Muilenburg remains an enigma for unions, commercial development

Jan. 21, 2015. c. Leeham Co. Dennis Muilenburg, vice chairman, president and chief operating officer of The

Dennis Muilenburg, vice chairman, president and chief operating officer of The Boeing Co. Reuters photo via Google.

Boeing Co., remains an enigma to Boeing’s largest unions a year after he was elevated to this position from his slot as CEO of Boeing’s defense unit.

Muilenburg assumed his current position Dec. 13, 2013. Boeing’s “touch labor” union, the IAM 751 here in the Seattle area, didn’t know much about Muilenburg then. It still doesn’t.

Neither does Boeing’s second largest union, SPEEA, which represents engineers.

Nor is there any understanding what Muilenburg’s view of future commercial airplane development is.

Muilenburg’s defense unit was is also represented by the IAM, but a different district, #837. IAM 751 and 837 don’t talk; 751 members believe 837 sold them out over the controversial contracts negotiated separately between Boeing and the two districts when 837 gave up its traditional pension plan and gave back health care benefits.

Members of 751 ultimately followed suit in January 2014 in exchange for Boeing siting the 777X assembly and wing production in the Seattle area.

Jim McNerney, Chairman and chief executive officer of The Boeing Co. Boeing photo.

Barely in his new job, Muilenburg had no visible role in those highly contentious contract talks. Ray Conner, CEO of Boeing Commercial Airplanes, and Jim McNerney, CEO of The Boeing Co., were targets of 751’s wrath, even more so than the Boeing negotiating team, whom 751 members viewed as little more than front men for McNerney, with no power or authority.

SPEEA represented few engineers within the Defense unit and has had no contact with Muilenburg, reports the union’s executive director, Ray Goforth. SPEEA is equally in the dark over Muilenburg’s views toward unions. But if Muilenburg becomes chief executive officer, as is widely expected, after McNerney steps down, Goforth assumes Muilenburg will be equally hard-nosed with a Board of Directors that remains anti-union.

A Wall Street aerospace analyst who knows Muilenburg says he hasn’t expressed his personal views about unions beyond the corporate lines.

A consultant who has worked with Boeing believes Muilenburg will be most cost-driven than McNerney, which will be bad news for labor and for the supply chain. Muilenburg, while still CEO of Boeing Defense, was faced with dramatic cost cutting as federal budget Sequestration kicked in and the Iraq and Afghan wars declined. Defense revenue continues to fall.

Muilenburg has, on occasion, spoken about the need for employee training and STEM education. Both are in keeping with long-standing corporate statements on these topics. Likewise, cost cutting and new product development has been aligned with McNerney’s strategic goals, as one would expect not only as No. 2 to McNerney’s No. 1, but also on the logical assumption Muilenburg is a participating architect of these policies.

While McNerney has been clear about new airplane development–no more “moonshots” and no 737 replacement until 2030–Muilenburg’s own views are a mystery.

The 737 MAX currently has only about a 43% share of the backlog vs the A320neo family, and the launch of the A321LR is likely to help Airbus retain or even increase this lead.

As long as Boeing is spending billions of dollars for stock buybacks and dividends, funding for research and development will be limited. The only saving  grace is that Airbus wants to cut its R&D and concentrate on derivatives, too. We could be in for a period of Armed Truce and Status Quo.

But if the A320neo moves to a sustained 60% market share, or certainly if it begins to go beyond that, there is an expectation on Airbus’ part that Boeing will have little choice but to launch a New Small Airplane program to have an entry-into-service as much as five years before the current target 2030 EIS date.

Just what Muilenburg thinks about all this isn’t known.

 

22 Comments on “Muilenburg remains an enigma for unions, commercial development

  1. FWIW and a bit of nitpick ‘” Members of 751 ultimately followed suit in January 2014 in exchange for Boeing siting the 777X assembly and wing production in the Seattle area.”

    Actually it wasn’t the members of IAM. It was the International President who settled the so called “deal.” The voting was a sham – and purely for optics. It turns out that according to the IAM rules, the National can ( and did) do the whole thing on his own. Local 751 members/officers/employees enjoyed the equivalent of finding a severed head in their bed (or perhaps the opposite end of the horse)

  2. This is an excellent moment to examine the future of commercial airplane development. Boeing had been successful for generations, concentrating on performance and customer satisfaction.

    Since mid-1997, Boeing’s philosophy puts cost-cutting first. McNerney has established “leverage” over major stakeholders, but the 787 has deferred production costs in the range of $25 billion. Overall profits rest solely on the 737 and 777 – two legacy programs.

    The Board can indulge itself in animus or adversarial practices with suppliers, workers and state governments, but their responsibility is to make products that succeed in the marketplace. Ummmm. or……. to make money going out of business.

    • “…. make products that succeed in the marketplace.
      Ummmm. or……. to make money going out of business.”

      I followed that US Air Force tanker mess for years and
      could not believe how Boeing could so mess up and not
      offer what we are going to really need.

      Now the A330 is getting new engines, etc., and the international
      tanker market is noticing. The effectiveness of our own US Air
      Force has been compromised for decades because of Boeing
      low-balling, rather than meeting customer needs.

      I figured how Boeing handled themselves during the tanker bid processes, all three of them, would somehow spill over into other business relations. Maybe we are starting to see those ripple effects.

      Eddie Maddox
      Michigan USA

        • Does the KC-777-8 exist as more than an Internet concept? Or is it at the same level of development as Keesje’s A322 concept?

