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I recall hearing "If it's not Boeing, I'm not going" maybe 25 years ago. Consolidation in the aircraft industry has failed the country. We've got no other vend

I recall hearing "If it's not Boeing, I'm not going" maybe 25 years ago. Consolidation in the aircraft industry has failed the country. We've got no other vendors. I'll also admit to working for McDonnell Douglas Aerospace, 1984-86. Sandy McDonnell was CEO, and John McDonnell III had been an engineer in various divisions and disciplines for a while, and was waiting in the wings. McDonell Douglas was a family company. I had to get a manager's signature to get office supplies, Sandy was so thrifty. If, as this article claims, MD accounting based culture was the problem, it hadn't been in place too long before the 1997 Boeing acquisition.

anonacct37 3y ago
I'm not sure if I follow but it does occur to me that being thrifty and changing from a aerospace engineering company to a financial engineering company can be two different things that might end up categorized as "accountants are in control".
colechristensen 3y ago
I’m increasingly of the opinion that companies flat should not be able to buy each other, though I’m not exactly sure how that would work.
- _heimdall 3y ago
  Removing legal and financial protections, not to mention the concept of "too big to fail", would help quite a bit. Consolidating companies into a few massive corporations centralized power, but it also centralizes risk. They'd be more careful, and may even be unwilling to risk the treadmill of endless acquisitions if each addition adds more risk and liability.
- smolder 3y ago
  Yeah, over-consolidation leads to fragility, and to market abuses, and together those make it not really worth the efficiency gains of shedding "redundancies". Redundancies are often good for robustness...
_heimdall 3y ago
Consolidating industry is always a failing strategy. There are often short term gains, but eventually the system breaks.
- ryukoposting 3y ago
  Now you have me thinking back to the big(-ish) companies I've worked for. One in particular was a global patchwork of smaller firms, assembled through acquisition. They were never integrated together all that tightly, though. They shared a C-office, a board, and a logo, and not much else. Working with other arms of the company was a lot like working with an outside firm, except everything was priced at cost and you got priority over truly-external clients. This probably sounds woefully inefficient to the average American business mind, but it seemed to work great. Each sub-firm had their own way of doing things that was tailored to maximize efficiency on a local level. Sure, inter-division communication could be wonky sometimes, but eventually you learn how to iron out those wrinkles. Sure, there's redundancy in some parts of the business. Those costs are easy to calculate. What's much harder to calculate is the cost of taking 14 manufacturing firms scattered 4 continents, stripping them of their current internal processes, and replacing them with a unified system.
  - _heimdall 3y ago
    That actually seems like a very reasonable approach. So reasonable that I assume it will eventually be ruined when management or ownership changes and the next crew comes hunting for efficiencies to cut costs. Most things are just so short term focused these days that there are few incentives to build a slower, more stable business (or product, or government, or social network, or news media, etc)
    - ryukoposting 3y ago
      It's a family business owned and run a bunch of stubborn Bavarians. I'm optimistic.
lostlogin 3y ago
Does industry consolidation ever make things better? There must be counter examples but I can’t think of any. Regulation can help, and it broke up the single telecom where I am and really improved things (just wondering if I can justify a 8gbps connection…).
- dartos 3y ago
  It does sometimes, specifically with utilities. That’s why many utility companies in the US are government sanctioned monopolies.
  - cogman10 3y ago
    That only applies when the utility companies are heavily and well regulated. Take that away or loosen enforcement and you get things like California's campfire. Or in my own case, a large water company purchasing smaller water companies and immediately applying for higher prices... to cover the cost of purchasing more of the local water companies (transparently so). Get a bunch of yes men on the board regulating a utility, though, and all the sudden it's easy for them to just approve whatever the utility wants to do regardless of public comment.
- panick21_ 3y ago
  Its because you cant see the effects. Consolidation is good lots of times. In the US they had an insane banking system regulation that resulted in the US haveing 10000s of banks. This lead to a lot of issues and was incredibly inefficent. I can name lots of examples. Before 1982 there were like 20+ companies who wanted to produce video game console. Did we need 10 different commercial unixs. Also, the consolidation results in companies that have the capital to invest. Having LM, MC, Boeing and Airbus all making widebodies didnt make sense and resulted in issues for both tri-jet producers. Airbus was the winner in that situation because neither company could invest in twin-jet widebody. The idea that the economy would be awesome if there were only small companies doesnt really hold up. So just saying consolidation bad 100% doesnt really hold up. The telecom are special because they were all state owned then privatized, they are mostly not the result of consolidation.
daedrdev 3y ago
I heard second hand that the MD managers who got promoted in Boeing after the merger decided to not build any new modules in house at Boeing. They were able put a lot of pressure on their new suppliers who were small compared to Boeing and made a lot of money. Over time many Boeing suppliers lowered their quality to stay in business and others failed outright. Since then there has been a lot of consolidation of the suppliers of Boeing, to the point where Boeing has much less leverage than it once did and often has only one option left for many of the parts in needs. I'm not sure how much this has contributed to its current issues, but it seems a systematic issue that Boeing doesn't make its own planes anymore and has to rely on suppliers who are scraping every ounce of margin out of their production processes.
ummonk 3y ago
Thriftiness to the extent of requiring a manager’s signature for getting office supplies is actually a great example of an accounting focused culture that inhibits good engineering.
- bediger4000 3y ago
  I honestly don't think MDAC was thrifty to the point of counterproductiveness in 1985, but you raise a good point.
- magnetowasright 3y ago
  Depending on the costs of office supplies, manager wages, and worker wages, it could be an accounting focused culture that inhibits good accounting. Talk about penny wise pound foolish.

anonacct37 3y ago

I'm not sure if I follow but it does occur to me that being thrifty and changing from a aerospace engineering company to a financial engineering company can be two different things that might end up categorized as "accountants are in control".

colechristensen 3y ago

I’m increasingly of the opinion that companies flat should not be able to buy each other, though I’m not exactly sure how that would work.

