Pontifications: Steady as she goes at Boeing–for now

By Scott Hamiltn

By Scott Hamilton

July 27, 2015, © Leeham Co. Dennis Muilenburg, who became the chief executive officer at The Boeing Co. the Tuesday after the Paris Air Show ended (and at which Jim McNerney was front-and-center in his role as CEO), was on the company earnings call for the first time in this role last Wednesday.

If anyone was expecting, or hoping for, dramatic announcements or policy changes, they were disappointed.

With this Muilenburg’s first earning call, it was McNerney’s last. Predictably, it was a love fest between the out-going and the incoming. Muilenburg and McNerney swooned over how well they worked together and praised each other’s work, accomplishments and vision. The discussion wouldn’t be any other way, absent a scandal of some kind (remember Phil Condit resigning over the air force tanker lease deal, Harry Stonecipher over zippergate). Despite the buzz on Wall Street and elsewhere of the relationship strains between the two men, those days really don’t matter now. What does matter is what comes next under Muilenburg.

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Muilenburg becomes Boeing CEO, McNerney non-executive chairman and leaves a mixed legacy

June 23, 2015, c. Leeham Co: Dennis Muilenburg has been named chief executive officer of The Boeing Co., elevating him from president and chief operating officer, the company announced today. Jim McNerney, chairman and chief executive officer of The Boeing Co. since 2005, was named chairman of the board. He will leave the company next February.

McNerney leaves a legacy of bitter fights with Boeing’s biggest labor unions, a runaway cost overrun on the 787 and 747-8, sour relations with the supply chain and settling to be second fiddle in the single-aisle sector to Airbus.
He also leaves a legacy of attacking costs that had to be cut, increasing production rates to record levels and restoring Boeing’s stock price from a low of 2009 during the depths of the 787 program difficulties to more than $150.

Last January we posted a think piece about the challenges facing Muilenburg on the assumption he would become CEO.

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Muilenburg’s challenges as Boeing CEO

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Introduction
Jan. 27, 2015: Dennis Muilenburg has been the No. 2 at The Boeing Co. for a little more than a year. He was named vice chairman, president and COO in December 2013.

Jim McNerney

His boss, Chairman and CEO Jim McNerney, turned 65 last August. Sixty-five is the mandatory retirement age, but this has been waived before and McNerney is widely understood to want to stick around through Boeing’s 100th Anniversary in 2016.

The industry is buzzing with reports that McNerney might move up soon to

Dennis Muilenburg

non-executive chairman, with Muilenburg assuming the CEO title.

If and when Muilenburg becomes CEO, he faces a laundry list of challenges.

Summary

  • Strong competition from Airbus that is getting stronger;
  • Continued cost cutting;
  • Learning the Commercial Airplanes business;
  • Declining defense business and revenues, putting pressure on profits and cash flow;
  • Flight testing and development of the KC-46A;
  • Development of the 737 MAX and 777X and proving that delivering new airplane programs on time and on budget can be achieved again;
  • Selling enough 777 Classics to maintain production rates to the 2020 EIS of the 777X;
  • Dealing with labor unrest with its Seattle area unions and a new attempt to organize the Charleston 787 plant; and
  • Deciding whether to take that “moonshot” and launch new airplanes earlier than the 2030 EIS McNerney set as policy.

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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.

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Odds and Ends: More from Airbus annual press conference; IAM focuses on wages

Jan. 13, 2015: More from Airbus: Airbus held its annual press conference today in Toulouse, reporting its full year 2014 orders and deliveries results. Our Bjorn Fehrm was there and filed a report from the event. He will have more this week. Here are some stories from other media.

Reuters: Airbus to juggle production, defense A380. Airbus says it will likely take A320 production about 50/mo. We reported months ago the supply chain has been notified to prepare for rate 54 in 2018. Airbus also said it will bring A330ceo production down after 2015. We predict 5-6. Decisions are to be made in the coming months.

Bloomberg: Airbus to add 20 passengers to A350-1000.

Aviation Week: Airbus formally launches the A321neoLR. You read this plan here first last October.

Seattle Times: Boeing is No. 1 by some metrics. Dominic Gates takes his usual thorough look at the bragging rights of Airbus and Boeing.

IAM on wages: Boeing’s touch-labor union, the IAM 751, says a Washington State study about aerospace jobs shows 58% of non-Boeing aerospace jobs in the state are paying less than $15 per hour.

Top 10 Leeham News stories of 2014

Dec. 30, 2014: This was a highly active news year. Airbus launched the A330neo and A321neoLR. Boeing firmed up more than 200 orders for the 777X. Emirates canceled 70 A350 orders, a record cancellation when no customer collapse was involved. Boeing and its principal union, the IAM 751, faced off in a bitter contract vote. And on the truly dark side, Malaysian Airlines lost MH370 and MH17.

The Top 10 stories read on Leeham News included all of the above but MH17. Others made the Top 10 list. Here it is:

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Oct. 28, 2009: five years ago today, Boeing announced 787 Line 2 goes to Charleston; then, now and the future

This is about eight pages when printed.

It was five years ago today that Boeing announced it would locate the second assembly line for the 787 in Charleston (SC).

The decision was expected and, some say, had actually been made months before–as early as the preceding February. We take a look back at the events leading up to Boeing’s decision to put the second line in Charleston, what’s happened since then and where Boeing will be in five more years.

