In the other Washington, Boeing’s future is far from clear
On May 9, 1917, William Boeing reincorporated the Pacific Aero-Products Co. as the Boeing Airplane Co. This was only 14 years after the Wright brothers first flew.
For the next 84 years, Boeing was synonymous with the Puget Sound region. He built the famous World War II B-17 bomber – dubbed the Flying Fortress by a Seattle Times reporter; the B-52 Stratofortress for the Cold War (still in service); the 707 which revolutionized air transport.
It was “Jet City,” with good union jobs at Boeing supporting a strong middle class. Boeing was synonymous with quality, driven by a culture of engineering. “If it’s not Boeing, I’m not going” was a phrase that symbolized the company’s reputation against competitors such as Douglas Aircraft and Lockheed.
But in 2001, Boeing moved its headquarters in a chic Chicago skyscraper, less than four years after its merger with McDonnell Douglas. Since then, little by little, the birthplace of Boeing fades into the rear view mirror of the company. In 2021, Amazon overtook Boeing as the state’s largest private sector employer, although the commercial aircraft division remains based here.
Given the changing nature of the C-suite, it’s no surprise the company said earlier this month that Boeing was ditching Chicago for a new headquarters near Washington, DC, in Arlington, Virginia.
Chief Executive Dave Calhoun’s statement curiously indicates that the move “makes strategic sense…given its proximity to our customers and stakeholders.”
Which customers and stakeholders? Certainly the military-industrial complex, exemplified by the nearby Pentagon. And proximity to federal regulators and politicians. The company is still under scrutiny because of the 737 MAX’s mishandling of disasters.
But proximity is not synonymous with constructive gestures.
No wonder aviation analyst Richard Aboulafia told my colleague Dominic Gates that Boeing returning its headquarters to Seattle would have sent “an incredibly powerful message” about repairing commercial aircraft, its most important unit. And the largest single source of US manufactured exports.
“Boeing’s problem is not with government relations,” Aboulafia said. “I don’t see doubling down on DC lobbying as a watershed moment. Sounds like a recipe for more of the same.
In other words, stick to the first hole rule: “When you’re in a hole, stop digging.”
Boeing’s problems are the neglect of the engineering culture that built the company and the desperate need to rebuild trust, with employees and the traveling public. Instead, for perhaps 25 years, the culture was captured by financial engineering.
CEO Phil Condit led the merger with McDonnell Douglas, but the latter’s bean counter culture began to plague the company. This became ascendant when Condit was ousted in a 2003 defense procurement scandalreplaced by Harry Stonecipher, who had managed McDonnell Douglas.
The biting joke was that McDonnell Douglas bought Boeing with Boeing’s money.
Stonecipher was the first in a line of future Boeing CEOs influenced by General Electric’s Jack Welch, one of the most venomous individuals in American business since the robber barons.
The massive layoffs and cost-cutting he ordered at GE earned him the nickname “Neutron Jack” (after the neutron bomb, which leaves buildings standing but kills people). But Welch drove the stock price and earnings soaring, becoming adored by the business press as well as the celebrity CEO prototype.
James McNerney, Boeing’s chief executive from 2005 to 2015, came under Welch and lost in the battle to succeed him. After Dennis Muilenburg was fired in 2019 amid the MAX crisis, he was replaced by Calhoun, another Welsh sidekick who rose through the ranks at GE for 26 years.
Insulating themselves from commercial aircraft allowed executives to focus on the stock price. They no longer lived in the same community as their workers. But it set the stage for disaster, first with the long-delayed 787 Dreamliner and later with the 737 MAX.
The Dreamliner was saved by union machinists. Their reward: assembly of the airliner was moved to North Charleston, South Carolina. Manufacturing problems there, and elsewhere, contributed to financial losses.
The massive Everett factory is nearly empty due to the 787 move and 777X delays. Granted, it got a boost with an order from Lufthansa this month, but the new widebody isn’t expected to enter service until 2025 due to delays and high costs.
So what now?
There’s no way the 737 is going anywhere. It’ll be in Renton until it’s done. Moving it would cost too much. Likewise, the billion-dollar composite wing plant in Everett secures that location for the 777X.
Following Welchian logic, Calhoun might think defense is the future of the company and split up the company.
Not that Boeing is doing well with its failed Air Force tanker or errors and cost overruns in its space program. Boeing’s space contributions date back to the Apollo project, which landed men on the moon. Today, the low-orbit launch and space travel industry is growing with companies like Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX.
Musk wants to colonize Mars. Boeing is struggling to successfully launch its Starliner spacecraft uncrewed this month after a failure in 2021. Starliner is Boeing’s high-profile attempt to carry NASA astronauts.
Meanwhile, the wolf is still at the door.
Airbus edged out Boeing for new plane orders in April. He also intends to add 1,000 new jobs to his assembly site in Mobile, Alabama. China, Boeing’s biggest overseas customer, has bought more time to produce its long-sought domestically produced jetliner.
In hindsight, the billions of dollars in Washington state tax incentives for Boeing might have been better spent luring Airbus. But at the turn of the century, Boeing was pitting states against each other for work. No amount of incentive could have caused a huge economic hole here.
Based in the other Washington, Boeing is on a very different glide path than envisioned here in 1917. We should prepare for a hard landing.