Leadership changes required at Boeing, say conference delegates

By Scott Hamilton

Analysis

Special Coverage of the Boeing Crisis

Jan. 26, 2024, © Leeham News: At the first commercial aviation conference following the Alaska Airlines Flight 1282 Boeing 737-9 accident on Jan. 5, much of the conversation was about the fallout to Boeing. Spirit AeroSystems was a topic of less conversation, even though the problem with 1282’s door plug appears to have originated with Spirit.

Aviation Week’s supplier conference was supposed to begin with a fireside chat with Boeing’s Ihssane Mounir, the head of Boeing’s commercial supply chain. Unsurprisingly, Mounir canceled the week before as the Alaska accident—in which there were no fatalities and only a few minor injuries—expanded into a full-blown crisis for Boeing.

News that the Federal Aviation Administration dropped the hammer on Boeing by freezing current 737 production rates and killing, for now, expansion of the airplane’s final assembly to the “North Line” in Everett (WA) brought disbelief that Boeing has fallen so far from what was once considered the Gold Standard of American engineering.

And, with contract negotiations beginning in March with its touch-labor union, the IAM 751, aerospace analyst Ron Epstein of Bank of America predicted that 751 has more leverage now than in recent years and Boeing will be in the weaker bargaining position.

David Calhoun, CEO of The Boeing Co.

Other than consultant Richard Aboulafia, a vociferous critic of Boeing CEO David Calhoun, speakers were willing to definitively call for changes in Boeing’s leadership. But in sideline talk, consensus was clear: “leadership” at Boeing headquarters and in Seattle with Commercial Airplanes has to go.

But there was no agreement, or even suggestions, about who should replace Calhoun and Stan Deal, the CEO of Commercial Airplanes.

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Analysis: With Gentile out at Spirit, here’s what Shanahan’s hiring likely means

By Bryan Corliss

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Oct. 2, 2023, © Leeham News – Tom Gentile is out as CEO of Spirit AeroSystems, the victim of a number of serious production missteps and a failure to lead the Tier 1 supplier into a stronger position following the Covid-19 pandemic and the grounding of Boeing’s 737 MAX. 

Interim Spirit AeroSystems CEO Pat Shanahan.

The new interim CEO is Pat Shanahan, a long-time Boeing and Pentagon executive who has been serving on Spirit’s board since 2021. 

Spirit said its board is conducting a search for a new chief executive.

  • Markets respond to news
  • Shanahan faces huge challenges as CEO
  • Shanahan’s resume fits Spirit’s need 
  • Our takeaway: What this means for Spirit’s future

Related Article:


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Analysis: Labor issues continue to challenge aerospace industry

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By Bryan Corliss

Sept. 18, 2023, © Leeham News – One of the continuing themes we’re hearing – at investor presentations and on quarterly earnings calls – is the shortage of skilled labor, which is disrupting deliveries up and down the aerospace industry supply chain.

The inability of suppliers to deliver parts on time – or to deliver correctly assembled parts – is hampering the OEMs as they attempt to ramp up production to meet high demand from airlines.

This is not just an issue affecting aerospace. There’s a general shortage of medium- and high-skill workers in the Western world right now, with shortages of every kind of worker from line cooks to truck drivers. Shortages existed prior to the Covid-19 pandemic, and there’s still strong demand, even with economies slowing as central banks move to tamp down inflation. 

The issue is more pronounced in industries that rely on high-skill workers – like aerospace.

One outcome of this worker shortage is a rise in union activism. In aerospace, we’ve seen the strike by the International Association of Machinists against Spirit AeroSystems this summer, and the near strike by members of the same union against Boeing’s defense business in and around St. Louis last year.

Next year, both Spirit and Boeing will be back at the bargaining table; Spirit to negotiate with members of SPEEA, the union for aerospace engineers, while Boeing holds talks with IAM District 751, which represents hourly workers at the company’s plants in Puget Sound and Oregon. 

IAM 751, in fact, is urging members to prepare for what it’s describing as a September 2024 contract vote that will “forever change the aerospace industry.” 

The environment seems to be favorable to the unions, for reasons we’ve discussed before. However, with the OEMs and Tier 1 suppliers heavily in debt (and currently bleeding red ink), there’s going to be a limit to what the companies will be willing to offer in a bid to satisfy their labor forces.