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Odds and Ends: Coming soon–new Leeham News; Boeing v SPEEA; 86-seat Q400; Boeing 326; Budapest Air Show

Coming soon: We will be rolling out changes this month to Leeham News and Comment.  We will expand our News and Analysis, providing the most insightful commentary of aviation issues of any on-line publication. Most on-line news resources either collate into one portal news from around the world, or report news without analysis, or offer superficial analysis. We’re famous (or infamous, depending on your viewpoint) for providing insight in a no-BS manner.

We often report the news before anyone else, and we spot market trends long before others.

For example:

  • We concluded in December 2013 that Airbus had to launch the A330neo program, at a time when other on-line publications were still muddling along and even Airbus hadn’t reached its conclusion.
  • We were the first to report that Airbus revamped its A350-1000, ahead of the company’s own announcement and before any other media tumbled to the development.
  • We’ve been the leading publication to focus on LOPA (Layout Of Passenger Accommodations) and IAC (Integrated Airplane Configuration) when comparing Airbus and Boeing airplanes at a time when other publications didn’t even know the terms.
  • Our aircraft economic analysis has the advantage of aerospace engineering background to take into account detailed understanding of aerodynamic improvements, down to the last percentage point.

These changes include transformation into a combination paid and free content site. We’ll have paid content several times a week in addition to our free content.

Changes are coming to Leeham News and Comment this month. Watch this space for details.

Changes are coming to Leeham News and Comment this month. Watch this space for details.

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Early IAM vote results back incumbents, reformers to protest

Update, 10:30am PDT: IAM International posted this press release about the election results, claiming the incumbents won by a 2-1 margin.

Original post:

Just posted on IAM Reform’s Facebook Account:

IAM REFORM TO DISPUTE ELECTION RESULTS, WILL FILE PROTEST WITH U.S. DEPARTMENT OF LABOR
Preliminary IAM Election results reveal Tom Buffenbarger and the nine other incumbent executive officers won enough votes to retain their positions. But IAM Reform candidates, buoyed by the support and votes of IAM members internationally, plan to immediately dispute the election results and file a protest with the U.S. Department of Labor, following federal election rules.

Throughout the April election, IAM Reform documented illegal activity by the incumbents’ campaign including:
1. The incumbents’ team illegally threatening union leaders to campaign and vote for the incumbents or lose their jobs and control over their lodges via trusteeship
2. The incumbents’ team illegally using union funds to campaign
2. Evidence of significant anomalies in the voting results to raise serious concerns about the legitimacy of thousands of votes for the incumbents.

“On behalf of every supporter of IAM Reform, we intend to ask the Department of Labor to investigate these serious violations, through every avenue available to us,” said Jay Cronk, Reform candidate for International President running against Tom Buffenbarger. “Unseating a corrupt and entrenched bureaucracy will require our continued strength and focus. With the support shown for our Reform goals and platform, our conviction to achieve these goals on behalf of our membership has been reinforced.”

Per election rules, candidates may file a protest and ask the Department of Labor to investigate violations.

Odds and Ends: Snookered by Boeing; Superman; Me2Al; Odyssey Airlines

Snookered by Boeing: That’s how one legislator in Washington State put it in the outcry aftermath of Boeing moving engineering jobs out of state despite an $8.7bn set of tax breaks to land the 777X wing production and assembly site here. She went on to say she wouldn’t have voted for the breaks had she known, and she’s so tired of Boeing.

Sound similar to what legislators said after voting for the $3.7bn in tax breaks in 2003 to land the 787 assembly line. Six years later Boeing put 787 Line 2 in Charleston, revealing that the State had failed to add strings to that set of tax breaks to assure all 787 assembly would be done here.

Snookered then and snookered now. What strikes us is that any legislator thought anything different would happen.

Boeing’s job strategy has been very, very clear for years: move engineering, IT and other non-touch labor jobs out of Washington as fast as it can. Move component work out of Washington. And for the 777X assembly work: can you say “robotics”?

IAM 751, the touch-labor union, claimed all along Boeing was snookering membership and the State of Washington and was going to assemble the 777X here anyway, regardless of the contract vote and state incentives (we disagreed, but only McNerney knows for sure).

Washington needs to get used to Boeing moving jobs (hence, our continued refrain of look Beyond Boeing). Aside from Chicago’s long-obvious job transfer plan, robotics and automation will, over time, take an increasingly prominent role in building airplanes. Boeing has been introducing robotics on the 777 Classic line, so expanding this use should be expected.

Superman: This video shows a Boeing 737 being pushed sideways at the gate by strong winds and an icing ramp. The most amazing part of this amazing video is the ramp worker who is trying to stop the airplane. It seems the rampie thinks he can bench press 150,000 lbs.

Me2Al: He’s widely known as U-Turn Al for his propensity to do 180 degrees multiple times on his opinions about airplanes, engines and orders, but now Akbar Al-Baker is becoming Me2Al as well. Long envious of Tim Clark, the president of Emirates Airlines, Al-Baker hooked his wagon to Clark on the 777X last year at the Dubai Air Show, claiming the two carriers negotiated similar specifications at the same time to get a better deal from Boeing.

Now he’s followed Clark’s lead once again, this time jumping on the prospect of the Airbus A380neo.

Odyssey reveals some details: Odyssey Airlines, the business-class start-up carrier that is building its business plan around the Bombardier CSeries, revealed a little bit of its plans in this article. It will have 40 lie-flat seats on the CS100, operate from London City Airport (previously known) and its funding is partially revealed.

Great B-17 Photos: See The Seattle Times montage here.