McBoeing, 787’s insidious impact overwhelm product strategy

McBoeing is alive and well in Seattle.

“McBoeing” is the derisive moniker given the combined Boeing-McDonnell Douglas merger of 1997 in which legacy Boeing personnel say MDC bought Boeing with Boeing’s money. Key positions in Boeing’s C-level suite were assumed by McDonnell Douglas officers despite the weak market position MDC had reached–just 7% of the commercial airplane business and a declining defense side.

In what turned out to be the most notorious placements, MDC’s CEO Harry Stonecipher became Boeing’s COO and widely was perceived to overwhelm a weak Phil Condit, Boeing’s CEO. Mike Sears, later of KC-767-Darleen Drunyan tanker infamy, moved from MDC to become Boeing’s CFO.

John McDonnell and Stonecipher, the largest shareholders in Boeing after the merger, went on the Board of Directors and formed a powerhouse team. They and directors allied with them dominated the Board.

It was this MDC-dominated leadership and Board that sent Boeing into a downward spiral. MDC starved Douglas Aircraft for R&D money and relied on derivatives. During the period 1998-2003, Boeing’s R&D fell precipitously, drawing scathing criticism from the normally pro-Boeing consultant, Richard Aboulafia of The Teal Group. Boeing offered derivatives of in the form of the 737-900 (not today’s more successful ER), 757-300 and 767-400, all sales duds. Boeing talked and talked and talked about new airplanes but had no action. It talked about three different derivatives of the 747 and the fanciful Sonic Cruiser.

By the time the end of 2003 rolled around, serious analysts were questioning whether Boeing would withdraw from the commercial airplane business.

Then the 7E7 was given the Authority to Offer in December 2003. By this time, the weak Condit was gone, done in with Mike Sears in the tanker scandal. Stonecipher had become CEO and proudly launched the 7E7, later renamed the 787. But Stonecipher and the MDC-dominated Board demanded of Alan Mulally a new scheme as a condition of the 7E7 launch: a global production system to lower the financial risk to Boeing.

An April 2003 article in the Wall Street Journal by then-aerospace reporter Lynn Lunsford detailed the debate within the Board. Although today Boeing says the global outsourcing was necessary for strategic reasons to accommodate a changing global market and win sales, the debate then was all about financial risk. The MDC-dominated Board wanted Boeing to spend no more than $5bn on development of the 7E7, according to the article.

The irony, according to the article, is that one Board member worried that too much emphasis was being placed on cost savings and that Airbus would be able to benefit as a result. The name of this Board member: Jim McNerney.

The rest of the 787 story is well known. Less well known is the insidious effect the 787 development problems had on Boeing’s product strategy. We’ve written about this on a couple of occasions over the years but now is a timely reminder.

As our partners at AirInsight recently pointed out, Boeing originally planned to introduce a “new small airplane” next year–in 2012, on the assumption the 787 entered service in May 2008 as scheduled. A CFM power point document from 2006 obtained by AirInsight had the timeline, providing definitive proof of what we had been told years ago: the plan was to do the 787, follow it up with the 737 replacement and move on to a replacement for the 777.

This would have been a timeline Airbus would have been unlikely to match and would have sealed Boeing’s dominance in commercial aviation for decades to come.

But, having insisted on global outsourcing to spread the financial risk, and then fouling up the 787 program so badly, Boeing’s entire product development program of leadership has been reduced to being driven by Airbus’ A320neo family (which in turn was driven by Bombardier’s CSeries).

This is the legacy of McBoeing and Harry Stonecipher, and Boeing was reduced to a me-too response to the NEO.

Dominic Gates has this story that sums up Wall Street’s reaction.

59 Comments on “McBoeing, 787’s insidious impact overwhelm product strategy

  1. There’s a long tail on failure and it’s remarkable that no one has yet gone for management with pitchforks and torches.

  2. I have more sympathy than some for Boeing’s wait and see policy towards the NEO. It now looks like they made the wrong call and have hurriedly backtracked. But they had reasons for their policy. Nevertheless, a well run operation would have had the re-engine option in their back pocket to be brought out fully formed when required.

    You get orders that are firm and not firm. But this is the first time I have heard of an order without a firm plane.

    • You must have forgotten the 7E7 then, when Boeing sold hundreds of paper aircraft to airlines. The 787 doesn’t even look like the 7E7, but the difference in looks are even closer than the difference in promised performance.

      • I think there is a difference. All planes are initially sold off plan. All plans change to some extent and sometimes drastically so. This plane doesn’t officially exist, but they have sold it anyway!

        Amusingly, if AA now say, we’ll give you a dollar for the 100 planes, Boeing will have to take it out of sheer embarrassment.