  • Demand for workers remains strong
  • Lack of skilled labor is hurting industry
  • Boeing, Spirit aren’t strong financially
  • UAW strike bellwether for next year’s talks

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Analysis: Spirit strike likely a sign of changing aerospace labor market

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By Bryan Corliss

Striking Spirit AeroSystems workers blow whistles in front of one of the factory gates./Wichita Business Journal photo

July 10, 2023, © Leeham News – In case anyone had slept through all the earlier alarms going off, the whistles and airhorns that sounded during the mercifully short-lived Machinists Union strike at Spirit AeroSystems should have been a wake-up call: 

This ain’t the 2010s aerospace labor market anymore. 

In the labor market of 2023, hourly workers don’t want to come in on weekends. They want raises, and they’re not interested in getting paid in stock. And don’t you dare think of cutting off payments for the prescription drugs their kids need to take to stay healthy.

All this is going to create a challenge for the aerospace industry. For the past two decades, executives have focused on growing profit margins by holding down marginal costs – especially labor costs. 

A decade ago, aerospace companies were able to win labor concessions by threatening to take work away

Today, it’s the workers who seem to have leverage, and OEMs are going to have to figure out how to keep them happy and productive, or explain to the Kirbys, O’Learys and Al-Baker’s of the airline industry why their planes aren’t getting out of the factories on time. 

  • Tide of outsourcing seems to have turned
  • Baby Bust: Fewer workers in the workforce
  • St. Louis, Wichita: Red state Machinists vote to strike
  • What’s next: SPEEA at Spirit, IAM at Boeing

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‘What kind of vision is that?’ Industry analysts scorch Boeing and CEO Calhoun

By Bryan Corliss

Feb. 7, 2023, © Leeham News – Less than a week after Boeing CEO Dave Calhoun stood in the company’s Everett factory and vowed to “maintain this leadership culture forever,” a panel of top aerospace industry analysts blasted Boeing’s corporate culture and criticized Calhoun’s leadership, saying he lacks vision, industry knowledge – even charisma.

Aerospace analyst Kevin Michaels.

“No new aircraft until 2035,” said AeroDynamic Advisory Managing Director Kevin Michaels. “What kind of vision is that?”

Having Calhoun at the helm of Boeing at this juncture is “the worst-case scenario,” said Michaels’ partner at AeroDynamic, Richard Aboulafia. “(Calhoun) is somebody not only not from this industry, but someone who maintains a willful ignorance of it.” 

The challenges Boeing faces mending fences with all the groups it has disappointed or alienated in the past 20 years – customers, suppliers, regulators and workers – are immense and it may be more than one person can handle, said Bank of America Managing Director Ron Epstein, who also was on the panel. 

“It’s a hard, hard, hard job right now, to be the president of the Boeing Co.,” Epstein said. 

  • Panel rips lack of new product development
  • Without a new airplane, whole industry is challenged
  • Panel: Boeing struggles to retain engineering talent
  • Michaels: Suppliers in ‘crisis’

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Boeing faces exodus of senior engineers in tight market for talent

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By Bryan Corliss
Nov. 28, 2022, © Leeham News: Boeing’s engineering corps could become further depleted within the next few days, as union-represented engineers and technical workers at the company’s Puget Sound plants face a Wednesday deadline on filing their retirement paperwork.

If they don’t leave now, individuals could face retirement benefit losses in the hundreds of thousands of dollars.

The potential loss of several hundred of Boeing’s most experienced engineers comes at a time when the company is scraping together engineering teams to tackle production problems in Charleston, and in the midst of an industry-wide shortage of engineering talent.

Summary

  • Aggressive hiring sparks Brazilian lawsuit
  • Engineers face Wednesday deadline
  • All aerospace companies need engineers
  • Tech industry layoffs won’t help
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Pontifications: Boeing spending millions to retain engineers

May 16, 2022, © Leeham News: Boeing is spending millions of dollars to retain engineers represented by the union, SPEEA.

It’s a reversal of efforts to trim SPEEA ranks through early buyouts and outsourcing and to address an aging workforce.