_heimdall 3y ago
Removing legal and financial protections, not to mention the concept of "too big to fail", would help quite a bit. Consolidating companies into a few massive corporations centralized power, but it also centralizes risk. They'd be more careful, and may even be unwilling to risk the treadmill of endless acquisitions if each addition adds more risk and liability.
smolder 3y ago
Yeah, over-consolidation leads to fragility, and to market abuses, and together those make it not really worth the efficiency gains of shedding "redundancies". Redundancies are often good for robustness...

_heimdall 3y ago

Consolidating industry is always a failing strategy. There are often short term gains, but eventually the system breaks.

ryukoposting 3y ago
Now you have me thinking back to the big(-ish) companies I've worked for. One in particular was a global patchwork of smaller firms, assembled through acquisition. They were never integrated together all that tightly, though. They shared a C-office, a board, and a logo, and not much else. Working with other arms of the company was a lot like working with an outside firm, except everything was priced at cost and you got priority over truly-external clients. This probably sounds woefully inefficient to the average American business mind, but it seemed to work great. Each sub-firm had their own way of doing things that was tailored to maximize efficiency on a local level. Sure, inter-division communication could be wonky sometimes, but eventually you learn how to iron out those wrinkles. Sure, there's redundancy in some parts of the business. Those costs are easy to calculate. What's much harder to calculate is the cost of taking 14 manufacturing firms scattered 4 continents, stripping them of their current internal processes, and replacing them with a unified system.
- _heimdall 3y ago
  That actually seems like a very reasonable approach. So reasonable that I assume it will eventually be ruined when management or ownership changes and the next crew comes hunting for efficiencies to cut costs. Most things are just so short term focused these days that there are few incentives to build a slower, more stable business (or product, or government, or social network, or news media, etc)
  - ryukoposting 3y ago
    It's a family business owned and run a bunch of stubborn Bavarians. I'm optimistic.

lostlogin 3y ago

Does industry consolidation ever make things better? There must be counter examples but I can’t think of any. Regulation can help, and it broke up the single telecom where I am and really improved things (just wondering if I can justify a 8gbps connection…).

dartos 3y ago
It does sometimes, specifically with utilities. That’s why many utility companies in the US are government sanctioned monopolies.
- cogman10 3y ago
  That only applies when the utility companies are heavily and well regulated. Take that away or loosen enforcement and you get things like California's campfire. Or in my own case, a large water company purchasing smaller water companies and immediately applying for higher prices... to cover the cost of purchasing more of the local water companies (transparently so). Get a bunch of yes men on the board regulating a utility, though, and all the sudden it's easy for them to just approve whatever the utility wants to do regardless of public comment.
panick21_ 3y ago
Its because you cant see the effects. Consolidation is good lots of times. In the US they had an insane banking system regulation that resulted in the US haveing 10000s of banks. This lead to a lot of issues and was incredibly inefficent. I can name lots of examples. Before 1982 there were like 20+ companies who wanted to produce video game console. Did we need 10 different commercial unixs. Also, the consolidation results in companies that have the capital to invest. Having LM, MC, Boeing and Airbus all making widebodies didnt make sense and resulted in issues for both tri-jet producers. Airbus was the winner in that situation because neither company could invest in twin-jet widebody. The idea that the economy would be awesome if there were only small companies doesnt really hold up. So just saying consolidation bad 100% doesnt really hold up. The telecom are special because they were all state owned then privatized, they are mostly not the result of consolidation.

daedrdev 3y ago

I heard second hand that the MD managers who got promoted in Boeing after the merger decided to not build any new modules in house at Boeing. They were able put a lot of pressure on their new suppliers who were small compared to Boeing and made a lot of money. Over time many Boeing suppliers lowered their quality to stay in business and others failed outright. Since then there has been a lot of consolidation of the suppliers of Boeing, to the point where Boeing has much less leverage than it once did and often has only one option left for many of the parts in needs. I'm not sure how much this has contributed to its current issues, but it seems a systematic issue that Boeing doesn't make its own planes anymore and has to rely on suppliers who are scraping every ounce of margin out of their production processes.

ummonk 3y ago

Thriftiness to the extent of requiring a manager’s signature for getting office supplies is actually a great example of an accounting focused culture that inhibits good engineering.

bediger4000 3y ago
I honestly don't think MDAC was thrifty to the point of counterproductiveness in 1985, but you raise a good point.
magnetowasright 3y ago
Depending on the costs of office supplies, manager wages, and worker wages, it could be an accounting focused culture that inhibits good accounting. Talk about penny wise pound foolish.