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Saturday, January 22, 2022

Boeing and us

In late 2018 and early 2019, in Indonesia and Ethiopia, two new Boeing 737 Max airplanes crashed right after take-off, killing 346 people.  In Flying Blind, journalist Peter Blind relates this horror to the broader decline of American industrial capitalism, tracing the catastrophe to the relentless focus on "shareholder value"  that has wrecked one part of American life after another.   That in turn raises broader questions. Two years ago, in a post about the superb HBO miniseries about the Chernobyl disaster, I speculated that our institutions, for different reasons, might be as rotten as those in the USSR in its later stages.  Checking that post just now, I see that I referred to a new story (in January 2020) about one of the key mistakes that led to the Boeing disaster.  Now, reading a much more thorough account, I'm inclined to believe that we have further disasters ahead.

The story of Boeing is long and complicated, involving a large cast of characters, and I do not plan to mention many names.  The one crucial name appears to be that of Jack Welch, the late former head of General Electric and corporate superhero who emerged in the 1990s and 2000s as the Henry Ford or Lee Iacocca of a new era.  Welch transformed GE by moving away from manufacturing and into financial services, the major US growth industry, of course, of the last thirty or forty years.  The downfall of Boeing began, oddly, i 1997, when it absorbed another once-leading but now-failing airplane manufacturer, McDonnell Douglas, in a merger.  The terms of the merger gave much of the control of Boeing to veteran McDonnell Douglas executives, who began destroying the culture of Boeing, that had been based on the skills of its engineers.  A later generation of corporate leaders drew heavily on GE proteges of Jack Welch.  They moved Boeing's headquarters from Seattle, its manufacturing center, to Chicago, so that top management would not become emotionally involved with the production process.  They began selling divisions of the country off and forcing the new owners to do the same jobs ore cheaply, largely by downsizing or hiring cheaper labor.  Eventually they built a new plant in South Carolina, where they would not have to deal with unions, to build a different new aircraft, the 787 Dreamliner.  By the 2000s it was losing significant ground around the world to Airbus, the European consortium.  The company's new management decided to produce a new generation of its medium range workhouse, the 737, and named it the 737 Max.

The key to the 737 Max was a new pair of more powerful engines that would increase fuel efficiency, raising profits directly for airlines and indirectly for Boeing.  But rather than spend billions and several years to design a whole new airplane, Boeing decided to put those engines on an existing version of the 737, while making the minimum necessary modifications.  Those older versions had fallen well behind in key areas.  While newer aircraft now had new computer screens in the cockpit which would immediately inform the pilots of any problem and tell them what to do about it, the 737 pilots had do some of their own diagnosing, and take several minutes, if not more, to find the appropriate response in a large manual.  This would obviously impose enormous pressure upon the pilots in any emergency situation, especially since most emergencies occur during takeoff or landing when they have a great deal more to worry about.   Then, working out the design and testing it in wind tunnels, the engineers found a serious problem.  The new, larger engines, mounted differently than in older generations of planes, could suddenly force the plane to pitch upward during a tight turn.  They decided to rely on a software program called MCAS--already in use in Air Force tankers--that would compensate by forcing the stabilizer in the tail to correct for the upward pressure. This decision became an example of the potential for catastrophe growing out of the use of what amounts to artificial intelligence to handle complex problems.  The last, fatal design mistake involved the sensor that would tell MCAS that the plane was pitching dangerously upward and had to correct.  Such sensors were vulnerable to damage and malfunction, and some engineers pressed for backup sensors, but without result. Two other Boeing decisions made the problem much worse.  They cut back severely on planned test flights that might have revealed the problem to pilots, and they decided not to tell regulators and buyers about the new use of MCAS because it might make it harder and take longer to get the plane certified.

Meanwhile, the industry had co-opted the regulatory process.  The Federal Aviation Agency experts who were supposed to evaluate safety independently now worked for Boeing, which could even influence the size of their annual bonuses.  (I used to receive small annual bonuses as a federal employee myself, but they were simply portions of unspent funds that were divided evenly among staff.)  There was no one willing, or probably able, to play the role of Dr. Frances Kelsey of the FDA in the early 1960s, who singlehandedly stopped the approval of thalidomide in the United States while it was leading to the births of thousands of severely disabled children in Britain and elsewhere.  Such a person might have insisted on building a simulator for the new plane and making every potential pilot spend some time in it--but Boeing didn't want to spend the money on one, and no one made them do it.  The pilots who had to face the fatal malfunction on the two aircraft that crashed had no idea of what they were dealing with and no quick way to find out. 

