At this time, in western culture, it is the time of wishing goodwill and greetings to all. As most people celebrate the holiday season, spare a thought for the people working for Boeing in Renton. They face a daunting winter of discontent and misery. And not of their own making.
Reports of the ‘very disturbing’ employee concerns just published are the backdrop to focus on. Mr Muilenberg’s leaving Boeing does not solve the key problems. While he became a lightning rod for the troubles, his departure does not really fix anything. A new lightning rod has been appointed and we don’t think he will be around in 18 months either.
The troubles run deep within Boeing. It is going to require a near volcanic eruption to expunge the rot. The cure may be worse than the disease.
The NY Times has a fascinating story you should read. Like the excellent MAX coverage from The Seattle Times, it has been relentless media digging that has exposed Boeing’s senior management’s series of failures. An honest accounting has not yet come from Boeing. If the FBI’s investigation really gets in there, finding all the information flow (who knew what and when and what did they do), almost certainly some people are headed for the Big House. After all, people died. This is as serious as it gets.
If you have any doubt as the level of damage to Boeing, look at this.
Bottom right corner (our highlight) – Boeing technical experts are the least trusted information sources. And 40% of the population does not want to fly the MAX. Consistently, month after month.
As we have stated several times, the past is not prologue. The DC-10 incident has little bearing today. Social media has changed that – the MAX is top of the news. EVERY WEEK. Boeing has managed to accomplish something nobody could have imagined. Every Boeing commercial program in is some sort of disarray. And, quite a few other non-commercial programs. This is incredible – who would have thought this possible a year ago?
A 100-year old company. At the top of its industry pyramid. The stock market continues to keep the share price relatively solid and you need to think about that. Why? What do market professionals know that nobody else does?
Boeing has put (very unappreciated) pressure on Chinese MAX lessors. In the midst of a trade war. Can one get dumber than that? Boeing has delivered poor quality products to important customers. Both the 787 quality and KC-46 quality is public. Since the 787 is keeping Boeing Commercial afloat you would have expected better.
Really this is quite incredible. Unbelievable really.
Mr Calhoun is now expected to solve these problems? Boeing’s culture is to throw people under the bus and pretend the problems are solved. Remember the “retirements” during the early 787 days? The MAX has only started to extract its headcount.
As smart as Mr Calhoun may be, he is part of how Boeing got to where it is. He can’t solve the problems – he partly owns them. Shareholder value isn’t #1 after all. Not when it causes people to die. That is not capitalism the way we were taught. We think Mr Calhoun will be gone within 18 months. The Boeing Board needs a refresh; no, a spring cleaning would be better.
And what of the amazing workforce in Renton? One plant that outproduces four Airbus plants? As the MAX grinds to a halt this winter, don’t expect a quick fix. There is an even chance the MAX is at its end. It is an aircraft so compromised, that even if Boeing were to (or even could) fix it, airlines now know that nearly half their customers won’t fly it. We estimated that among US airlines, it takes only five customers to refuse to fly a MAX before airlines go from profit to loss. Five? How about 40% of the 162 possible seats! It won’t work people.
If you were running an airline and had MAX in your fleet – what would you do? Want more? Not likely. By December 31 there are going to be nearly 700 parked MAXs. Who is going to want them? Not the traveling public. And, in the end, please remember it is the “self-loading freight” keeps this business going.
Boeing has lost more than the trust of the flying public. It has lost the trust of its airline and lessor customers. Interestingly, very little has been said about how destabilizing the MAX crisis is for Airbus. That’s right, destabilizing. If the market doesn’t need MAX, it may also be less keen on neo. The Boeing MAX crisis waves reach across the entire industry. It is truly that big of a deal.
Tragically, and true to form, the highest cost for the debacle will be paid by the yeoman-like people at Renton. Their union cannot protect them from this. Renton’s workers don’t deserve this. Boeing’s senior decision makers need to hang their heads in shame. And leave the industry forthwith. The sooner they do so, the sooner Boeing can start its recovery. Renton’s workers need and deserve this.
From my point of view, David Calhoun is a Financial Engineer and is field of expertise is the share orders values maximization. One week before Muilenburg got lick out from Boeing, Calhoun and the board voted to maintain the dividend while the cash cow is dying. This decision telle us where Calhoun stand.