Most of us would have learnt by now of the problem with the Boeing built plane that had a door blown out mid-flight. This is the latest in a series of events that affected Boeing in the recent few years, including the 737 Max crashes.
The Bloomberg Oddlots podcast interviewed Bloomberg investigative reporter Peter Robison, the author of Flying Blind: The 737 MAX Tragedy and the Fall of Boeing.
He went through the issues affecting Boeing planes and also what could have led to these issues with the planes.
The podcast is very informative and I think it is worth a listen. One thing that was interesting was the narrative that the culture at Boeing is to blame for the recent woes. I have listed the points relating to this specific topic below.
- Commonly accepted narrative that Boeing had a strong engineering culture and this was slowly replaced by a culture focused on financial performance
- According to Peter, Boeing did have a very strong product/engineering culture, but with the McDonnell-Douglas merger in 1997, it brought in influx of senior leaders who were disciples of Jack Welch (former CEO of General Electric).
- This brought a change in focus to free cash flows, raising stock prices, stock buy backs and not so much on investing in the future.
- He also cited comparisons between Boeing and other companies such as General Electric by Wall Street, which added pressure on Boeing to deliver financial performance
- As a result, engineers started to notice the Welch/General Electric influence seeping in. Employee evaluations would contain new items where ideas were measured in dollars
- He cited the example where Boeing spent money on stock buy backs but the development for the 737 Max had a tight budget. Engineers were told that any changes would have to "buy their way onto the airplane".
- A feature that may have prevented the crashes in 2018 and 2019 was rejected because there was no budget
- Over time the organization became very compartmentalized which led to miscommunication. This was cited as the reason for the series of errors that led to the crashes.
- Airbus may not have been affected by the pressures on Boeing because European does not have the same shareholder driven culture and capital investment has been higher at Airbus. The focus could be more long-term and with stricter work rules, it is not possible to have a hire-and-fire culture.
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