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Boeing is going! Boeing is going!!

The frequent alarm that Boeing is heading out of town is false. More worrisome, argues a veteran Boeing-watcher, is the way the company is becoming, like GE, too focused on the short-term.
Boeing plans to add 1,200 jobs at its Renton plant over the next couple of years.

Boeing plans to add 1,200 jobs at its Renton plant over the next couple of years. Yasuhiko Obara Yasobara, Wikimedia Commons

When Boeing’s Machinists went on strike this fall, the hand-wringing resumed: Boeing is going to leave town, unless we do something! Like rain in winter, this is a regular feature of the Puget Sound emotional landscape. The imminent departure of Boeing provides the unreflective pro-business elite with the opportunity to point out everything that’s wrong with this region and this state, as though Boeing’s business fortunes are entirely our fault.

It won’t entirely surprise me to see Boeing build its next jet somewhere else. After the fiasco of the 777 expansion in the late 1980s, I predicted in my 2001 book Wings of Power that Boeing would move something out of the Seattle area. Three weeks after the book came out, they moved the company headquarters to Chicago (which I didn’t predict). In fact, Boeing has been threatening to leave Seattle since the 1920s, regularly repeating such dire warnings thereafter, apparently whenever life ain’t perfect along the banks of the Duwamish.

So far, aside from the relatively unimportant headquarters decision, they haven’t decamped, and it’s worth thinking about why. Among the factors: A lot of people still don’t want to leave here. Every time Boeing has looked at going, the company has concluded that too many important employees were simply not going to march off to wherever. When the company moved the headquarters, for example, half of the 500 people they expected to follow didn’t. That’s a lot of talent out the door, an even more important consideration when you’re talking about actually building the planes.

But this is a new Boeing, modeled less after the old Boeing, which played for the long term and thus outlasted most of its rivals, than on the GE model, where you can build anything anywhere — and everything but short-term profit be damned. Production is mobile; workers are irrelevant.

The problem with this model is that it is not truly very efficient. Workers are not interchangeable parts; they have knowledge and skills that can create new products, solve problems, and go to the wall for you when you need it. It’s no accident that most of GE’s actual profit comes from its credit operations, not its manufacturing work. But the GE model prevails at Boeing, which means that worrying over short-term costs trumps building for long-term survival.

Had previous CEO Harry Stonecipher been able to follow his own ethics rules, Boeing would now be a dying company. He once bragged to me that he had made McDonnell-Douglas profitable without selling any airplanes. Not actually selling any of your product isn’t a strategy, unless your goal is to go out of business. Stonecipher has been replaced by another GE disciple, James McNerney, who does at least seem to realize that you have to sell the product to stay in business. He may not value his current employees any more than Boeing ever has, however. Boeing argues that it has to outsource work in order to sell planes, which doesn’t actually explain sending work to South Carolina. At the same time, the company effectively doesn’t let its own workers bid on those jobs, and then often spends a lot of money paying its workers to fix others’ mistakes. This isn’t a new phenomena, and Boeing engineers’ mistakes on 787 fasteners show its persistence.

Machinists’ strikes routinely cost the company more money than simply meeting the Machinists’ demands would have cost. But unions force companies to actually manage, and too many executives dislike having to treat their employees like something more than automatons. The same is true with layoffs. The production write-downs in the mid-1990s cost the company far more than laying off fewer workers in the early 1990s would have cost them, since having more experienced workers on hand likely would have negated the production problems.

And what if Boeing were to move south? Aside from the unions, Boeing pretty much gets everything it asks for in Washington state where the tax system was pretty much built to Boeing’s specifications. After the 777 misadventure, few state or local officials are going to be so dumb as to not do whatever they can to keep Boeing happy. As for the South, these low-tax, non-union, pro-business states also are the states with the lowest quality of life scores, poorer school systems, and wide disparity of wealth. In the end, that formula doesn’t make for a truly good climate in which to do business.


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Comments:

Posted Thu, Dec 4, 12:01 p.m. Inappropriate

Short-termism, more than anything else, I think, is responsible for the current state of the U.S. economy. This does not bode well for the region.

Posted Thu, Dec 4, 12:22 p.m. Inappropriate

It's the MBA culture. Colleges are turning out "businessmen" who can drive a company into bankruptcy while showing a profit every quarter.

dbreneman

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