  3. we can only hope those days are over and a 777 re-do or 797 will win back the day. I like to think the McBoeing days are over and Boeing will move ahead now that the 87 and 47 appear back on track. It was shameful what Stonecipher and his cronies did with Boeing. I think one day it will become an infamous case study at Harvard business school.

  4. While I’m mostly pro-management, what really sickens me is that these guys come out with tens of $$$ of dollars making a MULTITUDE of mistakes.

    This is the current problem with the current “buddy-buddy” system between management and Board of Directors (BOD).

    This must be addressed. The BOD should be independently and transparently chosen and have no connection with management.

    Until we see some fundamental changes, we’ll be hearing about this not only for Boeing, but for other companies..

  5. Very well done! How about a follow-up piece on what it will take to get the Boeing back into the lead.

  6. In the words of Gen. Cornwallis, “You dream Sir”. The Busboys have taken the high ground and will keep for the foreseeable future. They will provide modern aircraft at a very reasonable price on time, just what the airlines need and want. I think Big B needs to get the 787 back on track and start making deliveries.

  7. The ridiculous philosophy «Less is more» in heart of the financial vision of McBoeing Team don’t working with the old myth behind the airplane since Icarus: to escape from earth and dream to conquer the skies…Renew the paradigm, or never forget why we love planes…

  8. Scott,

    You did a fine job of tallying up the Boeing management disaster. Would that it were not so. Unfortunately, I don’t believe that the 787 trail of damage if yet complete. Everything that I see says that this program will still be a mess 3 years from now. “The 787 is a joke” is the way one longtime Boeing employee put it on Saturday.

  9. Don’t dismiss Boeing too fast – it wasn’t so long ago we all thought Airbus out of their minds with the A380 and then the V1 of the A350. They worked their way through tough times and are doing well now. A few heads had to roll, but the show went on.

    Boeing may well have to go through a similar process. But its show will also go on. They have lots of talent yearning to be productive. This week’s news was a shock. I’m certain they will learn from it and come back better than ever.

    • I agree with you. Having made the decision to re-engine the 737, Boeing will sell a shedload of them. They will eventually work through the issues with the 787 and end up with a very desirable plane. Sort of C-17 Globemaster style … Thinking about it, the C-17 was a McDonnell Douglas plane.

      • Speaking of the C-17, back in the early 1980s, of the three bidders for the C-X contract — Lockheed, McDonnell-Douglas, and Boeing — only Boeing produced a design that met the published requirements. Rather than award the contract to Boeing, the Department of Defense cancelled the competition, rewrote the requirements to match the McDonnell-Douglas proposal, and started a new competition. Strangely, McDonnell-Douglas won this second competition.

    • IMHO you have to make that comparison on facts and not the impression
      of the moment ( and at that time ). In this case hindsight is the view to take
      here, so lets see:
      The A350 Mk1 would have been a complete failure ?
      Probably not. even it’s predecessor still sells real good.
      The Mk1 would have been on par with the Dreamliners.
      The Mk2 aka XWB is a completely different type fitting another role.
      ( and Airbus decided that the A330 could soldier on for the initial type slot,
      that is the reason why I asked about when Airbus knew the Dreamliner
      project to be entangled for some time to come)

      The A380 was a fubar project?
      The A380 is a smooth running programme in comparison to the 787 😉

      And Airbus issues tended to get unending observational help from the press.
      For “Der Spiegel” in Germany Airbus still is a blundering giant that gets
      nothing quite right while Boeing can’t do wrong.

      IMHO one has to carefully remove all influence of aided perception here.

    • In contrast to the ill fated 787 program, the A380 had only about 4-5 months delay in respect to the first flight (internally scheduled for “end” of 2004, executed in April 2005). The A380 flight test campaign went very smoothly, without major problems (787-4 limit cycle oscillations, aka flutter, 787 electronic box fire). The cabin engineering issue and the ramp up caused the mess (two hard years of constant delays), following a big restructuring of the whole company who is more integrated and “transnationalized” than it ever was. Both Boeing products have still to overcome all the ramp-up problems.

      A350 MK1: To stick with that plane and disregard all things S.U-H said, would have been the right decisison. The fuselage diameter is still perfect from an “overall aircraft design” point of view (2 LD3 side-by-side containers in the underfloor cargo space, and 2-4-2 seat configuration, good “wetted area” trade off). A material mix (CFRP wings, AL-Li/Glare Fuselage and a CFRP rear end) with the new engines would have been good enough to be easily on par with what is known of the 787 today.

      You are right in your assessment: All the Airbus talent, strenghened during many years of crisis, can now put their expirence into place. I expect nothing different from Boeing!

