Insight- Tuesday 15 September 2020: The Boeing Dilemma: Transparency versus Reputation

News:

In recent weeks, Boeing has self-reported difficulties it discovered in quality control with the Boeing 787. Incredibly, the fourth area of concern has now been identified, involving shims in the vertical stabilizer, with a potential impact on about 900 aircraft. This is in addition to previously reported problems involving shims in two key structural areas that grounded 8 aircraft because of possibly reduced structural strength, and could potentially impact close to 900 more if having one of the two flaws requires repairs. A third area on the horizontal stabilizer was related to the force used in clamping structural components. There appears to be a lot of rework to be done on numerous 787s that have been delivered.

It is laudable that Boeing is self-reporting these problems as they are discovered, and we welcome the additional transparency from the company with both its regulators and customers. Coming out of the MAX crisis, in which the company lost considerable credibility, improved transparency would be a welcome change. It would also represent a cultural reversal for Boeing, particularly when contrasted with Boeing’s behavior on the MAX.

The downside, however, is Boeing’s reputation and legacy of building quality aircraft. The MAX crisis has tarnished the company’s reputation. The continued quality issues with the 787 add to the delays and quality issues that plagued the development of the jet through is first grounding, along with recent customer complaints of debris being left in airplanes. The further revelations of quality issues are tarnishing Boeing’s reputation, which is already at a historic low after the extended grounding of the MAX.

With continued quality issues emerging on the KC-46 tanker for the military built on the 767 platform, and delays in the development of the 777-X, one due to a test that resulted in structural failure, every current Boeing model has at least one major problem to address. Boeing was once the quality leader but has lost its way.

Analysis:

The 787 problems have emerged just as Boeing is considering consolidation of its two production facilities into one, given reduced demand for wide-body aircraft during the pandemic. With international borders and routes still closed in many countries, demand for wide-body aircraft is down substantially and not expected to recover until 2025.

Of the two facilities, Everett has a better reputation with customers than Charleston, with one outspoken customer, Qatar, accepting aircraft only built in Everett. It is quite clear that Boeing would prefer to consolidate operations in non-union Charleston rather than the unionized Pacific Northwest, as operations there appear to be more profitable. Since the latest model, the 787-10, is built only in Charleston, the handwriting is on the wall for the Everett operation. Given the history of Charleston quality issues, Boeing may be trying to show that it is on top of current issues in preparation for moving all 787 production to the South Carolina facility.

Insight:

Boeing does need to be more cognizant of quality control and more transparent about issues that emerge, which typically have taken everyone by surprise. The knowledge that investigation of a potential problem is underway would help them with airline customers and regulators, who would be aware of potential issues earlier and be in a position to support Boeing’s corrective actions. But that would be quite a change from the culture that resulted in a fine and reprimand from the FAA for placing undue pressure on Designated Authority holders who were fulfilling their quality control duties on behalf of the agency in the Charleston facility.

Boeing likely has ulterior motives in moving out of the unionized and higher cost Pacific Northwest into Charleston. The company has already given back tax breaks the State of Washington provided, citing a WTO ruling, which eliminates one potential obstacle for consolidation in the Southeast. Cleaning up quality on the 787 would bring regulators onto its side, and a downturn period, when production is limited, provides an opportunity to address the issues while the facility isn’t as busy as it could be. Even so, Boeing failed to catch the problems prior to delivery of the aircraft, and while better late than never applies, this still isn’t up to what once was “Boeing standards.”

The dilemma is that, in the near term, more transparency might reveal additional problems with Boeing aircraft and further damage the company’s reputation. The problems with shims and workmanship on the 787 came as a surprise to the industry, and Boeing still hasn’t revealed how many aircraft could have been impacted, what the remedial process for examination and testing will be, and how repairs will be carried out.

Historically, from a transparency standpoint, everything is going swimmingly at Boeing until it is abundantly clear that it isn’t, at which point it “hits the fan.” Then the obfuscation begins. With the company’s reputation at an all-time low due to the MAX grounding, it is an ideal time for a culture change to more transparency at Boeing. It can only improve the company’s reputation over the longer term, even if it takes a near-term hit.

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