The Boeing Follies

The Boeing Company has come a long way since 1916, when Bill Boeing began building airplanes in his Seattle barn. Looking to the future, the company is hopeful that its 737 MAX will soon be certified to fly again. The aircraft has been grounded since March 2019, after two crashes killed 346 passengers.

Boeing has been accused of withholding information from the F.A.A. during the 737 MAX certification process and the F.A.A. accused of not carrying out its regulatory duties when it originally okayed the aircraft.

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The Price of Failure

The Boeing Company named David Calhoun its new Chief Executive Officer a few weeks ago. The company, once the pride of Seattle, is trying to get back on course after discarding its engineering focus and putting the company’s direction in the hands of bean counters. The end result, as we know, was the crash of two aircraft, killing 346 people, and the grounding of the 737 Max — the latest iteration of its venerable workhorse.

Arch-rival Airbus took orders for more than a hundred aircraft at the 2019 Paris Air Show. Boeing left the show without an order. None. Zero. Nada.

The new chief executive Calhoun, a protege of former General Electric CEO “Neutron Jack” Welch, was an ardent defender of his predecessor at Boeing. He now says the company was in worse shape than he thought, already deflecting blame. “It’s more than I imagined it would be, honestly,” Calhoun said. “And it speaks to the weaknesses of our leadership.” (Welch got his nickname for his reputation of firing people but leaving buildings intact.)

Calhoun will be paid $1.4 million salary and guaranteed(!) cash bonus of $2.5 million and $10 million in restricted stock and another $7 million cash if the 737 Max gets back in the air. (“Bonus” does not mean the same thing in corporate execu-speak as it does to the rest of us.)

Boeing announced that its fired CEO Dennis Muilenburg will not receive severance pay. In addition, the company stated he is forfeiting his $14.6 million performance bonus for 2019. Muilenburg will still receive pension, deferred compensation benefits and long-term incentive awards totaling $62.2 million. Boeing paid the now-disgraced chief executive $23.4 million in 2018.

Muilenburg also holds options to purchase nearly 73,000 shares of Boeing stock at approximately $76 per share. Boeing’s share price currently hovers around $265, its twelve-month low. Still, not bad: an immediate profit of about $14 million when he exercises his options.

Failure Rewarded

Boeing Company’s board of directors decided it was time for Chief Executive Officer Dennis Muilenburg to go. Muilenburg oversaw the 737-Max disaster, with a pattern of obstructing F.A.A. oversight. Two crashes of the now-and-still-grounded plane killed 346 persons. Recently-released internal company communications display employees ridiculing the design and safety of the 737-Max. One employee derided the jet as “designed by clowns, who in turn are supervised by monkeys.”

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Amazon Effect – Part 2

Jeff Bezos and Paul Allen are competing to see who can make the heart of Seattle into his own vision. Microsoft co-founder and Seahawks owner Allen’s football stadium south of downtown and his Lake Union redevelopment Experience Music Center to the north are changing the face of the city.

Meanwhile, Amazon now occupies more than 25% of Seattle’s total office space. The all-things-for-sale behemoth filled 70% of new office space last year and is on track for the same in 2017. Of course, this keeps rents high for other tenants in the downtown area. People who are prone to worry have expressed concern that with one entity so entrenched in the city’s core, a downturn in Amazon’s fortunes could have a deleterious effect on Seattle. But that’s silly. Big companies are immune to that sort of adversity.

When Congress shut off federal funding of the SST – Supersonic Transport – in 1971, the Boeing Company furloughed 68,000 of its 100,000 employees.

Test Scores – Then and Now

missileWhen I was in school, a passing test score was 70%. That 70% meant a grade of “D.” If you are a contractor building weapons systems for the Department of Defense, a score of 45% merits a $2 billion performance bonus.

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