  10. The 788 and 748 program execution really highlighted a broken program management structure. It wasn’t so much the delays, but the appearance that Boeing management was the last to know what was going on. From the launch on 7-8-2007 it seemed to be just fantasy that the plane would be flying in 3 months, but management swore it so. In all the delays were over 10X that 3 months. Had management really had their ear to the ground there would have been better decisions and far less costs.

    There are some good things in the McBoeing approach, but it needs some fresh Boeing ingredients. A product on the front edge of technology needs to be designed to the function with an eye to costs, not designed to the least cost with an eye to function.

    I personally feel that it is too early to distill the lessons learned with the 787, but once in service it should be able to be fully evaluated. I see major lessons in that it is OK to outsource, if the supplier is capable (Spirit, GE, the Japanese) but is a really bad decision to go with a weak supplier (Voight, GA) but it is also not smart to outsource the design.

    Boeing can come back, but AA was a shot across the bow.

    • Boeing works in shareholder value. Constructing and Building airliners is a sideline.
      Shareholder value has quarter year timeframes. Those were leveraged perfectly.

      For how the project went the stockprice kept up remarkably well, don’t you think?
      Compare to the dunks EADS took. In comparison is the evaluation by the market
      adequiate?

  11. Scott,
    Is there any evidence behind…
    “By the time the end of 2003 rolled around, serious analysts were questioning whether Boeing would withdraw from the commercial airplane business.”

    I’d be interested in reading this analysis, any links?

    • UKAir, I also remember analysts saying Boeing might have to leave commercial aerospace. At the time – about 2003 – Boeing had no new models in the pipeline. They had canned the Sonic Cruiser and hadn’t invested in any major developments for a log time. Worse than that, Boeing wasn’t selling planes. They just didn’t accept the idea that they would have to compete against Airbus for each sale.

      They then changed their sales strategy and launched the 787. In PR terms at least, the 787 sales success transformed perceptions of Boeing.

  12. Not mentioned in this piece: Legacy Boeing had a board comprised of titans of commerce, men who knew how to run a business. Post-merger Boeing was saddled with a McD-D-style board of politicians, academics, money men, retired military, and half-wit McDonnell offspring i.e., people who don’t know how to run a business and would believe the [feces] Stonecipher et al fed them.

  13. UKair
    Evidence no, but there were very strong rumors already in the late 90s,
    quoting Boeing management circles as having concluded:
    “if those idiots in Europe want to subsidize the worldwide commercial
    aircraft industry, they are very welcome to it, that is why we purchased
    MDD!”
    Ironically, one has to wonder how Boeing would have fared during the
    the early part of this decade, without the massive amount of military
    business inherited from MDD.

  14. That’s Druyun.

    And the 757-300 and 767-400 were both well under way before the merger (the 757 especially so). so that particular direction wasn’t driven by McD execs. Was it a poor strategy? Yes, but at least they were done dirt cheap.

    The part about the company losing direction from 97-03 is certainly true, though. And I welcome Boeing’s new Product Strategy exec – American Airlines…

  15. Boeing passed over Alan Mulally, twice for the CEO position. So, Ford Motor Company snatched him up from his long career at Boeing. Mulally was an engineer first, and a businessman second. He was just what Boeing needed in 2005. But he was not a member of the MDD/McBoeing gang, to them, he was an outsider.

    Ford is very happy that he did not fit the new McBoeing mold. He almost single handedly saved Ford, which was the only US auto maker that did not need a government bailout.

    Mulally ‘grew up’ as a Boeing engineer and is a product of both MIT and Kansas U. He worked on every Boeing airplane from the B-727 to the B-777, where he was the General Manager of that program.

    As much as I am a Boeing supporter (I flew their KC-135 product for years and years), I have to agree the “McBoeing” monicker is well deserved.

  16. You’re awfully hard on Stonecipher.
    When he was down here in LA LA Land we considered him a very dependable source of information.
    Whatever he said, Mac Dac did the opposite!

  17. This quote misses the point. “”But, having insisted on global outsourcing to spread the financial risk, and then fouling up the 787 program so badly, Boeing’s entire product development program of leadership has been reduced to being driven by Airbus’ A320neo family “”
    Boeing didn’t insist on global outsourcing, they in fact had no choice but to spread the risk because there were no investors willing to invest in a new airframe like the 787 so long as Boeing’s chief competitor, Airbus, had infinite launch money which did not have to be repaid in the event of failure. No business can raise $billions of investment in that environment. Warren Buffet has pointed out the risk of aircraft manufacturing many times as a reason why he doesn’t invest in them: and that’s assuming a level playing field, not the position Boeing was in against Airbus. Boeing spread the risk because they had to, not because they wanted to. And they used indirect subsidies from Japan as a way to counter Airbus’ launch-aid. Boeing’s expertise had always been centralized manufacturing, but decentralized manufacturing became the only way to generate the investment needed to launch the 787. The decentralized manuafcturing was a bridge too far, and in the process they gave away prcious know-how to future competitors in Asia.

