McBoeing's dumb flight plan
The company is spending $900 million to save $9 million a year in wages. But we shouldn't get mad or succumb to the blame game. We should outsmart Boeing.
Boeing’s decision to place a second 787 production line has launched the usual squadron of handwringing, blame-laying and introspection. Handwringing, as in Boeing is going! The sky is falling! Sound the alarm! Blame–laying, as in Democrats/liberals/unions, etc., have made this such a horrific place to do business that Boeing had no choice — no choice I tell you! — but to move to the welcoming arms of the business-friendly south. And introspection, as in “What else could we have done? Where did we go wrong?”
Here’s what I’ve learned from the whole misadventure:
First, McBoeing’s board of directors remains rather short-sighted.
Next, some people in South Carolina are a bit insecure. In a TV interview Wednesday I said that Boeing was essentially assigning production of its most technologically advanced jetliner to “the functional equivalent of Wal-Mart greeters.” Some folks down there took that personally, judging by the e-mails I’m getting. They needn’t have. I don’t have anything against South Carolina or its people; I was talking about the relative wages that will be paid.
Boeing will pay workers around $14 an hour to a do job that pays more than $26 here. Think about your job: If they cut the pay for your position by almost half, what level of talent would your employer attract? As it turns out, the starting machinist's wage here for a comparable position is only $15; the $26-an-hour figure is for someone with 20 years of experience.
So here's the problem with moving to South Carolina, now. Having essentially junked the careful, collaborative process that made the 777 such a success, Boeing has collected a fleet of trouble trying to sort out the problems of the even-more complicated 787. So the answer is opening up a second production line for a jet that still isn’t ready to fly? And staffing it with new hires? In a state where you’ve already had considerable production problems, problems so bad, your evil, unionized Washington workers have had to fix them?
It’s not about the quality of workers in South Carolina. Frankly, it wasn’t fair from the start to ask a lot of recently trained workers to put out parts of the precision and quality required for jetliners.
Yes, they make BMWs in South Carolina, and they’re just dandy. But automobiles are not airliners. (As one aerospace CEO once told me: “Sure, we could build dashboards [instead of composite parts]. But it would be more dashboard than you’d ever need.”) Automobiles never run the risk of just falling out of the sky.
So getting a second line up and running in South Carolina seems like a potentially expensive gamble for Boeing, at a time when they’re still trying to fix the original product.
As for who to blame, there’s only person: Phil Condit. Condit was CEO when Boeing made the unfortunate decision to become McBoeing by merging with McDonnell Douglas, which had essentially failed at the commercial aerospace business. It was McDonnell Douglas holdovers who managed to bungle the Air Force tanker contract; it was McDonnell Douglas holdovers who managed to lose the Joint Strike Fighter competition.
And it is, to some extent, McDD holdovers on the board who have brought in the General Electric style of management, in which workers are interchangeable parts of no particular value. They let Alan Mulally escape to rescue Ford without federal bail-out dollars, and brought in Jim NcNerney. This is now a company with a short-term focus in a long-term business. They’re about to spend around $900 million to save $9 million a year in labor costs. Condit, who was plenty smart, should have smelled a lemon and walked away when McDonnell Douglas offered itself up for sale. Boeing hasn’t been the same since.
Don’t blame the unions. McBoeing clearly had no interest in negotiating, only using the machinists to pry a better deal out of South Carolina. The union offered what Boeing wanted, but asked for something in return.
Don’t blame state government, unless you think Washington can become a state with taxes so low we have to be bailed out by the feds. Because that’s where South Carolina is. Its unemployment taxes (a frequent complaint of McBoeing’s with regard to Washington) are so low that their unemployment fund went bankrupt last year, and had to be bailed out by the feds.
The final irony here is that your federal tax dollars are effectively subsidizing McBoeing’s move to South Carolina.
The question shouldn’t be what could have done? The right question is what should we do now? If Boeing is going (and I don’t want to chase them out the door), let’s go after somebody else — Airbus, Bombardier, Embraer. We have the talent and infrastructure for world-class aerospace work. Let’s use it.
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Comments:
Posted Fri, Oct 30, 6:32 a.m. inappropriate
Mr. Sell thanks for yet another insightful article on Boeing. Though I may not agree completely with your tone I think you have put together a more complete picture of what's been happening at Boeing over the last 12 years than anyone else.
Solutions, there may not be any and Boeing will become a textbook example of how game playing by business leaders has and is destroying US industry. Yours is one solution. How about a warning shot by letting the tanker deal go to Airbus, though it's probably self-defeating.
No, the real answer maybe that there might be just enough stock holders in this area to wage a proxie fight and fire the Board. Remember this is the Board that that put Stonecipher in charge after tanking MD. Who put McNerney in charge after he nearly killed 3M. Until these idiots are gone Boeing is doomed.
Posted Fri, Oct 30, 7:17 a.m. inappropriate
Acutally, the guys who do the scut work only make $13 an hour to start, as a Mcahinist in Everett, after taking an up to 8 week course, UNPAID.
