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Actions have consequences. Boeing decided they wanted to focus on maximizing profits rather than allowing organic growth to follow on continued high quality en

Actions have consequences. Boeing decided they wanted to focus on maximizing profits rather than allowing organic growth to follow on continued high quality engineering and services. In regulated industries, especially where safety is of utmost importance, this is exceptionally risky. They F'd around and found out, and imho the only solution is leadership and strategy changes to shrink their business and refocus on becoming an engineering-led firm cranking out superior products & services. If we're being honest, I think the same is true of Google/Alphabet.

fred_is_fred 3y ago
They also have a captive market which is why they can get away with this. Switching plane manufacturers is a long process around pilot and maintenance retraining. Additionally orders for planes go out years and years in advance and you can't just call Airbus and ask for new planes next week. I think it's inevitable consequence of no competition in the market. Boeing is the stadium food of planes, poor quality & expensive, but if you're hungry you still eat it.
WanderPanda 3y ago
They didn‘t maximize profits at all. Why do people operate on the principle „if it is bad it had to be because of maximizing profits“? This seems to be much more about corruption and misaligned incentives as well as bigcorp bullshit-job rot. There is really only one thing that can cure this and that is more fierce competition
- waterhouse 3y ago
  "Maximizing short-term profits (by cutting costs)" would be more accurate, and yeah, that is a misaligned incentive.
- csours 3y ago
  You're not wrong, but I would say it differently - the C suite has been focused on financialization - how to make their operations more tax efficient and make their SEC filings and shareholder meetings look good. So they spin off core manufacturing to a supplier and then squeeze them for pennies instead of concentrating on operational excellence and quality. They whip their test engineers until they pass a product instead of learning lessons. etc etc. Yes, this is all about incentives.
- rightbyte 3y ago
  > They didn‘t maximize profits at all [...] There is really only one thing that can cure this and that is more fierce competition Short term profits is what matter to the elite in these conglomerates. Their stock bonuses should just have a 10 year lag or something. That would align their incentives. And how could Airbus be more fierce?
  - FredPret 3y ago
    > Short term profits is what matter to the elite in these conglomerates That is not true. Long-term profits are by far the best thing for the owners in a corporation. See: Berkshire Hathaway. What happened here is someone got to be in charge who did not have the brain to do the job. When you see short-termism among CEO's, that's either due to a) owners not aligning the CEO's incentives correctly due to the owners' negligence or stupidity, or b) the CEO does indeed have the correct incentives, but is stupid. Boeing profits have cratered since 2019: https://valustox.com/BA https://valustox.com/BA If they focused on making great planes with reasonable R&D costs, everyone there would be vastly better off financially.
    - JumpCrisscross 3y ago
      Honestly, Boeing makes the case for returning certain companies to elite control. Mullenberg, an engineer, burned down Boeing for tens of millions today. A family that controls it wouldn’t rationally do that.
      - mulmen 3y ago
        Good point but Mullenberg was only CEO from 2015 to 2020. The MAX first flew in 2016. Before that was James McNerney a literal Jack Welch-ian MBA who actually oversaw the development of the 737 MAX, the divestment of Spirit, and was Boeing’s first CEO without aerospace experience. Just skimming the wikis for Boeing, the 737 MAX, and the A320neo it looks like Boeing’s downfall should largely be attributed to McNerney. Mullenberg is guilty of shipping a doomed product and botching the response to the subsequent crashes.
- croes 3y ago
  >They didn‘t maximize profits at all. There are multiple competing levels of profit maximization: Short-term vs long-term Personal vs. operational Cheap vs. expensive Easy vs. complex
- eitally 3y ago
  I would argue that relocating their HQ away from their engineering hub was done to "maximize" profits by colocating close to lawmakers & lobbyists. This goes hand in hand with corruption in what is a semi-nationalized industry worldwide. Just like American air carriers being uncompetitive on international routes, Boeing risked becoming uncompetitive against Airbus, which is still ~25% owned by France, Germany & Spain.
- bobthepanda 3y ago