    • John McCallan :
      Airbus, had infinite launch money which did not have to be repaid in the event of failure.

      I thought I heard it all but then… this gem 🙂
      Of course not a word about Boeing’s subsidies, but never mind…

      • There’s a big difference between launch money that does not have to be repaid, and a subsidy like a tax break for example. Tax breaks still require private investment before receiving the tax break. Launch money does not require external investment. This is one of those Econ 101 things that people miss. And when the launch money does not have to be repaid in the event of failure it becomes a financial advantage that no private investor is will to compete against.

  18. It look’s like Mcboeing has upset air newzealand with more delays until 2014+- for there787/9 making them 4/5years late making them use 767/747 pass by there sell by date i hope none of these old aircraft start to come apart like the southwestern 737(hole in the roof) united 801cargo door opened 1988 737 100 what lost it’s roof over the sea & the comet these aircraft are living things just like the old steam engine train they all have to be well riveted oiled watered& nursed along the way all it takes is one rivit to pop and all XXXX brakes out inside the craft ie pray’s screams injurys ect.

  19. Thanks for the post and the context/timeline it provided – I never quite believed that McBoeing storyline to be quite as much of an explanation of things as some made it out to be, but I have to admit having read this that there’s probably some truth to it. (Although I’m still kinf of thinking if Boeing made the decision to buy McDonnell Douglas, you could also argue it was ultimately the Boeing executives’ own fault or even design if they let McD executives take over.)

    One point, though, I disagree with:
    [quote]the plan was to do the 787, follow it up with the 737 replacement and move on to a replacement for the 777.
    This would have been a timeline Airbus would have been unlikely to match and would have sealed Boeing’s dominance in commercial aviation for decades to come.[/quote]

    Could’ve, would’ve.
    There are quite a few assumptions in that last sentence that I wouldn’t necessarily agree with. But let’s not dwell on that – my objections start with the initial timeline as such. Even believing that this would have ever worked is overly simplistic in my eyes, as is the conclusion you draw from it.

    Besides the risk-spreading gone wrong, one of my main criticisms (and I know I’m not the only one) of the 787 programme is its completely unrealistic timeline, risk-spreading or not. I remember that back when the 7E7 was launched, I raised the question how feasible it was actually going to be to introduce a new airplane that had to champion completely new technologies, production and otherwise, in much less time than the 777 had for its development and certification. 4 years (!) total. Boeing’s solution was apparently to throw as many test aircraft at it as they could, but the assumption behind that was that nothing would go wrong to begin with. Because if something does not quite work as planned, you’re in even deeper trouble because you have to re-work all your test aircraft (and any aircraft sitting on the ramp already, waiting to be delivered). Which is of course exactly how it turned out.

    So having said that, I think the plan to launch the 7E7 in 2004, deliver it in 2008, have a 737 replacement ready in 2012 (with a launch in what – 2007/8?) was completely and utterly unrealistic to begin with, in my opinion. Just look at how Boeing struggled to keep the derivative 747-8 on track at the same time as the 787. Finishing 787 and starting work on a 737 replacement? Complete non-starter, and it would’ve been the same for Airbus (which is probably one of the reasons for Airbus to go for A320neo instead of a new design, given they still need to deliver the A350XWB).

    Of course: In 2006 to still have and/or set the expectation that this timeline would in any way be feasible is a sign of a severe case of being out of touch with realities by the then-executives at Boeing. Quite possibly fuelled by the desire to counter those voices that suggested in 2003 there was actually a chance Boeing might exit the commercial market altogether. Which brings us back to the point you’re making in the article: yes, Boeing has definitely seen better times than it did between the mid-90s and late 00s.

    But noting how Boeing was/are planning a 7-to-8 year development cycle for the 737 replacement, from launch to EIS, there’s hope they actually have learned some valuable lessons that will enable them to stay a strong force in the commercial market. The PR-disaster that was the NSA vs. 737RE rhetoric will be quickly forgotten, I’m sure, unless they completely mess up the 737RE as well, which is unlikely. (I hope, anyway.)

  20. Of corse they will completely mess the 737re up last week i was on b737/900 to stanstead uk &noticed some paint missing on the cowling air deflector and for the whole flight i was try to work out how the paint was missing it was only when we landed and reverse thurst was applyed and to my shock horror the air deflector was scraping the leading flap i informed the captin on leaving the aircraft my advice for Mr McBoeing design a new aircraft as you don’t have much room for a new turbine and retool and THINK METRIC??????