By Scott Hamilton

The proposed 2017 joint venture between Boeing and Embraer was meant to address the retirement crunch. But delays in clearing the JV by the European Union and then the Boeing 737 MAX crisis and the global COVID pandemic killed the deal. Boeing walked in April 2020, shortly after the pandemic began. Officials claimed that Embraer failed to meet all the terms and conditions outlined in the documentation. Embraer denied this, claiming Boeing’s self-inflicted MAX crisis was the reason Boeing walked. The companies are in arbitration over a $100m break-up fee. With the collapse of the JV, Boeing lost access to Embraer’s young (and less expensive) engineering workforce, the No. 1 reason to do the joint venture.

“There is a big push to keep people,” SPEEA tells LNA. “Boeing is using raises, restricted stock, and incentive bonuses to keep engineers. Our contracts called for $7m in out-of-sequence raises last year and the company spent $22m.”

Boeing is more than a year away from clearing its inventory of 737s and 787s. Until then, or until the end is definitively in sight, it’s highly unlikely that Boeing will launch a new airplane program. But there are five 7-Series airplane programs that engineers and others are working on: the certification of the 737-7 and 737-10 this year and next; the development of the 777-8F; and increasing the gross weight of the 787-9 and -10. Certification of the 777-9 is also outstanding. Nothing official has been said in detail, but changes to the airplane demanded by regulators may require engineering work.

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2024 will be key year for Boeing in Washington

This is the second in a series of articles examining how labor, Boeing and Washington state could move forward following the COVID pandemic. The first article is here.

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By Bryan Corliss

Analysis

Introduction

Nov. 30, 2020, © Leeham News — You might want to set yourself an Outlook calendar reminder for January 2024.

It’s going to be a pivotal year for Boeing, its home state and its workforce. By then, the company’s recovery from the current Covid-caused crisis should be underway, with the order book refilling.

The countdown should be on for the long-delayed roll-out of the reconceived NMA, at long last giving Boeing a real counter to the Airbus A321. And — barring a surge in 737 MAX orders after its return to service — Boeing could be close to making some tough decisions about the future of the 737 program, thinking hard about whether after 60 years it’s finally time to design and build a clean-sheet replacement.

Also by then, the 787 program will have fully consolidated into Charleston, and the last 747 will have departed the Paine Field flight line, leaving The World’s Largest Building (By Volume) half-empty.

Then, in January 2024, Boeing’s contract with its touch-labor union – IAM District 751 – will expire, after a 10-year extension that was part of the price Machinists paid to ensure the 777X would be assembled in Everett. For the first time since the summer of 2008, the two sides will sit down at a bargaining table with the union having the ability to call for a strike.

What happens between now and January 2024 will pretty much decide the future of Boeing in Washington state. If the players are clear-eyed and rational, we could see a return to the days when high-skilled workers built high-quality planes that created handsome profits for Boeing shareholders and family-wage jobs for Boeing workers.

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Pontifications: Why I’d fly the MAX; lessons learned and still to come

Nov. 23, 2020, © Leeham News: I’m okay with flying on board the Boeing 737 MAX.

Yes, it’s gone through the wringer in the 20 months since it was grounded.

Yes, Boeing and the US Federal Aviation Administration screwed up royally.

And yes, there’s solid reason to distrust the company and the agency, wondering if they got it right this time.

Which is why for me the tipping point is the involvement of Transport Canada and Europe’s EASA are the reasons to trust getting back on the MAX.

LNA addresses the safety in our new podcast feature, 10 Minutes About. The inaugural podcast, 10 Minutes About the Boeing 737 MAX recertification may be heard here.

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Boeing, unions need reset: analysis

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By the Leeham News Team

Analysis

Introduction

Nov. 16, 2020, © Leeham News: Boeing is at a defining moment, says John Holden, the president of IAM 751. This is the labor union that assembles Boeing’s airplanes in Washington State.

The Seattle Times wrote that “Boeing must realign for better days“.

Neither said anything that hasn’t been said before, some of them repeatedly.

There is a new twist to it this time.  Boeing is seriously bleeding money.  It is making changes for survival and paying a horrible price as it loses talent that takes years to develop.  There are many losers here:  Boeing, Washington State, Snohomish, King and Pierce counties, Everett, Renton and all the communities in the Washington Aerospace heartland.  There are no winners.

But for all the points identified, few offer solutions. What should a realignment include?  What could it look like?

Over a series of articles, LNA will examine some possible solutions.

The first is Labor, starting with the IAM 751.

Summary
  • Long, tortured relationship.
  • Strong union state.
  • “Expensive labor.”
  • Is there a “value” premium?

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