Thursday, March 19, 2020

Should Boeing exit the commercial jet business?

Is it time for Boeing to reorganize and exit the commercial jet business?

The brand is tainted.

It would send a strong signal to other corporations that place financials and "looking good" over safety-and-performance.

There is over-capacity in the industry and deliveries stopped due to the airlines' severe financial Covid-19 induced stresses.

I don't have any inside information regarding the mechanics of how Boeing's product development went pathological. We can all make guesses.

They rolled the dice and it is time for them to leave the table.


  1. Its time for them to be allowed to go bankrupt. No Govt contracts. No bailouts.

  2. And buy what? An Airbus? They will survive for that reason alone. There are no alternatives for large commercial aircraft.

  3. The corporate culture at Boeing is the problem. They are trying to operate a business that caters to an essentially retail market as far as the commercial production goes and then a government market which is less focused on cost effectiveness as it is meeting specifications.

    In the military side, once a contract is let, let the cost overruns begin. The requirement of profitability is less important as practically all overruns are paid for if provided for by contract changes.

    Compare the commercial side who are faced with a multi-government supported air craft producer in Airbus who pose a serious threat to the long standing domination of the commercial aircraft market place by Boeing. Boeing has the same problem any 'legacy' industry does in that they are very 'bureaucracy' heavy and have been able to set prices for their products as they monopolized the market place for a long time.

    As an industrial comparison at one time EMD was the king of the diesel locomotive industry where they dominated the production of locomotives for decades only to be dethroned by GE who came along as a newcomer and managed to produce a product that was price competitive and of good enough quality to take a lion's share of the market place.

    Boeing needs to separate their military and commercial divisions and then allow a new management team to re-organize the commercial aircraft division into a profitable unit, or close it. Either way, staying the same will not work because Upstarts can always capitalize on the market place developed previously by an established producer. These upstarts can pose a serious threat and if the established business does not re-assess its costs and methods with a heavy emphasis on streamlining and improving efficiency these old guard businesses will fail.

  4. Won't happen. They have too many government contracts for that to occur.

    1. There are two "chapters" of bankruptcy. One is reorganization. They could split-in-two and the mil side could merrily continue to bid work. The commercial side could handle maintenance of the existing fleet as it wears out and slides into obsolescence.

  5. I do not claim to know what happened to Boeing, but something did. One of the first clues was when they moved their corporate headquarters from Seattle to Chicago. I think at some point it changed from a company run by engineers to a company run by MBA's. Only a bean counter would think it a good thing to move the headquarters half a continent away from where the airplanes are actually made.

    I work part-time several evenings a week at a local high end resort. Every year for the last 3 or 4 years we have hosted Boeing's top brass and sales people for their annual conference. Three Years ago I was in the room when their CEO went over what they were doing in China. They had beaten out Airbus and gotten a huge and long-term order from China for hundreds of airliners to be supplied over the next 10-20 years.

    But to get the order, they had agreed to build an entire factory IN CHINA, and staff it with Chinese workers, and train them how to build the aircraft, so that all of them could be BUILT IN CHINA.

    So basically they agreed to build the Chinese a state of the art airliner factory, and train the Chinese to become Boeing's biggest international competitor over the next 20 years. And Boeing's upper management was HAPPY about this.

    No doubt the upper management who decided to make Boeing commit corporate suicide got some huge bonuses and stock options for themselves. But in light of such a suicidal decision on the part of management, I was not at all surprised about the 737 Max debacle where they decided to go into production with an aircraft that they knew was inherently unstable in the pitch axis, and 'fix' it with a software patch that they decided not to tell the pilots about.

  6. Hey, Boeing could exit the aviation business and enter the medical market. I bet that their COVID-19 vaccine would be 100% effective, what with anyone who took it exploding and all.

    (gonna use that in Friday's post)

  7. George True, you have hit the nail squarely upon the head. I was going to make many of the same points, but you said it better.

  8. How about netting the $100 billion they spent on stock buybacks against the $60 billion asked for?


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