  Competition in the airline manufacturing industry is difficult and not for lack of trying; Bombardier and Embraer have found it tough, to say nothing of the poor results of state-sponsored competition like in Japan, Russia and China. Aircraft development is hideously expensive. 787 development cost Boeing $32B, and is part of the reason why airlines pushed Boeing not to replace the 737 wholesale.
- potatolicious 3y ago
  Wait what. I'm sympathetic to the notion that not every Bad Thing is because of "maximizing profits", but in this case you can point to incredibly specific things, done to maximize profits, that directly caused this crisis. After acquiring McDonnell, Boeing went on a spree of divestments where parts plants that supplied them were spun off into independent vendors. One of the biggest of these is Spirit Aerosystems, which provides the fuselage assembly for the 737. The divestments were specifically motivated by improving short-term profitability of the company, in the classic "sell it and rent it back" mode that's particularly in mode with private equity. By all accounts quality control at Spirit Aerosystems has suffered since, with Boeing having relatively little leverage in improving this state of affairs (one may argue that it's not terribly interested in improving the state of affairs). As far as we know the aircraft that kicked off this crisis was delivered from Spirit with an incorrectly installed plug door (more specifically, the bolts that secured it from opening were not installed at all) Sure, not everything is corporate greed, but there's a really bright and direct line here between the financialization of Boeing in the mid-00s and this specific crisis.
  - WalterBright 3y ago
    NASA subcontracted about everything for the space program.
    - emgeee 3y ago
      NASA is a government organization with different incentives, and, has arguably suffers from similar problems that Boeing is experiencing.
      - wolverine876 3y ago
        > arguably suffers from similar problems that Boeing is experiencing. What problems are you referring to?
        panick21_ 3y ago
        To airplanes failing and killing everybody inside. Excessive costs for new projects. Not upgrading their core technology. But I dont think the comparison makes much sense.
- itsoktocry 3y ago
  >Why do people operate on the principle „if it is bad it had to be because of maximizing profits“? HackerNews seems to hate companies maximizing profits, but loves when people like Elon run roughshod over shareholders. I don't get it, either. It's galaxy-brain stuff to believe that Boeing's biggest holders decided to make a few extra bucks in one year, and sink the 100+ year-old company the next. Versus, say, your theory that it's a multitude of issues relating to corporate rot.
wnevets 3y ago
> Boeing decided they wanted to focus on maximizing profits Except not really. The shareholders/board decided to gut the company so they can get richer with stock buybacks. https://www.washingtonpost.com/business/2020/04/15/bailout-coronavirus-airlines-boeing-buybacks/ https://www.washingtonpost.com/business/2020/04/15/bailout-c...
- taway789aaa6 3y ago
  > Boeing decided they wanted to focus on maximizing profits > The shareholders/board decided to gut the company so they can get richer with stock buybacks Are you not saying the exact same thing, just being more explicit about the implicit "short-term" profits? The shareholders/board (e.g. Boeing...the decision makers) decided to gut the company so they can get richer (e.g. maximize [short-term] profits, since the profits accrue to the shareholders/board) with stock buybacks.
  - wnevets 3y ago
    I separate Boeing the business entity from the private capital that receives the cash.
    - MattGaiser 3y ago
      The former is under the control of the latter.
      - wnevets 3y ago
        I'm not arguing that parasites don't have control over their host [1], I'm arguing that they're separate entities. [1] https://pubmed.ncbi.nlm.nih.gov/31980266/ https://pubmed.ncbi.nlm.nih.gov/31980266/
        wharvle 3y ago
        They're separate, but one owns and controls the other. I'm not seeing how pointing out that they're separate (a point on which I don't believe anyone here was confused in the first place) adds anything material to this exchange. "Boeing decided something", in a business strategy context, is just shorthand for "the people who control Boeing decided something", because Boeing doesn't ever decide anything. It can't.
boeinggoneone 3y ago
Very likely everyone is dumbing down a complex issue by projecting their own biases on Boeing. Boeing is an incredible cash cow and is likely to be a duopoly (along with Airbus) for at least around 50 years or so. I don't see why anyone burn their house down for temporary warmth. Also, the kind of issues we are seeing do not point out to any short term profiteering.
- simion314 3y ago