The labor difference is but a canard, a non-issue.
Ghe Geezer
Posted Fri, Oct 30, 7:52 a.m. inappropriate
A totally ill-informed article.
The State of Washington has tried to lure other airplane manufacturers, all chosen to locate elsewhere. The State has lending of credit restrictions that prevent them from getting involved luring manufacturing.
The South has a history of airplane manufacturing. Lockheed and Gulfstream both have had manufacturing plants in the South.
Employee run businesses have generally had a poor track record.
About the only thing I could agree with the article is that "We should compete at being better."
Posted Fri, Oct 30, 8:39 a.m. inappropriate
Why did the machinists go on strike in the depths of a recession? How dumb is that? They shot themselves in the foot.
Posted Fri, Oct 30, 9:55 a.m. inappropriate
Nice piece, TM.
The question that's been nagging at me is this: When Washington State negotiated $billions in incentives to compel Boeing to assemble the 787 in Everett, I assume the expectation was that we'd see all of the 787s built here. Now that Boeing has decided to send +/- half of that work to South Carolina, shouldn't we be modifying those incentives accordingly?
Posted Fri, Oct 30, 11:06 a.m. inappropriate
-"Why did the machinists go on strike in the depths of a recession? How dumb is that? They shot themselves in the foot."
How dumb is it to send work to the two WORST plants in this entire bungled outsourced supply chain? How intelligent is it to have the people who's work had to be redone by Everett Machinists do the final assembly?
New motto for 787: If it's Boeing, I'm not going.
Posted Fri, Oct 30, 1:34 p.m. inappropriate
Not with standing the very valid points made in this article, the hourly wages are not the only thing that Boeing is trying to save. They are in this move for the long haul.
First if the “10 year no strike contract” that Boeing wanted is no more than a great smoke screen, developed to reflect on the union as the Bad Boy. That way the PR could be used to imply that Boeing had no other choice than to seek a more economically friendly environment. Horse Nickels!
The way I see it is this move is going to set up a Boeing Aerospace Mechanical Training Camp. Here is how it will work. Vought could not manufacture to Specification the 2 body sections they are on contract for. Boeing tried to run that business but could not with out suing for breach of contract. They would lose again if Vought went bankrupt. All along Boeing has been looking for a bargain property and by buying Vought they found it. Not only land but an aerospace manufacturing plant, all for around 1 billion dollars.
What a better way to move out of Washington State than to start with a core labor force and to develop a major technical labor forced by training them on the body section that will pay for the training and produce a profit. Add a final assembly line now I have component and major assembly line training classes.
Washington State politicians keep saying, they have the best qualified aerospace work force in the nation. Well SC will soon have the same. Boeing is going to train people to be Aerospace mechanics. After they have enough trained they will be setting up shop to produce the next generation of jets. The 737 and 747 are 1960’s airframes, the 777 is a 1980’s and the 787 is the first composite airframe.
With the labor rates being 55-60 percent below what Washington State has to offer, Boeing will be moving their manufacturing operations to more states that are right to work states. When their rate become more expensive, then they will move to China or Indonesia. Until there are no more people making a livable wage to fly on their airplanes and airlines will not need to buy as many.
In my opinion in 10-15 years Boeing Manufacturing and maybe Engineering will be out of Washington State. No more Everett or Renton Washington as we know it.
Posted Fri, Oct 30, 4:36 p.m. inappropriate
Everyone in this state who has had anything to do with Boeing, ever, is pointing fingers at everyone else, or actually at themselves.
But Boeing is not listening and they don't need to listen. They did give an explanation, but that was simply courtesy. They were outta here when they moved to Chicago. Companies don't look upon themselves as part of a city or state; they're corporate cultures and it doesn't matter to them where they are. So all this examination and cross-examination is useless. This is now a cheap-wage, non-union world with no sentimental ties to any milieu. We could continue to make conjectures on what Boeing will do next but we are not part of their world. Better we figure out how we can replace those jobs, because they workers who would have done them are probably not going to be invited to South Carolina.
Posted Fri, Oct 30, 10:20 p.m. inappropriate
Mr. Sell I am a Boeing employee and yours is the first article that hits the nail on the head. Sure you didnt work for Boeing at sometime? Most of the people making comments dont have a clue because they do not work there and dont understand.
Thank you for your statements and I plan on forwarding this to other Boeing employees - every once in awhile there is someone that is not blaming us.
Posted Sat, Oct 31, 8:29 a.m. inappropriate
The Big Change didn't come with the move to Chicago. That's confusing cause with effect. The Big Change came with the merger with McDonnell-Douglas, which brought legions of "old school" business types into Boeing management. Imagine the merger of Daimler Benz and Chrysler, but with the Chrysler execs in charge. Why don't people want to buy AMG SL-63s with starters that go "Reee-neee-neee-neee-neee?" Fiat would be buying Mercedes right about now.
