already have the higher sales numbers. There is no way to beat it with the 50+ years old design that the 737 MAX basically is.
Not renaming the MAX goes against the advice of some of Boeing's biggest customers:
The Max brand is damaged following two fatal crashes last year, and there's no reason for Boeing to retain it, Udvar-Hazy, the founder and chairman of Air Lease Corp., said Monday at a conference in Dublin.
"We've asked Boeing to get rid of that word Max," Udvar-Hazy said. "I think that word Max should go down in the history books as a bad name for an aircraft."
Air Lease is one of the biggest customers for the Max, with about 200 ordered.
Calhoun continued to talk nonsense:
"If ever there was a moment to emphasize safety as ... the most important part of shareholder value, it's now," Calhoun said. "Safety first. Without it, there is no shareholder value."
Why the f**k is he talking about "shareholder values" at all? Neither the Boeing customers, nor its workers, nor the public care about that. They care about their safety. Full stop.
The new CEO, who was on Boeing's board for a full ten years, is not even trying to claim competence:
He said he and the rest of the board were unaware of the [MAX] problems "until too late in the game," after the crashes.
Calhoun then goes off to insult foreign pilots which fly some 85% of all the planes Boeing sells:
Calhoun also said he wants changes to the broader company culture.
"It'll be built around the level of light we shed on safety processes. It'll be built on the engineering disciplines and what we do for pilots around the world, not just pilots in the U.S."
There is zero statistical evidence that U.S. pilots are any better than foreign ones. With more than four-fifth of all flights taking place outside of the U.S. it is obviously a statistical given that there will be more crashes outside of the U.S. airspace than within. Blaming foreign pilots will not gain their confidence in Boeing planes.
Boeing had stopped the final assembly line of the 737 MAX because there was no more room to store the more than 400 produced but grounded new planes. It will take more than a year to clear that inventory. But Calhoun now wants to restart production even before the MAX is allowed back into the air. This is beyond silly:
He said Boeing plans to restart the 737 assembly lines in Renton months before the Federal Aviation Administration (FAA) approves a return to service to ensure that production can be restarted with maximum efficiency.
"We'll start it slow so we can practice and practice. That's a bit of a silver lining in the [production] pause."
That is an insult to Boeing workers. They do know how to build planes. They do not need more 'practice' but a management that is aware that pressuring workers will not produce better planes.
But Calhoun is not interested the gritty details of manufacturing good airplanes. It is all about the shareholders, the only group that counts:
Calhoun said Boeing is not planning to cut or suspend the dividend because Boeing has the "financial capacity and capability to do the things we need to do." Calhoun said he "will stay on that path unless something dramatic changes."
So Boeing will take on $10 billion of additional debt to pay dividends and will hike is lobbying spending even while it does not have the cashflow to develop new airplanes.
When Calhoun was named CEO analysts agreed that he was part of Boeing's problems and that it would be best for him to find a better man for the position and to step aside as soon as possible. Calhoun, who has no qualification in aerospace manufacturing, instead wants to stay on:
Calhoun also said he's in the job for the long haul.
"I intend to work well past 65," said Calhoun, who is 62. "The board can have me as long as they want me."
It is sad to see a once great company going down over the incompetence of such men.
Previous Moon of Alabama posts on Boeing 737 MAX issues:
Posted by b on January 24, 2020
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