  21. Some calming perspective is obviously called for:

    1. Why is B’s “losing” it exclusivity in narrow bodies with AA such a big deal? It had to come some time. AA is the last of B’s “exclusive” customers. A has a solid A320 base in the US, the benefits of competition to AA are obvious, and B’s belatedly offering the RE puts it in a position to compete with A for the remaining big narrow body orders coming from UA and DL and elsewhere. At the very least, any margins A had for the neo before the 737RE will erode fast. In fact, the AA model is likely to be the norm with the US airlines that operate both types, which gives B an opportunity which they might otherwise not have had.

    2. To me, the main reason for AA’s buying A320s is that it needed lots of planes very quickly that are significantly more fuel efficient that their MD 80s, and neither OEM alone could provide those. This urgent necessity arose, as Andreas has pointed out, because the crash of 2008 prevented US carriers from re-capitalizing in a more orderly way. s2. After these new contracts, B’s position with AA remains fare stronger than A’s. B has a total backlog of 406 planes, including the new 737 orders and more than 100 wide bodies. A’s is only 260 neos. It has options/purchase rights etc for many more neos, but these may not be exercised.

    3. The most serious danger for B going forward is that the A321neo will get most of the 752 replacement orders, and therefore make lots of money for A absent competition and give A leverage with other carriers needing to replace both 752s and 773NGs/320s. I suspect doing this was the main reason B wanted first delivery of the NSA in 2019-2020, when airlines would begin to replace the 732s. The NSA was also sized to replace the 762/3s. But with no NSA, the question is whether the 739RE can compete with the 321neo. I have yet to see a comparison between the two, and it seems clear AA will use 321neos to replace at least part of their 752 as well as 762s. Note however, AA can convert 738s to -9s, so perhaps the -9 can compete for some of the 752 replacement mkt.

    4. Altho much maligned, B’s 737NG PIP program is producing significant fuel burn and other overall efficiencies which A320 classic cannot match. This gives B powerful leverage with its customers who need planes before they can get significant numbers of neos/REs, which now is the 2017-20 time frame, more or less. 2017-18.

    5. Lastly, AA’s nudge got B off the fence re the NSA. There is now no reason to deliver that before 2025-30 because A will not be doing its new plane until then. AA has effectively forced B to focus on getting the 787 program out the door, something AA cares a lot about because they have orders 48 789s.

    • Do you really think that the currently build A320 familiy members still consume the same
      amount of fuel as their brethren a decade ago?
      Airbus may not beat up a lather like Boeing does, but they are still silently busy improving their products with good success.

  22. No not like the Tanker. Big B has a serious problem with very late deliveries or is that NO deliveries on the 787. Why would the airlines put their names on another list for another airplane (737re) that may be very late if ever in coming? Much less would you put money in the bucket again for said airplane? If you had an airline and a board of directors would you stick your neck out again with your money and theirs? If so please update your resume and start making connections with possible new places to work.

    • Jay :
      Why would the airlines put their names on another list for another airplane (737re) that may be very late if ever in coming? Much less would you put money in the bucket again for said airplane?

      Personally, I would, provided I like the performance guarantees.
      I really do think that Boeing isn’t incompetent enough to totally mess up a re-engine programme. (Especially given that the core component, the engines, are already well along the development path, and are not handled by Boeing.) The 747-8 is a bit of a cautionary tale on derivatives, agreed, but that in turn was influenced by resources being diverted to the 787.

  23. Jay, how many A-380s have been delivered on time? Hint; NONE. Airbus has only delivered about 55-60 WhaleJets since the first delivery in October 2007. How many B-787s will have been delivered 45 months after the first one? I don’t know, but I’ll bet the number is in 3 figuers.

    Do you know the B-737NE will be late? If it is, most likely it will be because of the engine, so the LEAP equipped A-320NEOs will also be delayed.

    You do know the A-400M is 4 years late, and counting, don’t you?

    Airlines are gambling with both the A-32X-NEO and B-737NE.

    • saying no A380’s have been delivered on time simply isnt true. Yes, the A380 was late initially, but current delivery forecasts and actual deliveries are almost spot on.

      Can’t wait to hear more lies from Bobo CEO re: 787 deliveries for 2011… remember he said 25~40 787/747-8 at the 2011 1st quater earning call. Integrity at its best!