Posted Sun, Nov 1, 6:57 p.m. inappropriate
Yeah TM. Let's not blame the unions. I'm sure 2 strikes in less then 6 years had nothing to do with Boeing's decision so of course union management is totally blameless. Get a clue.
Posted Sun, Nov 1, 8:33 p.m. inappropriate
Boeing is saving $9,000,000 per year to move to a place where in September 1989, Hurricane Hugo, a category 5 storm, hammered the City of Charleston and nearby areas, causing $5.9 billion in property damage, leaving 50,000 people homeless and dozens of people dead. In recent decades, Hugo has been surpassed only by Hurricanes Andrew and Katrina in terms of devastation, and it remains the sixth costliest hurricane in U.S. history. Much of the damage was caused by Hugo's 20-foot high storm surge that swamped the Charleston area, which has a mean elevation above sea level of only 10 feet.
Hugo packed sustained winds of over 135 mpg and gusts up to 175 mpg. It was also accompanied by extremely intense, localized winds that some people described as mini-tornadoes. I shudder to think of what such winds could do to Boeing's giant hangars.
As an article posted here...
www.nytimes.com/2007/08/26/magazine/26neworleans-t.html?_r=1&pagewanted;=all
...explains, playing poker in "nature's casino," is just one facet of corporate America's penchant for playing poker using share prices and government tax subsidies as chips. If Boeing wins, everybody wins, but if Boeing loses, so will shareholders and taxpayers while company execs make out like bandits thanks to the golden parachutes they dish out to themselves.
Boeing might manage to save a whole $9,000,000 per year on labor costs, but I wonder how much more it will have to pay for wind and flood insurance??? If Boeing is hit by one or more catastrophic hurricanes, US taxpayers will pick up the tab for much of the damage because we are the one who fund FEMA's disaster recovery programs.
Hopefully Boeing is building its new hangars to withstand Category 5 hurricane winds and storm surges. I'm not an architect or an engineer, so it's not for me to say how practicable it is to build such structures. In future decades the entire coast of South Carolina could flood even in smaller storms. Maybe Boeing can elevate its buildings to guard against this possibility.
Maybe the reason that Boeing shrugs off the risks of building airplanes in a place that is vulnerable to environmental havoc is that it has no intention of staying in South Carolina very long. Instead, Charleston may be only a brief stepping stone on Boeing's long march to China and/or India where labor costs even less.
Posted Mon, Nov 2, 9:01 a.m. inappropriate
Boeing is now being ran by McDonald Douglas. Everyone knows that. Everyone also knows what happened at McDonald Douglas. I think Mr. Boeing would never have approved of any of the decisions that are being made. This new plane is going to be the end of what was the greatest company in Avianics. As far as people from South Carolina building the 787? Every single thing we receive in Everett has to be completely reconfigured BEFORE it can go on the plane. But that goes for most of the parts that are being received. The strike didn't have any affect on this whole process but it's a good scapegoat.
Posted Mon, Nov 2, 9:01 a.m. inappropriate
Boeing is now being ran by McDonald Douglas. Everyone knows that. Everyone also knows what happened at McDonald Douglas. I think Mr. Boeing would never have approved of any of the decisions that are being made. This new plane is going to be the end of what was the greatest company in Avianics. As far as people from South Carolina building the 787? Every single thing we receive in Everett has to be completely reconfigured BEFORE it can go on the plane. But that goes for most of the parts that are being received. The strike didn't have any affect on this whole process but it's a good scapegoat.
Posted Mon, Nov 2, 7:17 p.m. inappropriate
As a long time Boeing employee, Boeing wants out of this state, the first clue came when they moved the HQ to Chicago. They are not going to stay, at least not in any major capacity. Boeing management is some of the worst in the world, and it is only due to the talent and hard work of the employees, going around the incompetant management, who have made the quality Boeing jets we all love to love. This is another example of incompetant management/board of directors decisions, moving out of state, spending hundreds of millions to save just millions. They did not even learn, with the huge problems on the 787 due to outsourcing most of the jets sections and parts, the lesson there that others can't do as well as the experienced home team can...years ago they outsourced a lot of the 757 jet aircraft, got horrible results and had to, at a cost of tens of millions, bring most of it back inhouse.
I just hope my pension is secure with them, I am worried now.
Posted Mon, Nov 2, 8:26 p.m. inappropriate
Interesting. I have never been in a situation to belong to a union but I do support the union and think Boeing is making a major dumb business decision. Of course we wont know for a number of years how well it works. What they need to take to NC with them is who ever it is that inspects all the work and has been inspecting it for years here and knows what works and doesn't. You start building planes in NC with fresh trained inspectors who have no experience with what works and what does not and you best just stay off that plane because you can't trust some amateur to say it is "good to go"!
Posted Sat, Nov 7, 1:43 p.m. inappropriate
"Tomorrow is another day". Decision was made, get over it. What new jobs and ventures can WE create so that if Boeing starts looking like a GM, it won't matter. Yours for diversity in adversity: