Feb. 14, 2023, © Leeham News: Ihssane Mounir was named senior vice president of Global Supply Chain and Fabrication for Boeing Commercial Airplanes (BCA). Appointed in December, he previously was the top salesman for BCA.
Mounir has a huge challenge ahead of him that goes beyond managing the logistics of BCA’s huge supply chain. He faces an irate group of suppliers who are increasingly openly angry. Some border on open rebellion.
As LNA reported last week, suppliers at the Pacific Northwest Aerospace Alliance (PNAA), some suppliers on the sidelines of the conference openly complained about Boeing’s lack of transparency and reliability. Some vowed to reduce their exposure to Boeing or even abandon working with the company. As always, Boeing’s Partnering for Success program—a long-running cost-cutting effort that demanded suppliers cut costs or be terminated—was another complaint.
Some who also supply Airbus but have to trim costs for it as well nevertheless praised Airbus’ gentler, collaborative approach vs Boeing’s threatening tactics.
The latter is relevant for some of the panelists.
The suppliers I spoke to didn’t even caveat their comments with an “off the record” or a “don’t identify me.” Historically, anything they say even in one-on-one discussions has this request. Not this time. Not one supplier asked for anonymity. Nevertheless, when reporting last week, I gave them anonymity. Why? Because Boeing is infamous for retaliating against those who say things officials don’t like.
Which makes the comments by some panelists all the more indicative of the growing frustration with Boeing. As LNA reported last week, consultants Richard Aboulafia and Kevin Michaels and aerospace analysts Ron Epstein and Ken Herbert were blunt and elbow-to-the-ribs in their criticism of Boeing.
Aboulafia is now with Aerodynamic Advisory, which is Michaels’ company, a consultancy. Aerodynamics stands to lose work from Boeing for comments each made. Each has been a long-time critic of Boeing. Aboulafia, previously with The Teal Group, has beaten up Boeing for well over a decade over its lack of spending for research and development vis-à-vis Airbus. Michaels has been a long-time critic of Boeing over its treatment of the supply chain. Both are critical of Boeing for failing to launch a 757 replacement or the Middle of the Market twin-aisle aircraft.
Their comments at an event immediately preceding the PNAA conference and at the conference itself were unusually blunt and, in Aboulafia’s case, especially biting.
Epstein is unusual among Wall Street’s aerospace analysts. His research notes pull no punches and his questions on the earnings call sometimes are presented respectfully but often challenging that go beyond the normal softball, kiss-ass questions posed by his peers. Boeing has in the past frozen Epstein out of earnings call questions and refused to cooperate on other occasions.
Herbert conducts a survey of suppliers twice a year in which Boeing comes out at the very bottom of the airframe sector. At the PNAA conference, he and Epstein advocated for a new airplane program instead of shareholder value, placing them at odds with most of their peers. Herbert’s comments were tempered by the need for Boeing to clean up its balance sheet, however. Epstein, a former aerospace engineer, might be forgiven for his position but he views the need for Boeing to do an airplane sooner than later as vital to the long-term future of the company than short-term profit and shareholder returns. It’s a position that runs contrary not only to his short-sighted peers but also to Boeing’s executive management.
The comments by Aboulafia, Michaels, Epstein, and Herbert—and those sideline comments by suppliers—all represent things Boeing officials don’t want to hear. But these are things the officials need to hear. One hopes Boeing won’t retaliate. Not listening to contrarian views is partly why Boeing is in the pickle it’s in today.
Mounir, the new head of BCA’s supply chain, has a lot of fence-mending to do on Boeing’s behalf with the suppliers. Boeing needs the suppliers. Many suppliers can diversify away from Boeing. It’s time to be collaborative rather than dictatorial.
Consultants who are willing to tell inconvenient truths are the valuable ones. Those who only tell the client what they want to hear are worthless. Aerodynamic Advisory is one that speaks the truth. Boeing needs them.
As for the likes of Epstein and Herbert and the one or two others on Wall Street who don’t play kiss-ass, once again, these are voices that need to be heard. It’s time to put GE’s residual overhang of shareholder value to bed. There is a middle ground. Returning 100% of Free Cash Flow to shareholders is detrimental to the long-term health of the company. From 1997, when the McDonnell Douglas merger was completed, through 2019 when stock buybacks and dividends were suspended, Boeing spent around $62bn for shareholder value. If only half of this was spent on product development, Boeing could have developed two or three new airplanes. Airbus would have been hard-pressed to keep up, even with launch aid.
It’s time for a sea change at Boeing. And time to listen to contrary viewpoints.