    • KC135TopBoom :
      Jay, how many A-380s have been delivered on time? Hint; NONE. Airbus has only delivered about 55-60 WhaleJets since the first delivery in October 2007. How many B-787s will have been delivered 45 months after the first one? I don’t know, but I’ll bet the number is in 3 figuers.
      Why do you have to keep bringing up Airbus planes for comparison when nobody was actually talking about Airbus at this point?
      The 787 was much later than the A380 by any metric imaginable, both didn’t/won’t have nearly as many frames delivered as originally planned during the first years, and the 787 will outsell the A380 by a comfortable margin, just like it will itself be outsold by the 737(RE) by a comfortable margin (and just like the S-class will be outsold by the Ford Mondeo will be outsold by the Vauxhall Astra will be outsold by the VW Golf – adjust brands and models as applicable to your country of residence.)

      Can we please move on now?

      KC135TopBoom :
      Do you know the B-737NE will be late? If it is, most likely it will be because of the engine, so the LEAP equipped A-320NEOs will also be delayed.
      You do know the A-400M is 4 years late, and counting, don’t you?
      Airlines are gambling with both the A-32X-NEO and B-737NE.

      No.
      Assuming, again, that Boeing won’t mess up the 737RE completely on the drawing board, it’s not that much of a gamble. (Right now, it’s a bit more more of a gamble than the A320neo, simply because it’s further left on the development curve, but in half a year’s time, that factor will play much less of a role.)
      As you mention the engines – if you really wanted to scrutinise the programme with regard to potential delays, Boeing is slightly more exposed because they’re tied exclusively to CFM. I.e. if CFM screws up, they’ll delay the 737RE, while Airbus still has the GTF as a second option. Then again – Airbus wants to deliver LEAP-X-powered planes a year or two before Boeing does, so there’s plenty of margin there to eat up before 737RE would be affected.

  24. a380 is a completely different beast compared to 787. But in the end both planes will do very nice im sure.
    As goes for military programs we all know how that goes…

  25. Getting back to the topic- the MD culture of short termism if you will , as the main driver of the supply chain fiasco (87) and derivatives earlier (barring 77) , a couple of observations:
    -without defending MD way of doing things, their military side has always done better -for lack of true competition, entry barriers due to technology and access to the market etc.You will have to say Boeing did gain a nice defence portfolio from MD, which keeps it in good stead atleast till now; once the budgets go down, it would be very different , then the shift to exports (started already -C17 exports to India and so on)
    – the culture of MD in the commercial business -which possibly had a higher risk , given the competition and with lower margins- was to play safe and go by financials, which drove MD into the derivative game, instead of doing a bold ,clean sheet design; the 787 on the other hand was bold, perhaps too bold interms of technologies ; apart from the global sourcing. In terms of managing the supply chain and not allowing bad news to come up etc-Boeing fell short clearly , which to be frank cannot ,in my opinion be related to McBoeing way of doing things. It was a high risk venture with a short development period of four years -playing to the market, instead of understanding the risks and mitigating them with strong monitoring project mechanisms.
    The last issue is in my opinion clearly Boeing problem- they have always been good taking the big bets- 47,77 and atleast conceptually 87; but they have not been good defending their market- they allowed Airbus to run away with 320 vs 73 classics, and now doing a lot talking on Neo without doing anything.
    So McBoeing while true to some extent, you cannot put 87 execution and the 37 RE/Neo product decision on MD culture alone.

  26. My “just like the tanker” was for reply #14

    Why are you guys always blaming management?

    Did the blue eyed, honest, hard working engineers not the ones who wanted an all new aircraft?

    Who knows. The bean counters no doubt wanted a quick cheap update / re-engine, but the techies didn’t listen they wanted gaming changing technology, like the 787.

    Nobody knows, yet..

  27. keesje :
    My “just like the tanker” was for reply #14
    Why are you guys always blaming management?
    Did the blue eyed, honest, hard working engineers not the ones who wanted an all new aircraft?
    Who knows. The bean counters no doubt wanted a quick cheap update / re-engine, but the techies didn’t listen they wanted gaming changing technology, like the 787.
    Nobody knows, yet..

    Well, the techie guys can want all they want (pun unintended), it won’t happen until somebody in management green-lights it. Also, the global risk-sharing was surely not a techie’s idea, and neither was the 4-year development timeline, nor the “use bolts from the DIY store to get the plane rolled out on a nicely marketable date” approach.

    So while the techies surely aren’t completely without blame in the 787 delays, the core problem to me does lie in management and the apparent lack of accountability and oversight inherent in the project structure. This, in my view, didn’t just lead to much of the delays, but also to the fact that nobody seemed to be aware of what state the programme was in until very late. One could analyse this further, but we’d reach one or two books’ worth of material quite quickly if we did 😉

  28. Heads up, Boeing supporters!
    This industry allows some management f##k-up.
    Look what Airbus did survive.
    Boeing’s asset is people, and management can be changed quickly, the experienced workforce cannot.

