Why is Boeing such a shitty corporation?

 A key factor in many manufacturing companies is the outsourcing of the manufacturing of components which the parent company has become expert in creating, manufacturing, and quality control of components. Unless a company’s employee is to be on site, it is difficult to ensure the quality of manufacture. The outsourced company does not have the innate ownership of the sourcing company.

Been at this too long. I was reading on Linked-In how a bunch of Purchasing managers and executives would manage on time delivery of critical parts to their companies. It was all about control of the purchasing process. I was in purchasing, planning, consulting, supply chain, etc. at the plant and corporate levels. If you do not know how the part, etc., is made (process), how are you going to plan it? I explained such and then left.

Robert Reich’s friend Harld has a good take on the issue. Hat to have been sitting in that seat! I usually go for the exit rows if I am not in Business Class, etc.

Why is Boeing such a shitty corporation? Robert Reich, substack.com

My friend Harold Meyerson just wrote this for The American Prospect, and it’s so good and timely that I wanted to share it with you.

In the wake of the midair blowout of a door on a Boeing 737 MAX 9 earlier this month, the lead that Airbus has taken over Boeing in the manufacture and sales of the world’s commercial aircraft has, not surprisingly, grown.

It’s actually been growing for some time: Last year, Airbus delivered 735 new planes to airlines and leasing companies, The New York Times reported, while Boeing delivered just 528. Airbus had an order backlog of 8,600 new planes, against Boeing’s 5,626.

This month’s blowout reinforced the public’s—and consequently, the airlines’—doubts about Boeing’s commitment to safety, which soared after two disastrous crashes of its 737s in 2018 and 2019.

“What used to be a duopoly” in the manufacture of commercial aircraft, Richard Aboulafia of AeroDynamic Advisory told the Times, “has become two-thirds Airbus, one-third Boeing.”

The long descent of Boeing has now become the subject of widespread analysis in the mainstream media. A story last Saturday in The Wall Street Journal began with an account of one Boeing engineer’s white paper in 2001 that warned against the company’s new commitment to outsourcing production of key parts of the aircraft it assembled.

But continuing to produce the parts in-house, with the work done by Boeing’s very experienced and unionized workforce, cut no mustard with Wall Street and the company’s new-model CEOs, who no longer came to their posts from careers in production, but rather from the financial side of the industry.

In 2005, the company sold its Wichita plant to a private equity firm that slashed costs before unloading the plant to Spirit AeroSystems, which has become notorious for its deficient quality inspection practices.

But this fish stunk from the head. Boeing continually objected to what it said were Spirit’s high costs and inability to meet deadlines. As the workers on the shop floor and their union repeatedly noted, this led to rushed production and deficient oversight.

Workers—members of the International Association of Machinists—had “great quality and safety concerns,” one union representative wrote to union leaders, but their concerns were routinely ignored by senior management, the Journal reported.

So how are work practices at Airbus different from those at Boeing? I’m not arguing that Airbus provides a panacea for 21st-century production; a chunk of their own production, for instance, is outsourced as well.

But consider, for starters, who actually owns the two companies. Airbus’s four largest shareholders, in order, are the government of France, the government of Germany, the Capital Research and Management Company, and the government of Spain.

Boeing’s four largest shareholders, in order, are The Vanguard Group, Vanguard Group subfiler, Newport Trust Company, and State Street Corporation (a bank and asset manager). In other words, Airbus’s largest shareholders are mainly politically accountable governments that must pay heed to such public concerns as air safety; Boeing’s are entirely investors in business for profits.

Moreover, as the merger of German, French, and Spanish companies, Airbus production is centered in nations where workers historically and currently have more power than their U.S. counterparts.

Forty-six thousand of Airbus’s roughly 130,000 employees work in the company’s German factories, where workers, by law, routinely discuss production and safety issues with managers in works councils. In the U.S., the Machinists are a union in which workers do have voice and power by American standards, but lack mechanisms like works councils through which management must take at least some heed of their concerns.

In sum, Airbus’s clear leadership over Boeing in matters of flight safety stem in good measure from their differences in ownership and worker power—that is, from the European model of mitigating laissez-faire capitalism with a measure of public and worker power, and from the American model of subjecting corporate policy almost entirely to the demands of investment institutions.

Which, if you track the value of Boeing’s stock, hasn’t worked out that well for those investment institutions, either.

By the way, just how outsourced is Boeing production? Only yesterday, it was revealed the door plug that blew out of the Alaska Airlines plane wasn’t actually produced in Wichita. It was produced in Malaysia, where I very much doubt that workers’ concerns about speed of production and quality oversight have much impact on their managers.

More significantly, the fact that the Malaysian production of the door plug didn’t come to light until yesterday—12 days after the blowout—suggests just how profoundly outsourcing can obscure the public visibility required for corporate accountability.

AB PS: I would not blame the Malaysians for this. Boeing should have people on site. Part of the cost of overseas manufacturing.