  >Also, the kind of issues we are seeing do not point out to any short term profiteering. They cut 900 QA jobs, I bet this was doen for short term profits and I bet is realted with the issues we see. https://eu.usatoday.com/story/news/nation/2019/05/06/boeing-inspection-job-tech-crashes-outcry-737-max-poor-quality/3650026002/ https://eu.usatoday.com/story/news/nation/2019/05/06/boeing-...
- lamontcg 3y ago
  > I don't see why anyone burn their house down for temporary warmth. Muilenburg got $62.2 million for burning his house down: https://www.manufacturing.net/aerospace/news/21109798/boeing-ceos-golden-parachute-was-62-million https://www.manufacturing.net/aerospace/news/21109798/boeing...
  - itsoktocry 3y ago
    CEOs get paid a lot of money. Is this news? You think he'd rather the company be successful in his tenure, or unsuccessful?
surajrmal 3y ago
It's amazing how everything on HN manages to bring focus back to Google.
Zetobal 3y ago
The government is easier to squeeze if they think you are incompetent.
SoftTalker 3y ago
Airlines are contributary to this though. Boeing was working on a "clean redesign" new airliner to replace the 737. They shopped it around and nobody wanted it. They did not want to train mechanics and pilots on a new type. They wanted a "better 737." Then Airbus came out with the A320neo and that also pushed Boeing towards another incremental rework of the 737 since a brand new airliner takes 10 years to get designed, built, and certified.
- lxgr 3y ago
  The A220 seems fairly popular though, and that's a completely new type, although it's admittedly in a different class than the A320/737. Many airlines use both A320 and 737s in their fleets too, so they already have pilots rated for two different types. Trading one of these entirely for a 737 successor doesn't seem completely infeasible.
  - SoftTalker 3y ago
    I think that individual pilots fly one type or the other, even if the airline operates multiple types. Flying is flying to a certain extent but the details, procedures, checklists, and emergency memory items are different particularly between Airbus and Boeing. I doubt there are many/any pilots that are hopping back and forth between 737s and A320s day to day.
    - lxgr 3y ago
      Yes, that's what I mean: The downside of having to juggle multiple shift rosters, needing effectively two sets of operational guidances, engineers trained on respective models etc. is balanced out by the significant upside of having more than one supplier and being able to negotiate accordingly when ordering new airframes. But returns are probably quickly diminishing on the latter compared to the increasing scheduling, training etc. complexity of the former, and having two effectively similar classes of plane from the same vendor completely negates the benefit of supply competition. That probably makes it very hard for a manufacturer to sell a new type of the same class to an existing exclusive customer: Short-term, the downsides largely outweigh the benefits.
c2occnw 3y ago
> Actions have consequences. In 2022, Calhoun received $22.5 million from Boeing. In February 2023, Boeing awarded Calhoun an incentive of about $5.29 million in restricted stock units to "induce him to stay throughout the company's recovery." In March 2023, Boeing announced Calhoun was being given shares worth $15 million that will vest in installments over three years. Consequences for who?
callalex 3y ago
> Actions have consequences. It’s not clear to me that this is the case here. The people responsible for ruining Boeing are all still fabulously wealthy and will be for generations. I guess you could call only having 20 lifetimes of wealth instead of 100 a consequence, but I certainly don’t see it that way.
mk89 3y ago
You know, when a company this big does this kind of things it always makes me think: are they really the only ones? It could be, or it could be that these are the guys that know how to navigate through these risks that you mention - until something bad happens and the world is then bashing them. How many things happen and we don't see them? And they get f** rich thanks to that lack of information (which they can rely on thanks to us employees, who normally keep an eye closed or complain and "just create the Jira ticket, we will handle it later"). If this can happen in such a regulated industry, there are loopholes, and they can't be the only smart guys to exploit them to "accelerate, simplify, streamline profits" and all that. It reminds me of the VW scandal. A lot of other companies did that artwork (using a defeat device) to pass the tests. One company got the blame - no problem there, but finally, it was like a wake up call for everyone else.
up2isomorphism 3y ago
Boeing does not have much competition in a real sense for a long time, and when that happens, MBAs quickly take over the world. It is just in Flight industry this is too much to mess with and we see some consequences. But if we are comparing just messiness in terms of R&D to operations, probably none of FANG or something like AT&T are better than Boeing.

