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The Rise And Fall of Boeing

Boeing’s troubles began with an earthquake in 2001, which shook the Pacific Northwest and damaged the company’s Renton campus. However, the event served as an opportunity for Boeing to innovate and become its best Boeing. Instead of moving staff to office space, Boeing moved to the lake, which had been the home of 737 assembly since the 1970s. In 1993, Boeing launched the 737 Next Generation, aiming to meet the demand for cheaper domestic human haulers and streamline construction and assembly. By 2000, Boeing had swept, simplified, sorted, and sold off unneeded stock and clutter, resulting in acres of new floor space and storage.

When the earthquake and 9/11 shook the world, Boeing moved the entire 737 team into the same building, closing the distance between machinists, engineers, and management. This led to difficulties in assembly, pain points, and slowdowns, and eventually reduced individual production time from 22 days to just 11. By the mid-2000s, Boeing had reached its peak, becoming increasingly dependable, revered, and an American institution.

Boeing also decided to take on a bolder project with an even bolder business model, the Everett factory, located 36 miles or 58 kilometers north on Highway 405 from its Renton factory. This is where Boeing’s troubles first appeared.

Boeing’s 2003 plan to create the 787 Dreamliner was met with resistance from the board and investors who wanted faster returns and a more efficient aircraft. They proposed a solution, combining the design risk of McDonnell Douglas with the cost of the 717. However, this strategy failed due to financial struggles and the preference for selling the 737.

Boeing’s former executives decided to follow the 717 strategy, involving subcontractors to design and produce parts. However, this approach was disadvantageous for suppliers, as they had to foot the majority of development costs. Boeing’s negotiating leverage allowed them to secure contracts better than no Boeing contract, leading to the 787 being delayed for three years.

The 787’s initial success was short-lived, with the plane being less than a plane and more of a shell. The expected production cost benefits from new technologies never fully came, and it had a rough start to commercial service with thermal runaway incidents in its lithium-ion batteries.

In response to the global financial crisis, consumer demand for air travel increased, and Airbus launched a fuel-efficient A320 narrowbody aircraft. Boeing had to launch a corresponding aircraft or risk losing market share to Airbus. However, their top engineers and finances were tied up in getting the 787 flying, and they couldn’t build a new aircraft quickly enough. The only way to respond to Airbus was to make another iteration of their 737 design.

Boeing has been focusing on a more traditional development and manufacturing process in response to the 787 difficulties. They have subcontracted out to a smaller selection of suppliers, such as Spirit Aerosystems, which used to be Boeing’s Wichita factory. However, this strategy failed, leading to a systemic increase in disruptive manufacturing issues.

Boeing’s decision to iterate upon the 737 design proved catastrophic, leading to fatal crashes in 2018 and 2019 and a loss of hundreds of orders. This led to Boeing shutting down MAX production for months in 2020 and restarting it at a much-slowed rate during the COVID pandemic. Suppliers like Spirit have been responsible for defect after defect that slipped past QA.

The relationship between Boeing and its former Kansas division has only begun to right itself under new management and a new Boeing contract that lets Spirit finally earn money on its contribution to the 787 after losing more than $1 million on each one since 2007.

The machine that builds the machine is broken, and it’s not the suppliers, airlines, pilots, or maintenance engineers, but it’s Boeing that’s broken. They are now unable to reliably convert the singular engineering marvel into a consistent product. In today’s commodity market, commercial aircraft are more or less the same thing as an A320 or A350. Boeing and Airbus have responded to these commodity economics in slightly different ways, with both companies focusing intensively on their factories and Airbus seeking supply-chain stability.

In the world’s most entrenched duopoly, Boeing and Airbus know that they will get orders regardless, and their financial success will be about the combination of how fast they can build aircraft and how cheap they can build aircraft. Boeing is wholeheartedly embracing the realities of the market while fixating on the financial returns of free cash flows for investors, which is not working.

Manufacturing an aircraft is a complex and challenging process that requires careful planning, attention to detail, and a commitment to quality. Boeing’s attempt to emulate a Michelin-starred kitchen with a fast-food mindset has proven unsuccessful. The company’s best people are leaving due to cost-consciousness, leading to overruns and further cost-consciousness. Boeing needs new aircraft but has fewer people with the know-how to build the last one. This has resulted in a cycle of cost-consciousness and overproduction, leading to a lack of cash and debt.

Boeing is at the bottom of a deep, dark hole, with competitors like Airbus and Lockheed Martin also struggling. Lockheed Martin specializes in military aircraft, which have a different design and manufacturing approach from commercial aircraft. For example, their B-2 bombers cost about $2 billion each, and only 21 were built due to the incorporation of new technologies.

The company’s misguided belief that it can cut and squeeze those it needs most without it all falling apart is a major issue. While Boeing is the US’s only commercial aircraft manufacturer, there are other aerospace companies like Lockheed Martin that specialize in military aircraft. They focus more on research and development, which is disproportionately focused on. The question is: who can rise and replace Boeing in the US?

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