All this is shocking enough, but even worse was the failure to ground the new plane after the first crash--as had been done in 1979 when a DC-10 crashed--until a thorough investigation could find out what had happened.  Partly because the first failing plane belonged to an Indonesian airline, Boeing found it easier to blame the airline or the pilot.  And thus, a few months later, the same thing happened again, in Ethiopia.  Then began a long story of attempted damage control, recorded in detail by Robison, in which Boeing tried to get the planes in the air again as soon as possible while denying any responsibility among the higher ups.  Like the Perdue Pharma executives who addicted hundreds of thousands of Americans to opiods, the Boeing executives will clearly never face criminal prosecution.   The grounding of the planes cost the company far more money than it would have cost either to design and build a new aircraft or to provide for adequate testing and training.  What saved Boeing was the pandemic.  Initially it looked like the last, fatal blow to the corporation and the industry, but the federal government stepped in to bail it out.  Yet the company's future remains far from bright.  The corporation also benefited from an interlocking network of lawyers, one of whose hubs is the firm of Kirkland and Ellis, who are extremely strong within the Republican Party and have penetrated the regulatory establishment.

Corporate America's new philosophy, pioneered by Jack Welch, has been disastrous for everyone else in the short run, and for American business, I believe, in the long run.  In the short run it puts relentless downward pressure on wages and benefits as more and more jobs are outsourced.  It also encourages corporations not to spend money on the development of better new products as long as they can make consumers buy the same older ones.  Profits go into stock buybacks, which enrich investors and executives, instead of investments in new equipment which would create jobs and better products.  For two years now, the pandemic has made issues like this almost invisible--even in health care, where they are also very important.  I do not know where real change is going to come from.



Bozon said...

Wonderful synopsis of very difficult material.
Thank you for researching and posting such a summary.

For those interested in the longer history of how this situation came about, here are a few references:
"Trading American Interests", Foreign Affairs.
"Trading Places" (See Index: Airbus)
"Manufacturing Matters"
"MITI and the Japanese Miracle"
"The Enigma of Japanese Power"
"The Coming War with Japan"
"The Coming Conflict with China"
"The Hundred Year Marathon"
"The Clash of Civilizations"
"The Global Trap"

All the best

Unknown said...

Typically, as democracy fades in both economic results (the USA now has the sort of economic inequality that one ordinarily associates with kleptocracies and fascistic regimes) and the legislative process, a culture of corruption sets in. People find less recourse to competition and law. If one needs a job or wishes to hold onto a professional career one must either go silent about the moral decay of economic and political life or, for more security, endorse the vileness as the portent of something new and better. At some point one must decide, if one holds onto two of the lowest-paying professions, whether teaching or preaching the truth is a good practice for career survival or even avoiding prison.

It is worth noting that however different the formal ideologies of the executive elite of the USA and the old Soviet nomenklatura were, they had some marked similarities. They got rich despite having never invested in business, and they established rigid, low ceilings for career advancement for people within their organizations. Living much like aristocrats, they made entry into their class practically hereditary. They attained great influence within the political system and did everything possible to stifle competition.

If anyone thinks that the replacement of Donald Trump with Joe Biden signals a turning of the corner on recent rot, then think again. The Hard Right has mastered a practice of supporting a political stooge who shows his wife, kids, and some religious devotion, the Dark Money groups assault the liberal-to-moderate opponent with an intense smear campaign. Whatever is offensive at the time comes through loud and clear.

The result in the end is politicians who firmly believe, just like aristocrats of the pat that no human suffering can ever be in excess on their behalf.

Energyflow said...

I recall an anecdote. In late Sovviet times a group of Russians visiting Bulgaria complemented the taste of their marmelade to which they replied that they merely used standard Soviet recipes. The Russians looked knowingly at each other as they always cheated to save on costs, skimping on portion of fruit added. Glad to see a busineß analysis here as I studied that and did import export in auto parts so I really appreciate this stuff. VW hired a spanish cost cutter as chief at one point and that cost them dearly apparently. Accounting should not control a company as a general rule. OTOH engineers can be dreamers and create monsters with huge cost overruns that never finish or function very poorly. For this study military procurement. Anything govt is a freeloader thing and private economy is Ebenezer Scrooge. This all speaks to a lack of comon sense, balance or morality which is probably all the same thing. In late soviet times people would casually leave the office to wait in line for food at the store, steal from their own factory or office goods as these were common property. If individual responsibility is lost in such a large group then nobody has responsibility. Smaller countries or companies do better. Bloat and skimp are bad. Funny pictures or statues of buddha as pot bellied or wih bones sticking out. Himself he propsed the middle path won by hard experience being born in lap of luxury and trying extreme asceticism.

Ben Mealey said...


A very cogent article. What a mess Boeing has become!

I believe you mean to name Peter Robison as the author, not Peter Blind. I don't need this published.