          • We’re not aware of any “KC-77-8” concept. The 777-200LR/F is the anticipated KC-Z to replace the KC-10.

          • Is there an A330-800 MRTT in the works, and when will the first one fly?

          • Engines dont matter so much for Air Force tankers. With TBO of 10,000 hours, that makes 20 years when you are doing 500 hr per year.

          • Even the already in service A330MRTT can deliver more fuel at long distances or on long loiter time than a KC-10.

            Therefore I guess “more” will be more relevant for KC-Z.

    • ” Ummmm. or……. to make money going out of business.”

      But but but – BA is to big to fail as they are the only LCA producer in the U.S .. errr or mostly in the U.S. .. 🙂

      Or is SPEEA going to provide/insist on free french lessons ?

  3. So, when those mgt guys put their shoes on in the morning is that a moon-shot?

    Auto companies make cars, tire companies make tires, so it would seem it is logical for Airplane companies to make airplanes and come out with new models as the situation dictates (that being true for cars and tires by their respective mfgs as well)

    Of course I am sure that is far too simplistic.

    Maybe the goal is for us to pay them NOT to make airplanes.

    It actually might be cheaper and let someone who want to make airplanes do so.

    • When I worked towards my thesis at VW (’87/88) their financial department had been very busy “working” with money. In a select window in time they achieved significantly more profits than the whole of VW AG could show from productive work ( buidling/assembling cars).
      And then they lost it all. ( and a range of high up people there had to take a significant adjustment in living standards 😉

      The philosophy of profit being the single valid metric is faulty.

      • It happened at Porsche, too. Different circumstances but again just a drive for financial bottom line, and ended up in a disaster.

        Current VW management, whatever their other faults, at least seem to have figured out that they need to design, build and sell cars in order to make a sustainable profit.

    • A new tyre costs $40, a new car costs$25k. Tell me again how they are the same as a new airplane. Then again they have a ‘life’ of 3-6 years, but may linger on longer. But you would have heard of the A350 and the B787. Same old thing ?

  4. Tires, cars etc are a commodity.

    If you don’t want to build airplanes you should be in a different business.

    Obviously aircraft are extremely technical compared to tires and cars, but its still a product and if you think each new iteration is a moon shot and you don’t want to do that, then go do something else and leave the field to the people who do.

    A new tire is a moon shot for a tire company. Ford just came out with an Aluminum frame pickup and no certainty the public will got for it.

    If Boeing comes out with an all new 737RS, you know damned well its going to sell, it isn’t a moon shot. That’s simply over the top BS hyperbole form bean counter, not someone who makes aircraft. It as plane (pun intended) as that.

  5. Seems PW is avoiding moonshots, too.
    Not wanting to upscale their geared turbofan tech,
    where it would really pay off.
    http://youtube.com/#/watch?v=7CU0B7VeLFU

    Oh, that reminds me, the Europeans took a moonshot
    with that engine on their A400M, which was also a
    moonshot. What do we have? Elon Musk.

    Eddie Maddox

    • Airbus was forced to use a new European engine instead of something out of Canada. That was a decession made by the buyer.

      The comment by PW is aimed at the share holders and market gurus which think inventions only lower quaterly results.

      Maybe PW will upscale the engine together with other partners.

      • “… which think inventions only lower quaterly results.”
        Which is why Elon has decided not to take SpaceX “public”,
        at least until after he gets back from Mars,
        if you get his drift. “… like dealing with manic-depressives”.

        With aircraft engines, and the airframes they are intended for,
        taking years to decades to reach profitability, perhaps Elon
        is showing us something besides just how to get to Mars,
        like how to do moonshots, for instance.

        Eddie Maddox

        • There is a difference between moonshots ( i.e. going into a project “underknowledged” and on a short horizon driven by omissions from the past and the unreasonable “quarterly” hordes) and moving on a longer ranged plan and similarly scoped understanding of the issues. ( forex Airbus )

          Not quite sure where I would like to place Musk.

          Musk esentially is a dabster spending his own money on his own vision in an intelligent way with lots of “drive”.
          imho he fits neither of the two poles i described above.

  6. McNerney has tried his best. Some folks gave him the benefit of the doubt after the dismal performance on the 787. They argued it all wasn’t on his watch. Now with the cost overuns on the 767 tanker I think wall street has lost faith Anyone who has interacted with Muilenburg knows he is smart as a whip. In my opinion, he will be a much better leader than McNerney. It is time for McNerney to retire. I know he has stacked the board with ex-GE-ers but he needs to class it up a bit and retire like Mullally did at Ford. Some interpret his desire to stick around for the Boeing centennial as he wants to make another $50 million.

    • At the very least, McNerney could step down as CEO before the 100 year mark.
      Maybe he wants a statue in his honor. Perhaps employees could have a design contest to brighten their day while cowering ?

  7. In a peculiar and backward way, Boeing’s unionized workforce should thank McNerney.

    Without his missteps, many fewer would be working on the 787 program, as right up to the present, thousands are still needed where they would not have been save for the mistakes. Just fixing errors out of S.C. keep hundreds employed.

    Further, James Albaugh would have won the day, and a 737RS (built elsewhere) would see Renton winding down to become high end housing, a park, and more retail kitch. (It still will at the end of the MAX, but that’s neither here nor there).

    All those jobs getting 747-8 squared away.

    And the coming hubris initiated problems with 777x introduction would never happen.

    No, They should be thankful. James McNerney has been a fount of job creation and maintenance, and overtime induced wealth.

    God forbid Boeing ever re-discover it’s core competencies again.

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