  29. afromme :
    Could’ve, would’ve.
    There are quite a few assumptions in that last sentence that I wouldn’t necessarily agree with.

    I tend to agree with that. Who know what would have happened if Airbus delivered the A380 on time in 2006 (with a ramp up to 45/year) and launched their XWB right from the start in 2004?…

    • Thats moot, if you ask around Airbus being a socialist jobsprogramme funded by the commy eurotrash was lucky to achieve the current trainwreck.
      And only due to endless free of interest gifted money they had to squander like there was no tomorrow.
      They would never be capable of what a real for profit All American Corporation could achieve over a few days of bankholiday.

      So, just forget about asking 😉

      Now switching persona:
      At the dark and moldy core of the Dreamliner horror is exactly this deep feeling of entitlement. If you tell it often enough “we are the best” it becomes true. NOT.
      ( recently stumbled over an article about MBB Lampyridiae, entertaining for sure.)

  30. The real unfortunate aspect of this is that the old time Douglas Aircraft Company engineers saw this coming in 1997. In today’s low risk investment environment to appease Wall Street innovation is stopped. The Reagan era of technology of advancement will NEVER happen again because of WALL STREET and the Jack Welch clones and wannabe’s.
    Stonecipher was a Jack Welch clone and wannabe, So is McNerney. Condit was useless as a leader and the real leader from the 90’s has proven his metal leading Ford through this greed based politically corrupted recession.
    McDonnell family destroyed Long Beach and their inept egos and theirr leadership with military programs just blinded them to reality of their business blindness.. StL has not won a military program on it’s own design since 1972 – F-15.
    F-18: Was political graft because Northrop with the YF-17 did not have carrier experience.
    AV-8 and T-45: BAE products again with political graft that led to MDC leadership.
    C-17: Was a Long Beach program that was screwed over by StL micromanagement and stupidity.
    A-12: They just screwed the pooch.
    F-22: DOD was finally catching on to StL ineptness.
    JSF: a GUPPY, enough said.

    Combine Jack Welch mantra with James McDonnell Sr’s ghost and Boeing 2011 is the result. Add to this to Wall Street and the US is screwed with overpaid executives that will shortchange US companies and workers..

  31. There is much much more to the McBoeing story than covered by Scott. even so he did a great summary of the ‘ high” ( low ) points. For some detailed support of parts of the mcBoeing and including a few observations on the 7 late 7 fiasco- i would recommend reading ” Turbulence” by Greenberg, Grunberg, Moore and Sikora. A relative good summary of surveys run over the time period from 1996 to 2006. This book will no doubt be required reading for MBA and similar types. The subtitle is ” Boeing and the State of American workers and managers. ” While there are a few ” name’ typos, the overall effects of the mcBoeing story seem to be well documented.

    What many seem to forget, The mcDonnel gang realized their dream of getting into Commercial Airplanes when Douglas lost track of how much the DC-9 was really costing them, and almost missed meeting payroll. Being used to sucking off the government teat and not really having to worry about such mundane commercial issues like real profit, the mcDonnel gang carried over that thinking to Boeing. In the late 90’s, in a case about hosing employees inTula, a federal judge remarked on record about the ‘ MDC corporate culture of mendacity ‘ in regards to testimony of John McDonnell ( james r milsap v McDonnell Douglas ( 2001 ). That culture continued/ continues to this day…

    • I read the book. Very interesting and revealing. There are some parallels to the European aircraft manufacturers AFAIK. (The merged) Airbus in particular. I am European, therefore I cannot really understand the principles of mass layoffs (Is this the rationale? Giving away company capital to protect shareholder value, while risking that there might no shareholder value anymore without people to produce good products???? ). I think that the constant on and off braindrain at Boeing is partly responsible for the current mess there. Even in bad times, AIrbus tried to to lay off as few people as possible. You can find extremely experienced engineers all over the place and they are recognized by the top brass as capital and heart of the company.
      On the other hand, the LEAN hype is currently very visible at Airbus…. you want to start a project….call it LEAN!

  32. After the merger in 1967, Douglas only built one new wing – for the DC-10!
    The first aircraft that John McDonnell killed off as VP of Finance at the time was the DC-10 Twin in 1973 despite orders from all the loyal European Douglas customers.
    According to the late Jackson McGowan, then President of Douglas, that was the reason he quit at 55.
    After that there was the DC-11 (ATMR) twin-aisle 180 seater that Delta wanted in 1982, then there was the tie up with Airbus but MDC insited that any new narrowbody aircraft be based on the MD-90 not the A320!! Can you actually believe that?
    Next fiasco was the MD-12 when MDC blamed the Taiwanese for pulling the plug – but it was McDonnell that baulked at the cost.
    After that it was walking away from leasing companies becuase the margins were too fine….except someone forgot to tell them that these leasing companies got new airlines started and once up and going they were flying 737s or A320s and NOT MD80s.
    After the MDC/Boeing merger it was low rate niche production for the 777 and 717 to up yields, which ignores the first rule of mass production – economy of scale.