fred_is_fred 3y ago

They also have a captive market which is why they can get away with this. Switching plane manufacturers is a long process around pilot and maintenance retraining. Additionally orders for planes go out years and years in advance and you can't just call Airbus and ask for new planes next week. I think it's inevitable consequence of no competition in the market. Boeing is the stadium food of planes, poor quality & expensive, but if you're hungry you still eat it.

WanderPanda 3y ago

They didn‘t maximize profits at all. Why do people operate on the principle „if it is bad it had to be because of maximizing profits“? This seems to be much more about corruption and misaligned incentives as well as bigcorp bullshit-job rot. There is really only one thing that can cure this and that is more fierce competition

waterhouse 3y ago
"Maximizing short-term profits (by cutting costs)" would be more accurate, and yeah, that is a misaligned incentive.
csours 3y ago
You're not wrong, but I would say it differently - the C suite has been focused on financialization - how to make their operations more tax efficient and make their SEC filings and shareholder meetings look good. So they spin off core manufacturing to a supplier and then squeeze them for pennies instead of concentrating on operational excellence and quality. They whip their test engineers until they pass a product instead of learning lessons. etc etc. Yes, this is all about incentives.
rightbyte 3y ago
> They didn‘t maximize profits at all [...] There is really only one thing that can cure this and that is more fierce competition Short term profits is what matter to the elite in these conglomerates. Their stock bonuses should just have a 10 year lag or something. That would align their incentives. And how could Airbus be more fierce?
- FredPret 3y ago
  > Short term profits is what matter to the elite in these conglomerates That is not true. Long-term profits are by far the best thing for the owners in a corporation. See: Berkshire Hathaway. What happened here is someone got to be in charge who did not have the brain to do the job. When you see short-termism among CEO's, that's either due to a) owners not aligning the CEO's incentives correctly due to the owners' negligence or stupidity, or b) the CEO does indeed have the correct incentives, but is stupid. Boeing profits have cratered since 2019: https://valustox.com/BA https://valustox.com/BA If they focused on making great planes with reasonable R&D costs, everyone there would be vastly better off financially.
  - JumpCrisscross 3y ago
    Honestly, Boeing makes the case for returning certain companies to elite control. Mullenberg, an engineer, burned down Boeing for tens of millions today. A family that controls it wouldn’t rationally do that.
    - mulmen 3y ago
      Good point but Mullenberg was only CEO from 2015 to 2020. The MAX first flew in 2016. Before that was James McNerney a literal Jack Welch-ian MBA who actually oversaw the development of the 737 MAX, the divestment of Spirit, and was Boeing’s first CEO without aerospace experience. Just skimming the wikis for Boeing, the 737 MAX, and the A320neo it looks like Boeing’s downfall should largely be attributed to McNerney. Mullenberg is guilty of shipping a doomed product and botching the response to the subsequent crashes.
croes 3y ago
>They didn‘t maximize profits at all. There are multiple competing levels of profit maximization: Short-term vs long-term Personal vs. operational Cheap vs. expensive Easy vs. complex
eitally 3y ago
I would argue that relocating their HQ away from their engineering hub was done to "maximize" profits by colocating close to lawmakers & lobbyists. This goes hand in hand with corruption in what is a semi-nationalized industry worldwide. Just like American air carriers being uncompetitive on international routes, Boeing risked becoming uncompetitive against Airbus, which is still ~25% owned by France, Germany & Spain.
bobthepanda 3y ago
Competition in the airline manufacturing industry is difficult and not for lack of trying; Bombardier and Embraer have found it tough, to say nothing of the poor results of state-sponsored competition like in Japan, Russia and China. Aircraft development is hideously expensive. 787 development cost Boeing $32B, and is part of the reason why airlines pushed Boeing not to replace the 737 wholesale.
potatolicious 3y ago
Wait what. I'm sympathetic to the notion that not every Bad Thing is because of "maximizing profits", but in this case you can point to incredibly specific things, done to maximize profits, that directly caused this crisis. After acquiring McDonnell, Boeing went on a spree of divestments where parts plants that supplied them were spun off into independent vendors. One of the biggest of these is Spirit Aerosystems, which provides the fuselage assembly for the 737. The divestments were specifically motivated by improving short-term profitability of the company, in the classic "sell it and rent it back" mode that's particularly in mode with private equity. By all accounts quality control at Spirit Aerosystems has suffered since, with Boeing having relatively little leverage in improving this state of affairs (one may argue that it's not terribly interested in improving the state of affairs). As far as we know the aircraft that kicked off this crisis was delivered from Spirit with an incorrectly installed plug door (more specifically, the bolts that secured it from opening were not installed at all) Sure, not everything is corporate greed, but there's a really bright and direct line here between the financialization of Boeing in the mid-00s and this specific crisis.
- WalterBright 3y ago
  NASA subcontracted about everything for the space program.
  - emgeee 3y ago
    NASA is a government organization with different incentives, and, has arguably suffers from similar problems that Boeing is experiencing.
    - wolverine876 3y ago
      > arguably suffers from similar problems that Boeing is experiencing. What problems are you referring to?
      - panick21_ 3y ago
        To airplanes failing and killing everybody inside. Excessive costs for new projects. Not upgrading their core technology. But I dont think the comparison makes much sense.
itsoktocry 3y ago
>Why do people operate on the principle „if it is bad it had to be because of maximizing profits“? HackerNews seems to hate companies maximizing profits, but loves when people like Elon run roughshod over shareholders. I don't get it, either. It's galaxy-brain stuff to believe that Boeing's biggest holders decided to make a few extra bucks in one year, and sink the 100+ year-old company the next. Versus, say, your theory that it's a multitude of issues relating to corporate rot.

wnevets 3y ago

> Boeing decided they wanted to focus on maximizing profits Except not really. The shareholders/board decided to gut the company so they can get richer with stock buybacks. https://www.washingtonpost.com/business/2020/04/15/bailout-coronavirus-airlines-boeing-buybacks/ https://www.washingtonpost.com/business/2020/04/15/bailout-c...

taway789aaa6 3y ago
> Boeing decided they wanted to focus on maximizing profits > The shareholders/board decided to gut the company so they can get richer with stock buybacks Are you not saying the exact same thing, just being more explicit about the implicit "short-term" profits? The shareholders/board (e.g. Boeing...the decision makers) decided to gut the company so they can get richer (e.g. maximize [short-term] profits, since the profits accrue to the shareholders/board) with stock buybacks.
- wnevets 3y ago
  I separate Boeing the business entity from the private capital that receives the cash.
  - MattGaiser 3y ago
    The former is under the control of the latter.
    - wnevets 3y ago
      I'm not arguing that parasites don't have control over their host [1], I'm arguing that they're separate entities. [1] https://pubmed.ncbi.nlm.nih.gov/31980266/ https://pubmed.ncbi.nlm.nih.gov/31980266/
      - wharvle 3y ago
        They're separate, but one owns and controls the other. I'm not seeing how pointing out that they're separate (a point on which I don't believe anyone here was confused in the first place) adds anything material to this exchange. "Boeing decided something", in a business strategy context, is just shorthand for "the people who control Boeing decided something", because Boeing doesn't ever decide anything. It can't.

boeinggoneone 3y ago

Very likely everyone is dumbing down a complex issue by projecting their own biases on Boeing. Boeing is an incredible cash cow and is likely to be a duopoly (along with Airbus) for at least around 50 years or so. I don't see why anyone burn their house down for temporary warmth. Also, the kind of issues we are seeing do not point out to any short term profiteering.

simion314 3y ago
>Also, the kind of issues we are seeing do not point out to any short term profiteering. They cut 900 QA jobs, I bet this was doen for short term profits and I bet is realted with the issues we see. https://eu.usatoday.com/story/news/nation/2019/05/06/boeing-inspection-job-tech-crashes-outcry-737-max-poor-quality/3650026002/ https://eu.usatoday.com/story/news/nation/2019/05/06/boeing-...
lamontcg 3y ago
> I don't see why anyone burn their house down for temporary warmth. Muilenburg got $62.2 million for burning his house down: https://www.manufacturing.net/aerospace/news/21109798/boeing-ceos-golden-parachute-was-62-million https://www.manufacturing.net/aerospace/news/21109798/boeing...
- itsoktocry 3y ago
  CEOs get paid a lot of money. Is this news? You think he'd rather the company be successful in his tenure, or unsuccessful?

surajrmal 3y ago

It's amazing how everything on HN manages to bring focus back to Google.

Zetobal 3y ago

The government is easier to squeeze if they think you are incompetent.

SoftTalker 3y ago

Airlines are contributary to this though. Boeing was working on a "clean redesign" new airliner to replace the 737. They shopped it around and nobody wanted it. They did not want to train mechanics and pilots on a new type. They wanted a "better 737." Then Airbus came out with the A320neo and that also pushed Boeing towards another incremental rework of the 737 since a brand new airliner takes 10 years to get designed, built, and certified.

lxgr 3y ago
The A220 seems fairly popular though, and that's a completely new type, although it's admittedly in a different class than the A320/737. Many airlines use both A320 and 737s in their fleets too, so they already have pilots rated for two different types. Trading one of these entirely for a 737 successor doesn't seem completely infeasible.
- SoftTalker 3y ago
  I think that individual pilots fly one type or the other, even if the airline operates multiple types. Flying is flying to a certain extent but the details, procedures, checklists, and emergency memory items are different particularly between Airbus and Boeing. I doubt there are many/any pilots that are hopping back and forth between 737s and A320s day to day.
  - lxgr 3y ago
    Yes, that's what I mean: The downside of having to juggle multiple shift rosters, needing effectively two sets of operational guidances, engineers trained on respective models etc. is balanced out by the significant upside of having more than one supplier and being able to negotiate accordingly when ordering new airframes. But returns are probably quickly diminishing on the latter compared to the increasing scheduling, training etc. complexity of the former, and having two effectively similar classes of plane from the same vendor completely negates the benefit of supply competition. That probably makes it very hard for a manufacturer to sell a new type of the same class to an existing exclusive customer: Short-term, the downsides largely outweigh the benefits.

c2occnw 3y ago

> Actions have consequences. In 2022, Calhoun received $22.5 million from Boeing. In February 2023, Boeing awarded Calhoun an incentive of about $5.29 million in restricted stock units to "induce him to stay throughout the company's recovery." In March 2023, Boeing announced Calhoun was being given shares worth $15 million that will vest in installments over three years. Consequences for who?

callalex 3y ago

> Actions have consequences. It’s not clear to me that this is the case here. The people responsible for ruining Boeing are all still fabulously wealthy and will be for generations. I guess you could call only having 20 lifetimes of wealth instead of 100 a consequence, but I certainly don’t see it that way.

mk89 3y ago

You know, when a company this big does this kind of things it always makes me think: are they really the only ones? It could be, or it could be that these are the guys that know how to navigate through these risks that you mention - until something bad happens and the world is then bashing them. How many things happen and we don't see them? And they get f** rich thanks to that lack of information (which they can rely on thanks to us employees, who normally keep an eye closed or complain and "just create the Jira ticket, we will handle it later"). If this can happen in such a regulated industry, there are loopholes, and they can't be the only smart guys to exploit them to "accelerate, simplify, streamline profits" and all that. It reminds me of the VW scandal. A lot of other companies did that artwork (using a defeat device) to pass the tests. One company got the blame - no problem there, but finally, it was like a wake up call for everyone else.

up2isomorphism 3y ago

Boeing does not have much competition in a real sense for a long time, and when that happens, MBAs quickly take over the world. It is just in Flight industry this is too much to mess with and we see some consequences. But if we are comparing just messiness in terms of R&D to operations, probably none of FANG or something like AT&T are better than Boeing.