  33. Its becoming a tradition to blame anyone but “Boeing”. It’s the foreigh supply chain, management from outside, Euro subsidies’ discounts, anything, not holey “Boeing”

    Maybe an honest look at the company and its culture would be more helpful

    • It’s a good point. And why not the psychological perspective ? Why Boeing Team Management sold a lot of airplane to an airline (AA) with 16 billons of debt and will pay the bill for half of 13 billons financing ? Just for, tell to Airbus, «Yes we can» to follow you, and your ego hypertrophied ? If we considering the risk of bankruptcy of AA in two to five years, what do we think ?

    • See my comments regarding the boo0k ” turbulence” for as close an honest look as you will find.

      A much older book- ” made in America ‘ by the MIT commission – Deturzos, et al published in the mid 80’s also has a section on the Commerical Aircraft Industry including Boeing is worth reading.

      having over 30 years with Boeing and nearly 40 years in the industry including missles prior to retiring in the mid 90’s, I can vouch for the general accuracy of both books as regards industry and management ‘ dog and pony ‘ shows come decision making time.

      Lets not forget the TFX fiasco . . .

  34. Game changing technology was the wrong answer. Market observations were tuned to match the desired answer. Technology driven company.

  35. Your grasp of the econ 101 too is incomplete 😉

    Boeing is not a startup and additionally the mechanics
    are dependent on what type of tax is “gifted”.

    RLI:
    The interesting thing with reimbursable launch aid is
    that you have good reason to be successfull beyond
    just taking the risk ( which is slightly aleviated with RLI )
    payback + license cost as in the Airbus case force you
    to make the investment really worthwhile.

    Tax gifts don’t carry this incentive. It is gifted money i.e
    untaxed “profit”.
    You can bring it to good use or you can just squander it.
    That is the reason why Boeing is hacking away at RLI.
    If the US adopted RLI ( we know it is successfull for
    giver and taker ) Boeing would have to actually work for
    their money 😉

    • RE UWE— groooannnn . . . .” . . .Tax gifts don’t carry this incentive. It is gifted money i.e
      untaxed “profit”. . . .” Suggest you take Econ 002

      The airbus launch aid supposedly under GATT92/WTO rules has been determined to be improper for several reasons. At least ONE point you have missed goes like this. Loans were supposed to be at “Commercial Rates ” and a specific payback schedule factored by certain sales targets by date, etc. And if the targets are not met, portions of or all the ‘ loans” are forgiven.

      Tax breaks in the U.S OTOH have specific time limits, amounts, and requirements which if NOT met, ( eg company gets breaks for 10 years, but moves out in 5 ) require payback or clawback. If companies do NOT use it for purposes intended, they don’t get it. ( e.g. reduced property tax for 10 years on 100 acres, but never build a building or pay for infrastructure improvements, etc – then they do NOT get the tax break )

      Airbus OTOH long since moved from the ” startup ” class, but still got the goodies for such great moves as the A380, and certain Cargo planes.

      Comparing the two on the basis of tax breaks versus subsidies is based totally on then laymens conflation of the two terms, and NOT on the underlying legal-tax- financial issues involved.

      • RE UWE— groooannnn . . . .”
        your bones hurting, Mr. Shuper?

        Afaik Airbus never reneged on RLI.
        The basic mechanism has not been found actionable.

        Tax break specifics: I guess Boeing is carefully dancing around the fine print of those.
        Still there is no fundamental obligation to be met by Boeing.
        They could invest it in tangible research or they can “invest”
        in grooming their shareholder value. The balance seems to tilt over to the shareholder value cofeur.

        Keep on groaning, it won’t change all that much.

  36. Foaming Solvent :
    Speaking of the C-17, back in the early 1980s, of the three bidders for the C-X contract — Lockheed, McDonnell-Douglas, and Boeing — only Boeing produced a design that met the published requirements. Rather than award the contract to Boeing, the Department of Defense cancelled the competition, rewrote the requirements to match the McDonnell-Douglas proposal, and started a new competition. Strangely, McDonnell-Douglas won this second competition.

    Sounds like the Tanker Deal.
    McB pays for canceling the competition.
    Its a shame for the hole USA. Thats not a free market.
    Think about this would happend in any other Country of the world.
    The USA would start a “war” to give american companies a “free” market everywhere in the world but not in ther own backyerd.

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